Hot Docs: Fannie Mae, Freddie Mac, and the Financial Crisis, Adults Playing Video Games
Today's selection of timely reports
Fannie, Freddie, and the Financial Crisis: The House Committee on Oversight and Government Reform concludes its investigation into the financial crisis with a hearing on the failures of the mortgage lenders Fannie Mae and Freddie Mac. The committee heard from four former CEOs of the two lenders and examined "nearly 400,000 documents." Chairman Henry Waxman (presiding over an Oversight Committee hearing for the last time) says that Fannie and Freddie ignored warnings, making a strategic choice to back riskier mortgages with "irresponsible investments that are now costing federal taxpayers billions of dollars." Waxman dismisses claims that the lenders caused the subprime crisis, though—"They were following the market, not leading it." Former Fannie Mae Chief Credit Officer Edward Pinto goes further: "Fannie and Freddie have subprimed America," he says, with their lending practices leading to "an estimated 8.8 million foreclosures expected over the next four years, accounting for the failure of about 1 in 6 home mortgages."
Video Games By the Numbers: If you think video games are juvenile, think again. A survey by the Pew Internet and American Life Project found that more than half of the adults polled are video-game players, and about one fifth are frequent gamers, playing "every day or almost every day." Young adults play more than seniors, and men are a bit more likely to play than women (55 percent versus 50 percent). Adults still lag behind teens, though. An overwhelming 97 percent of youths in the survey play video games on computers, consoles, or handheld devices. Despite media attention, virtual environments like Second Life and massive multiplayer online games such as World of Warcraft "have yet to catch on." Pew found that only a relative handful of players chose these games.
House Committee Report Blasts FCC Chairman: The House Committee on Energy and Commerce has issued a majority staff report that calls into question actions by Federal Communications Commission Chairman Kevin J. Martin. The report, based on a review of thousands of pages of documents, E-mails and interviews, charges that Martin "manipulated, withheld, or suppressed data, reports, and information," operated in a less-than-open manner, failed to carry out responsibilities, created "distrust, suspicion, and turmoil" and did not efficiently manage staff. The report is titled: "Deception and Distrust: The Federal Communications Commission Under Chairman Kevin J. Martin."
Unmarried Women Less Likely to Have Health Coverage: Unmarried women are less likely to have health insurance coverage, a study by the Centers for Disease Control and Prevention's National Center for Health Statistics has found. The study found that unmarried women 25 to 64 are about 60 percent more likely than married women to lack health insurance. The study concluded that "private, employer-sponsored coverage remains the most commonly held type of health insurance and married women are more likely to have private coverage than unmarried women in almost all income groups."
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Reader Comments
A solution to the home mortgage problem
1. The government should purchase only a predetermined portion of any toxic or nonperforming mortgage package offered. This would save a part of the federal funds, give the existing lender an incentive to help solve the problem, would be easily implemented, and possibly save the government from actually managing vacant houses. For example, purchase 60% of any existing packaged portfolio of troubled properties valued at the face amount of the mortgages or the outstanding remaining equity balance, whichever is less. Any income would go first to pay the operating expense, secondly to repay some small interest to the government for participation, and thirdly to retire the entire portfolio in proportion to the percentage owned. When implemented with step two below, the government investment in each package is easily determined with no reverse auctions or appraisals necessary, does not completely bail out speculators or high risk lenders, removes a large, readily determined percentage of liabilities from lenders portfolios, and may leave in place some servicers and managers of the mortgages and properties. I doubt the government is really set up to manage vacant houses across the nation.
2. Reset the interest on all primary personal residential home loans made by commercial banks or conventional mortgage lenders who tender packages of mortgages (performing or non performing) to a fixed rate of 4% amortized over 30 years. This would adjust nearly all payments to a lower amount and would still give mortgage investors a return far above treasury rates. If they choose, homeowners could still make larger payments with the excess balance going toward reducing the loan amount. This would not require appraisals, renegotiations of loans, loan fees, credit reports, etc., or months of paper work: just a reamortization of the payments. It would be done across the board to every loan in any package offered. In reverse, lenders with performing books of loans could sell 40% to the government and retain 60% giving them additional money to loan as well as a majority position is performing assets.
3. Allow anyone with an existing mortgage and good credit to refinance at 4.5% amortized over thirty years if the current lender does not offer to join the program or reset the rate. Refinancing would only be for the outstanding balance of the current loan and would not require appraisals, only a credit report and title insurance. The program should run for a minimum of three years.
Example: A mortgage loan of $300,000 at 6.5% interest amortized over 30 years requires a principal and interest payment of $1896.50 per month. At 4%, the payment is $1432.25 a savings to the homeowner of approximately $400 per month continuously with no reverse auctions, appraisals, radon checks, or excessive loan processing fees. A far better stimulus than a $600 one-time tax rebate.
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