Conor Dougherty on transferring low-rate mortgages to new home buyers

Because so little is for sale, home prices have remained stable, and even resumed their ascent, despite a huge increase in borrowing costs.  The refrain among real estate agents and economists is that anyone who secured a mortgage rate of 3 percent or lower owns a valuable asset that they are loath to give up. 

But every asset has a price.  And now an emerging cadre of investors and real estate agents are trying to, in effect, sell mortgage rates from several years ago by transferring them to new buyers. 

Redfin, the real estate brokerage, has seen a steep rise in listings like Mr. Kilboy’s that have comments like “beautiful home with assumable loan at 3.25 percent.”  Facebook groups have popped up to find buyers for them, while new companies are pitching services to speed up the transfer. 

“Homeowners with mortgages that are capable of being assumed have something valuable that many home buyers want and would be willing to pay for,” said Daryl Fairweather, chief economist at Redfin.  “For people who bought when home prices were near the peak but mortgage rates were still low, it may be an attractive way to get out of a remorseful purchase.”

~ Conor Dougherty, "The Hot New Thing Is a Loan From 2021," The New York Times, June 11, 2023

Franklin Raines on the erosion of credit standards

Most of the erosion in credit standards happened on Wall Street, it didn't happen amongst the GSEs. Wall Street led with the securitization of subprime loans, they led with the securitization of non-performing loans, loans that didn't fit the Fannie and Freddie standards. So, they really were the engine.

~Franklin Raines, former chairman and CEO, Fannie Mae, CNBC, May 4th, 2010

Franklin Raines on risk management at Fannie Mae

When I was at Fannie Mae, we had a very tough risk management structure. That was 5, almost 6 years ago [2003, when housing bubble first took off]. Instead of staying the course as later management said, they changed that structure in order to become a bigger player in the market. They were losing market share by maintaining their tough standards, they wanted to be players, they jumped in and they bought a lot of things they shouldn't have bought. They've testified to this themselves so I'm not really speaking out of turn here, and that really led to the company's failing financially because they took on more risk than they should have.

~Franklin Raines, former chairman and CEO, Fannie Mae, CNBC, May 4th, 2010

(Of course, this directly contradicts the point he made moments earlier in the interview, in which he argued that Fannie Mae, Freddie Mac and the FHA need to be available to support the mortgage market when traditional lenders become risk-averse and flee from these very types of mortgages he now says shouldn't have been made.)

Franklin Raines on how to prevent financial crises amongst large institutions

I think the American system and its focus on 30-year fixed-rate mortgages is a very, very powerful thing. Canada is a country of 20, 25 million people with adjustable-rate mortgages for banks, not a very consumer-friendly environment. Although, if you put the burden on the consumers, it's true you won't have as many crises amongst your large financial institutions.

~Franklin Raines, former chairman and CEO, Fannie Mae, CNBC, May 4th, 2010

Franklin Raines on the importance of federal mortgage subsidies

Today, they [Fannie and Freddie] and the FHA are 100% of the mortgage market and we have seen in this last crisis that ordinary financial institutions will withdraw from that market at the slightest indication of problems. You simply can't have a country like ours, with a large middle class, that doesn't have a functioning mortgage market all the time.

~Franklin Raines, former chairman and CEO, Fannie Mae, CNBC, May 4th, 2010

Citigroup banker and hip-hop performer on selling mortgages

Trust me, it's all the same hustle. It's just that mine is legal. Selling mortgages is very emotional. Just like in rap, we're trying to connect with people's hopes and dreams.

~ Terence Bradford, Citigroup banker by day, hip-hop performer by night, "The Rap on Wall Street," Fortune, August 22, 2005

Michael S. Rozeff on the GSEs: Let them fail

The stock price of Fannie Mae, which almost hit $90 in December of 2000 is down to $22. It fell over 10 percent on March 6 alone. I hope this company goes bankrupt along with Freddie Mac, which is down to $20 after being north of $70 a share. The government has no business butting into the mortgage business, so if Fannie Mae and Freddie Mac fail, good riddance.

Although I’d enjoy seeing a complete debacle occur in these two government-created monsters, quite possibly the government will prevent or otherwise forestall their bankruptcies should they ever be imminent. The government provides no explicit guarantees to these companies, and the companies state that there are no guarantees. Nevertheless, investors have acted as if the companies had some implicit guarantees. They have good reason. Congress clearly wants these companies around so that they can buy up mortgages. The political fallout from their failures would be severe.

Investors therefore have lent money to Fannie Mae and Freddie Mac at (low) rates not in accord with their risk. This has allowed these companies to create and dominate a secondary market in mortgages. They bought up mortgages originated by banks, packaged them up, and resold them... These securities have been turning sour because the mortgages in them are defaulting. As a result, the yields on these debts are running 3 percent higher than Treasury bond yields, as compared with a more typical 1 percent. And even that premium is not as high as other troubled mortgage-related debts.

~ Michael S. Rozeff, "Let the Bankruptcies Roll," LewRockwell.com, March 8, 2008

Henry Paulson on expanding the role of Fannie Mae and Freddie Mac to deal with the mortgage mess

If we ever need them it's during times like today, and they're most valuable when there is distress in the mortgage market. I'd like to see them playing an even bigger role.

~ Henry Paulson, Treasury Secretary, "Paulson Shifts on Mortgages; Treasury Secretary SeeksBroad Moves by Lenders;'Not Business as Usual'," The Wall Street Journal, November 21, 2007

(Mr. Paulson faulted Congress for failing to pass several bills that could potentially provide relief for borrowers, and took aim at a Republican senator who is holding up a piece of legislation that would allow the Federal Housing Administration to play a greater role in the cleanup. While the Bush administration and Democrats in Congress backed the bill, Oklahoma Republican Sen. Tom Coburn objected, saying it will result in additional risky loans for which taxpayers will be liable.

Mr. Paulson said he understands Mr. Coburn's concerns, but notes: "This is not business as usual. This is an extraordinary situation.")