WHERE ARE THE DAMN HANDCUFFS? (Fraudie)
Karl Denninger
November 5, 2009
Thousands of borrowers on the verge of foreclosure will soon have the option of renting their homes from Fannie Mae, under a policy announced Thursday.
The government-controlled company, through its new "Deed for Lease" program, will allow borrowers to transfer ownership to Fannie Mae and sign a one-year lease, with month-to-month extensions after that.
It is entirely about Fannie not having to recognize the written-down value of these houses - that is,allowing them to hold the "mark" on the loan at it's original value, rather than recognize the loss.
The rental program is designed to help homeowners who don't qualify for a loan modification under the Obama administration's plan, but still want to remain in their homes. Fannie Mae is not planning to market the homes for sale during the one-year rental period.
Fannie won't sell the properties because then they would have to recognize the mark.
This is nothing other than yet another scam to avoid recognition of bad paper Fannie took on their books and has a HUGE embedded loss.
To qualify, homeowners have to live in the home as their primary residence and prove that they can afford the market rent, which would be determined by the management company. The rent can't be more than 31 percent of their pretax income.
Oh, so the rent can't be more than 31% of their pretax income, but the original note's payment was, right? After all, if it wasn't then the homeowner wouldn't have been in foreclosure in the first place!
That's the key paragraph, and tells you that:
This is simply an attempt to avoid mark-to-market on the properties.
The rent charged will be insufficient to meet the PITI (Principal, Interest, Taxes and Insurance) on the original note, as by definition if it could the "homeowner" wouldn't have defaulted in the first place!
This is yet another scam folks, all courtesy of our government who will do anything to avoid admitting the extent of the liabilities that are now in Fannie and Freddie's portfolio (and by extension, partially in The Federal Reserve as well!)
But the economy is getting better, right?
That's why we keep seeing scheme after scheme, scam after scam, all intended to do one and only thing - avoid a true and accurate accounting of losses that have already occurred.
And the market roars - it spiked a full 1% on this announcement - on yet more government-sanctioned and legalized fraud.
IF the economy was truthfully improving we wouldn't need any of these schemes. Honest profits would be sufficient to both support the housing and stock market. The fact is those honest profits simply do not exist, and neither does the value of these "assets" support the loans outstanding against them.
IF the government gave a damn about these homeowners they would instead reset the loan to the discounted cash amount of that market rent and re-write the loan at that same 31% of the homeowner's income. Of course that would force recognition of the fact that the property isn't worthanywhere near what the loan balance is, and thus force Fraudie and Phoney to EAT the bad paper they're holding.
Scam scam scam scam scam - it's all good for the banks and oligarchs, while the average American is dispossessed of his house!
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