Fannie Introduces "Innovative Solutions" Allowing Student-Debt-Laden Millennials To Buy A Home

Tyler Durden's picture

So what do you do when a massive student loan bubble results in crippling leverage for an entire generation of your population rendering them financially unqualified to obtain mortgage financing and their 'God-given right' to a slice of the 'American Dream'?  Well, you simply change the rules to allow mortgage lenders to ignore all that pesky student debt...anything less would simply be evil and potentially racist, sexist and all sorts of other -ist words.

Luckily, Fannie Mae is right on top of the issue and has just released new rules allowing millennial borrowers to, among other things, simply exclude student loans, credit cards and auto loans that are "paid by someone else"...wink wink...when applying for a new mortgage.  As an added benefit, taxpayer subsidized mortgage loans can also now be used to repay student debt...Hooray for taxpayers!

Fannie Mae announced new policies that will help more borrowers with student debt qualify for a home loan. These innovations address challenges and obstacles to homeownership due to a significant increase in student loan debt over the past decade and provide access to credit for qualified borrowers. The new solutions give homeowners the opportunity to pay down student debt with a mortgage refinance, allow borrowers to exclude non-mortgage debt paid by others as part of the loan application process, and make it more likely for borrowers with student debt to qualify for a mortgage loan by allowing lenders to accept student debt payments included on credit reports.

 

Student Loan Cash-Out Refinance: Offers homeowners the flexibility to pay off high interest rate student debt while potentially refinancing to a lower mortgage interest rate.

 

Debt Paid by Others: Widens borrower eligibility to qualify for a home loan by excluding from the borrower’s debt-to-income ratio non-mortgage debt, such as credit cards, auto loans, and student loans, paid by someone else.

 

Student Debt Payment Calculation: Makes it more likely for borrowers with student debt to qualify for a loan by allowing lenders to accept student loan payment information on credit reports.

 

“We understand the significant role that a monthly student loan payment plays in a potential home buyer’s consideration to take on a mortgage, and we want to be a part of the solution,” said Jonathan Lawless, Vice President of Customer Solutions, Fannie Mae. “These new policies provide three flexible payment solutions to future and current homeowners and, in turn, allow lenders to serve more borrowers.”

You know, because more debt is exactly the cure for millennials suffering the financial consequences of too much debt. 

But, at least this should help with inflating Housing Bubble 2.0.

Housing

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mkkby's picture

Millenials deserve the same chance we got.  Live payment free for years and years, because the bank doesn't want to foreclose.  Then strip out the copper and do it again.

What a mess_man's picture

Gotta keep feeding that credit beast. Or else it all goes boom (which of course it will eventually anyway)

warpigs's picture

I work in this space. Unless the parents are cosigners or take over those student loans, there is not a loan type at the moment which will let me exclude/omit the student loan obligation from the loan application. This article is absolutely garbage and has no root in reality nor Fannie/Freddie loans, nor govie loans like FHA, VA, nor USDA.

 

The article presents zero new evidence of increased latitude for debt laden potential buyers.

 

B.S.

BigFatUglyBubble's picture

So is housing due for a big correction soon, or is everything awesome?

FreeShitter's picture

Correction, recession, depression, and for certain the word crash is strictly forbidden by our khaazarian, keynesian - control peeing overlords.

espirit's picture

I'm looking forward to living in a tarp-over cardboard box in an underpass.

No Rent!

warpigs's picture

Whoa. That photo is out of hand!

 

Housing is a bit perplexing to me. I have to confess I have some scar tissue from the last collapse, so I am always looking over my shoulder a bit. Not that it matters, but all markets seem wildly inflated (equities, dollar, r.e.).

 

Here locally, everything is multiple offers over list price and appraisal value. I reside in Northern Colorado.

 

The only thing I can think of, considering my above comment about inflated markets everywhere and for everything, is that maybe housing is not directly scalped this time, but that it instead takes an indirect hit. But nothing operates in a vacuum. If the auto industry goes belly up, that means loans will in auto and that will impact credit. Impacted credit impacts housing applications. Same for student loans. Rates are damn near the bottom. If they tick up .75-1pt from where they are now, that logically has an e-brake impact on sales.

 

We just hit Canada with a tarrif on lumber. That should impact about 18-30% of the soft wood used to make homes.  Construction defect legislation sucks and also kills off wanna be housing starts, as do utility hook-ups and the rising costs of water.

 

As far as I am concerned, and to directly answer your question: I feel we are in the midst of a blow-off event and the euphoria is high, like it is in stocks. We are in the process of trying to get the last remaining potentially eligible buyers into the market now (stocks and homes). Unless the underwriting guidelines are changed drastically, such as by using stated incomes, stated assets, etc etc etc, then current guides can not get a whole lot looser. I would anticipate, however, greedy assholes to waive student debts entirely, or to change the guideline to allow me to omit the student loans which are currently deferred on the credit report. That would allow a stream of new millenials to buy. 

 

What a mess...

Your Good Friend's picture

It's all stated income anymore and has been for years.

techpriest's picture

I dunno. In my case they wanted pay stubs, W2s, and bank statements.

Of course, if we had none of that maybe there was a different person we would have been routed to.

noless's picture

Me too, pretty sure I just wasn't on the "approved" list.

warpigs's picture

Whoa. That photo is out of hand!

 

Housing is a bit perplexing to me. I have to confess I have some scar tissue from the last collapse, so I am always looking over my shoulder a bit. Not that it matters, but all markets seem wildly inflated (equities, dollar, r.e.).

 

Here locally, everything is multiple offers over list price and appraisal value. I reside in Northern Colorado.

 

The only thing I can think of, considering my above comment about inflated markets everywhere and for everything, is that maybe housing is not directly scalped this time, but that it instead takes an indirect hit. But nothing operates in a vacuum. If the auto industry goes belly up, that means loans will in auto and that will impact credit. Impacted credit impacts housing applications. Same for student loans. Rates are damn near the bottom. If they tick up .75-1pt from where they are now, that logically has an e-brake impact on sales.

 

We just hit Canada with a tarrif on lumber. That should impact about 18-30% of the soft wood used to make homes.  Construction defect legislation sucks and also kills off wanna be housing starts, as do utility hook-ups and the rising costs of water.

 

As far as I am concerned, and to directly answer your question: I feel we are in the midst of a blow-off event and the euphoria is high, like it is in stocks. We are in the process of trying to get the last remaining potentially eligible buyers into the market now (stocks and homes). Unless the underwriting guidelines are changed drastically, such as by using stated incomes, stated assets, etc etc etc, then current guides can not get a whole lot looser. I would anticipate, however, greedy assholes to waive student debts entirely, or to change the guideline to allow me to omit the student loans which are currently deferred on the credit report. That would allow a stream of new millenials to buy. 

 

What a mess...

Your Good Friend's picture

I dunno about that. Prices are falling at a pretty good clip in Boulder. Rental rates are falling too.

rejected's picture

Yes,,, ZH does add some color to their articles on occasions........

yrad's picture

You can now also use the income of a non borrower, non relative, if you can prove they will occupy the property. Like providing an "I swear" letter.

I'm not joking. I write these loans...

warpigs's picture

Just chiming in as a colleague to let others know you are correct. Multi-gen homes, border income etc. Guides are loose for sure. I just cringe when people tell me standards are too tight.

techpriest's picture

What surprises me is, it seems that there are so many regulations that small banks are being driven out of business, yet these types of activities still go on. Regulating the wrong things?

Gargoyle's picture

Same thing on the loss mit/modification side...we'll take any promise of non-borrower income.  Any reasonable scenario gets modified.  It's all about keeping the cash flowing to the note holder. 

swmnguy's picture

The people who have crushing student loan debt are paying rent right now.  It's possible they'd pay less each month if they had a mortgage.  If you mind your P's and Q's, taking on debt to buy a home could be a very solid financial move, long-term.  As opposed to borrowing to buy a car or consumer goods. Buying the right house at the right time for the right price has been a part of my rising into the middle class.  

And while I myself don't have a college degree, it would have been a helluva lot easier for me if I had.  But not everything works out for everyone in the right sequence.  The problem with student loan debt is the cost of a college education, which is way out of hand.

 

Dilluminati's picture

Not so, you have to be disciplined and have an accomplishable plan.

Buy a book, refuse to fail, CLEP or get the lifetime credits

https://www.geteducated.com/cutting-online-university-cost/145-online-li...

I was a lead for one of the portfolios at Dept ED.

Teach yourself that teaching yourself is the key.

 

Cabreado's picture

"So what do you do..."

1) You Focus on a thoroughly corrupt and defunct Congress.

2) Instruct Your Congress to shut Fannie Mae down.

sorta puts the onus on The People, eh?

I believe that was the original idea.

Yen Cross's picture

 Usury 101 -Cal Berkley--- Specializes in those degrees.

 

 

Usury is, as defined today, the practice of making unethical or immoral monetary loans that unfairly enrich the lender. Originally, usury meant interest of any kind. A loan may be considered usurious because of excessive or abusive interest rates or others.

youngman's picture

We know its soon to be over when the BLM people start demanding loans for their neighborhoods.....then they can blame it on the banks again..that they did not know what whas in the documents....and will just live their forever as it will be racist to kick them out....

Bunga Bunga's picture

Subprime 2.0, here we are again.

khakuda's picture

Free education and free house courtesy of the American taxpayer. Joke.

Joebloinvestor's picture

Barry gave them a phone to.

Who is going to give them a car?

Catullus's picture

But can i buy my home from zillow and just sign for the mortgage doc with my Apple touchid?

quartshort's picture

Lift the burden of getting a mortgage. Rocket mortgage to the rescue! Brought to you by Quicken Loans.

Good Lord we are fucked. My advice to the millennials: Buy everything of long-term value you can get your hands on w/ non-secured credit, pay your bills till you can get your limit raised, raise the shit out of your limit, buy way too much value and default. Hell, stick it to the boomers before they do it to you... oh wait, SUCKKERS!!!

Instead you settled for a certified paper decree and a iGadget. Enjoy.

Joebloinvestor's picture

FIAT makes it all possible.

 

Your Good Friend's picture

The best indicator yet housing is imploding.

 

They're desperate.

Dilluminati's picture

I read this and think, they know not what they are getting into if they service the loan.

A 30 year old millenial doesn't get a 30 year loan, 15 years if they can refi into it, on top of student loans, death and taxes, in that order...

I'm treading water at the 55 mark in the midst of a forced re-engineering, and  I own my home (no mortgage) and the challenges I have are enough

my advice: don't do it, you need to be able to stay flexible, unless you have kids, don't do it

homes are traps you can't get out of easily, they can trap you.

 

Your Good Friend's picture

Gawd.... The best path forward for you is dump the house for whatever it will fetch and carry on.

Dilluminati's picture

Student Loan Cash-Out Refinance: Offers homeowners the flexibility to pay off high interest rate student debt while potentially refinancing to a lower mortgage interest rate.

I dumped property last year and glad the fock it is gone.  I own the home I'm in now, but the taxes and upkeep are about par with renting.  Still have one in highschool so another few years anyway.... 

The part of refinancing to pay off student debt.  Since when was that not the case?  Let me see I can payoff higher rate of lending with lower rate of lending???  Revolutionary..

Fannie needs to hire all the old portfolio managers that ran up the debt crisis in student loans to manage the new round of bad collateral and promisary notes that needs to be tracked.. lol

TOPS will be doing skip trace biggley



NevadaMirage's picture

Refi student debt into mortgage, declare bankruptcy. Problem solved.

Zorba's idea's picture

Some perspective for todays modern consumer...in 1975, paid $35 per credit hour for private college education...earned enough from summer job to pay entire annual tuition. Today, it take a entire career to discharge. How did this happen? Deflated dollar/dengrated fiat/inflated cost of evrything. the american experience...fleece and debt

swmnguy's picture

Financialization, and the adoption of the corporate model.  That's what happened in higher education.  I grew up in an academic family and saw the process first hand.

When the GI Bill and the Baby Boom dramatically swelled the number of people looking to get a college education, a lot of colleges were built to meet that demand.  That led to a huge increase in faculty, administration, support, etc. jobs.  Those were solid middle class to upper middle class jobs, and all those new colleges were a huge benefit to the communities they were in.  Then that college-aged population tanked in the 1970s.  Many of those colleges faced closure, with all the lost jobs, lost revenue in their communities, etc.

Somebody had the idea to form a partnership with businesses.  The deal was that colleges would start all kinds of vocational and Business programs, in cooperation with business interests, and then businesses would require degrees in those programs for their good jobs.  That worked fantastically; it relieved business of the cost and trouble of training employees, transferring that cost onto the employees themselves; and it saved the colleges and universities.

That also introduced to colleges the notion of the student as a customer who should get what he or she paid for, creating increased pressure to give passing grades, as well as to eliminate difficult or troubling curriculum, or just subject matter students don't like.  And college administrators started to see themselves as Executives, entitled to Executive-level pay and perqs, as well as the squadrons of staff and assistants, as is customary for a solidly feudal Executive class.  The growth in the number of Administrators and their pay and perqs in academic life is astonishing and incredibly lavish.  People talk about the pay given to tenured professors; that's nothing.  Most faculty jobs in colleges now are adjunct positions that don't even pay the median wage of $30,000, so those people can't pay their own student loans.  The money flows to the top, more and more into fewer and fewer hands as one goes up.  The usual crony-capitalist corporate model.

That, in addition to the overall financial decay you describe, is how college tuition costs have gone up more than anything else except possibly health care in America over the past 40 years.

My last quarter in college, tuition and fees for a 3-quarter academic year cost about $1,200.  Books, room and board or living expenses additional, of course.  Now they use semesters, "banded" tuition so between 12-18 credits costs the same, they don't charge in-state or out-state tuition differentials; but it's about $8,300 for tuition and fees for a year.

They have a really nice football stadium though, for a school of about 2,000 total students in a town of about 12,000 people.

techpriest's picture

Thanks for explaining what "adopting the corporate model" means. There is a dichotomy about that phrase, in which it either means "pay attention to costs," which would be a good thing, or "Charging for anything is just WRONG."

Now I see that its a false dichotomy, and that there was something else going on entirely. I have a PhD myself and was somewhat aware of IABs (industrial advisory boards) and their role in curriculum, but I wasn't aware the relationship was that direct.

It's also funny to see how "help" in the form of the GI Bill was in fact the snowball that started the avalanche.

silverer's picture

Because financial suicide for everybody is fair.

hotrod's picture

ABSOLUTELY REPULSIVE

Let's roll that student loan right into the mortgage

Richard Head's picture

But then you can default on the mortgage and walk away! Can't do that with the student loan. Isn't this an elaborate student loan bailout?

Cast Iron Skillet's picture

that's what it seems like to me, too.

headless blogger's picture

My guess is they won't let you out of the mortgage either, in the event of bankruptcy. That way they got you on the hook for even more stuff. They will own everyone who does this.....for their entire life.

aloha_snakbar's picture

Just stand down and wait, Millenials.. the coming real estate meltdown will make what happened in '07/'08 look miniscule by comparison... it literally cant NOT happen....McMansions for pennies on the dollar...fuck Uncle Scam... save your money and pay cash...

decentralisedscrutinizer's picture

 

Why is everybody so afraid to admit that almost all the world’s economic and political problems revolve around the hegemony here in America of the global corporate cartel, which is only headquartered in the US because this is where their military arm resides. The only way to regain our (we People) sovereignty as a republic is to strictly curtail the priveledges of any corporation doing business here. The government must be reconfigured to represent the Middle Class if we are ever to restore sanity, much less prosperity. There will be no peace and prosperity in America until we, the good folk, drain the "swamp" created by the US Constitution. The "swamp" can't be drained at this point because the Constitution  does not contain a “drain plug". This is the kind of "plug" it needs. And it needs to be pulled ASAP:

 

28th Amendment

 

Corporations are not persons in any sense of the word and shall be granted only those rights and privileges that Congress deems necessary for the well-being of the People. Congress shall provide legislation defining the terms and conditions of corporate charters according to their purpose; which shall include, but are not limited to:

 

1, prohibitions against any corporation;

 

a, owning another corporation,

 

b, becoming economically indispensable or monopolistic, or

 

c, otherwise distorting the general economy;

 

2, prohibitions against any form of interference in the affairs of;

 

a, government,

 

b, education, or

 

c, news media, and

 

3, provisions for;

 

a, the auditing of standardized, current, and transparent account books, and

 

b, the establishment of a state and municipal-owned banking system

 

c, civil and criminal penalties to be suffered by corporate executives for violation of the terms of a corporate charter

 

The biggest hurdle to convening an Article 5 convention will be to silence the 24/7 corporate media propaganda machine which will “guarantee” that a constitutional convention is the sure path to anarchy and chaos. There are so many issues that need addressing that it will be extremely difficult to focus on just one issue: draining the swamp; first and foremost. Just that one thing: get the idea of incorporating business enterprises (or political movements) out of our collective thought process. Incorporation is a subtle, inconspicuous little glitch in our collective philosophical evolution and, as appealing as it is to join groups and let them do your thinking, such groups immediately assume identities of their own and become eternal super-groups with their own agenda and more money than the sum of all members’ total investment. Corporations can’t even be controlled by their own executives; they’re “fictitious persons”, legally, morally, and tangibly. Yes, corporations are comprised of good, church-going, honest, people, while the corporations they belong to, work for, administer, or own, go about the planet (and at home) committing genocide, or worse. You can spend a lifetime fighting legal injustice, global warming, illegal immigration, racial disparity, Democrats, Republicans, Joos, globalization, and bathroom assignments, but nothing is going to change so long as corporate media has your brain in a bottle. If nothing else or until a better organizational plan comes along; try whispering in your neighbor’s ear: “Article 5 Amendment 28. Article 5 Amendment 28. Article 5 Amendment 28” until we all understand what’s necessary and act in unison when opportunity presents….

    

sagramore's picture

Go to the City of London or Guernsey and start dealing with these corporate "persons" on a level field. You don't need all that concon stuff, you need to start hanging fraudsters.