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Federal National Mortgage Association Message Board

  • chestor_investor chestor_investor Jul 23, 2013 7:35 AM Flag

    Let me see if I understand the Corker/ Warner idea of a Federal Mortgage Insurance Corportation

    There are several trillions of dollars that some lawmakers supposedly want to be shifted from the Federal Responsibility to Private Responsibility. The govt. (Taxpayer) will still provide 90% backing in the form insurance for default, non-repayable however the first 10 percent will be at risk to the private MBS bondholder (investor). Lending policies and loan quality will be more discretionary and less restrictive and big bank lenders will have more control. The cost will shift to the consumer to pay for insurance through a monthly cost of insurance adding to the monthly loan burden OR perhaps the risk absorbed by charging higher interest rates. That means if the housing market undergoes another bubble or meltdown, private bondholders get clobbered, new bond interest will falter and will be considered risky. The taxpayer's govt insurance entity will have to pay for 90% of any default and there will be a deficit of money coming into the Federal Mortgage Insurance Corporation. These funds will be considered a non-repayable taxpayer bailout because they are insurance. What exposure of this multi-trillion dollar industry will the taxpayer be on the hook for? Apparently trillions. And why is this idea better? I think it will cause more problems than some realize. What we need are less rules in lending. The tight policies that DeMarco is adhering to work, obviously. Intelligent comments welcomed.

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