Mortgage Lender of First Resort

I frequently need to know who actually owns the notes and mortgages connected with my clients’ homes.  So, keeping an eye on who the players are on the National mortgage scene makes a certain amount of sense.

Here is an article from BusinessWeek that makes me reconsider my decision not to subscribe.  I mean, seriously, at $2.49 a month delivered automatically to my Kindle while I sleep — why am I not?  However, I regress.

This article makes two very serious points.  First, FHA is now backing more mortgage loans than Fannie and Freddie combined.  Why?  Simple, lower down payment requirement.  Second, 90% of the current mortgage market is guaranteed by the U.S. Government by way of FHA, Fannie, Freddie (and to a much lesser extent VA and FHLBB).

I can see how this happened.  The takeover of Fannie and Freddie was a reaction to events rather than a carefully planned policy choice, and what to actually do with them is going to be a great big, hairy mess.  Then, there has been enough going on with regulatory changes and policy decisions that making changes to FHA policies would require affirmative political effort.  Not making them is the default.  So, by default the U.S. Government has become the backstop for effectively the entire home mortgage market.  This is an amazing policy decision to be made by accident.


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