Edward Pinto

We have long held the machinations of The National Association of Realtors (NAR) up to some ridicule. As many will note, we ignore every NAR data release due to the fact that it is certified guesswork (at best) as per the massive periodic revisions that just so happen wipe out all prior year gains. We also suspect a darker side, as the NAR, courtesy of its anti money-laundering exemption, is simply a middleman allowed to close its eyes as dirty money is ferried into the US and specifically its real estate market. But former Fannie Mae chief credit officer Ed Pinto digs a little deeper into the real driver behind the NAR. For 90 years the NAR (and its predecessor organization) has supported expanding the government’s role in housing finance. Today, the government guarantees upwards of 90 percent of all new mortgages. It is easy to reconcile the NAR’s interest in home ownership and its support for the expansion of the government’s role in housing finance. In Ed's research he has not come across a single instance where the NAR has stated that lending standards should be tightened. To the contrary the NAR has almost always called for loosened lending standards and continued or increased government involvement, no matter the market conditions.

FHA insured loans have been a big booster for the current market.  Historically FHA insured loans made up roughly 8 to 12 percent of all mortgage originations but in 2009 they hit 30 percent.  For first time home buyers it was a stunning 50 percent showing that most people can only purchase a home today with a very small down payment.  Yet small down payments create instant negative equity positions if the market moves sideways or pops lower (aka our current market).  For example, the 3.5 percent standard FHA down payment is wiped away by the 5 to 6 percent selling costs.  What is interesting with this is that the FHA insured loan market is fully backed by the government (i.e., you) so any losses will be completely shouldered by the public.

Latest from Ed Pinto, who piles on the blame the GSEs argument with some new data and analysis in #1e439a;">The American, AEI's online magazine. This will not help the cognitive illusion being so skillfully maintained by our friends Ritholtz and Nocera, who still cannot bring themselves to admit that Wall Street runs the GSEs just like a private SIV. Lawyers and first loss exposure is the only difference.

Other than THAT, it's free market capitalism ...

How is the government STILL bailing out the giant banks? Let me count the ways ...

After observing the considerable amount of interest over my most recent article, The Astounding Failure of the US Educational System that has received more than 15,200 reads thus far, I have decided to extend that article into a 3-part series. Here’s Part 2.

Tomorrow, a variety of luminaries, such as Bill Gross and Mark Zandi, will be panelists in a worthless and futile spectacle titled "Conference on the Future of Housing Finance" which has the aim of doing something or another to extend and pretend the ticking timebomb that are the bankrupt GSEs. It will most certainly succeed in that regard. What it will definitely fail at, is to provide some resolution to the $7 trillion mortgage "holding" problem, which incidentally was the first domino to fall in 2008, which just so happened nearly took down western-style capitalism with it (and morbidly, it should have: the result would have been a system infinitely better). Yet as we prepare for this hearing (and try to track down Mr. Gross' testimony to validate his previous statement that absent an implicit government guarantee he would buy MBS/Agency securities only with 30% down), here is another view, this one from none other than Edward Pinto, who himself was an executive vice president and chief credit officer at Fannie Mae in the late 1980s. As Pinto says, echoing the previous high dB statements by Rick Santelli, "We'll never get a rational mortgage system until the government's affordable housing mandates are ended." We couldn't agree more.

Some days ago we wondered aloud after the blank check extended to Fannie and Freddie along with the suspiciously convenient timing of those announcements on Christmas Day.  Back then we wondered if we had been told the entire story. Recent news not only tells us that we had not, but points astute observers to what might well be one of the largest financial frauds in the history of... well, ever.

"Yesterday’s subprime is today’s FHA. It’s a definite train wreck and the flag will go up in the next couple of months: Bail us out. Give us more money." - Bob Toll

In keeping with the warnings presented by Kyle Bass warned that the entire housing bubble is now being ported over to the taxpayer's balance sheet, Edward Pinto, a former chief credit officer for Fannie Mae claims that the Federal Housing Administration will likely require a major taxpayer bailout "in the next 24 to 36 months" as it is likely to incur $56 billion more in losses than it can withstand.