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*Apologies for reworking the motto of Frederick the Great or actually, some say, of French revolutionary figure Georges Jacques Danton: "L'audace, l'audace, toujours l'audace" or "Audacity, audacity, always audacity."
The front-page headline of a new blockbuster report by Gretchen Morgenson in The New York Times reads: "Insiders Aid Big Banks in Effort to Displace Fannie and Freddie" (Monday, December 7, 2015, posted online with the headline, "A Revolving Door Helps Big Banks' Quiet Campaign to Muscle Out Fannie and Freddie"). Ms. Morgenson and The Times reviewed "lobbying records, legal filings, and internal emails and memorandums, as well as housing officials' calendars and White House and Treasury visitor logs" during their investigation that led to this report.
The big banks' goal at the expense of homeowners and lenders smaller than themselves: "unseat Fannie Mae and Freddie Mac, the mortgage finance giants, and capture their share of the profits in the country's $5.7 trillion home loan market." [Emphasis added.]
Rather than restructure Fannie and Freddie, the big banks have a plan to reassign Fannie's and Freddie's assets, such as the proprietary government-owned database of "mortgage underwriting systems the government-sponsored enterprises had built to bundle loans into securities to be sold to investors." The big banks' choice to receive Fannie's and Freddie's assets? Themselves.
Oh, and the big banks are pushing the idea in Washington that they are entitled to Fannie's and Freddie's profits too because they should take over Fannie's and Freddie's very profitable lines of business.
To whom you ask are the big banks pushing this idea in Washington? Why, the Obama administration. One General Counsel for a nonprofit and a low-income housing advocacy group does not get much listening time from officials within the Obama administration, many of whom came from Wall Street or are on their way back to Wall Street. (It apparently gets confusing there.) "It's been a long time since HUD was an effective advocate for homeowners, much less low- or moderate-income homeowners," he said.
And as shown in this report and elsewhere, apparently the insiders in question also include the Federal Housing Finance Administration or FHFA, Fannie's and Freddie's overseer. Fannie and Freddie fought with the FHFA for the right, and won, to refuse to use Federal taxpayer money to buy mortgage loans that have unauthorized lender force-placed insurance practices attached. If the Obama administration implements the big banks' plan, then there will be no Fannie or Freddie -- or anyone or anything else -- to stand in the way of spending Federal taxpayer money, once again, to buy mortgage loans from the big banks regardless of what additional costs may or may not be attached.
So, everything comes back around in the end: Increase profits forever and ever, world without end. Amen.
Please Read The Disclaimer. ©2015 by Dennis J. Wall, author of "Lender Force-Placed Insurance Practices" (American Bar Association 2015). Policies of the FHFA, seemingly in favor of such practices at various times, come under scrutiny in particular in Section 2.5. Go to the free podcast of "Litigation and Prevention of Insurer Bad Faith" about Lender Force-Placed Insurance Practices, which also features a 68 slide Powerpoint presentation on "Lender Force-Placed Insurance Practices" with audio added via YouTube. All rights reserved.
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