The Mortgage Industry in the Global Economy
Filed under: FHA Bailout, Global Economy, Mortgage Industry Trends — admin @ 10:13 pm
I have said it before:
“…I could not help but cringe when I saw the proposed legislation for FHA to purchase and refinance “underwater” mortgage loans. It would essentially make FHA the largest scratch and dent lender in the market.”
I will say it again.
This story from the Wall Street Journal reinforces how much our industry is interconnected with both the US economy and the global economy. Our industry needs to be educated about global economics and understand just how extensive the effects of our actions are. These types of reports also demonstrate how critical a return to quality in lending and a renewed focus on quality control are to the total recovery and future viability of the mortgage market and our industry:
A new report from Standard & Poor’s indicates that a government bailout of Fannie Mae and Freddie Mac would cost upwards of 10 percent of gross domestic product (GDP) and jeopardize the United States’ AAA rating. According to the credit rater, “Even though . . . credit damage from GSEs is unlikely, the greater risk to the U.S. lies with them than with broker-dealers.” The report notes that a bailout of broker-dealers would cost the government less than 3 percent of GDP, with the bailout of Bear Stearns by the Federal Reserve pegged below 1 percent of GDP.