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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Uranium Mountain's picture

I'm waiting for them to introduce ; 40, 50 and even 60 year mortgages.  Sure, the price of homes will soar but the payments will be low!

headless blogger's picture

The Boomers will like it, because they would be able to sell their over-priced house to some kid who's willing to put it on a 50 year loan.....as long as he/she can also include the student loan debt.

Of course, once the student loan is joined with the Mortgage, the kid will never be able to file bankruptcy on the Mortgage either....maybe that's the plan by the banksters.

warsev's picture

The only way to "get ahead" is to stop being a debt slave. That's tough when everyone wants you to take on more debt. Already a debt slave with student loans, car payments, and credit card debt? Heck, a mortgage is just the thing to fix it all. Not.

I was thinking just yesterday what I'd tell my grandchildren and great grandchildren the most important things I'd learned in life are. One of them is, "never become a debt slave".

Hongcha's picture

The only cheap asset, worth investing in right now, is cash.

YHWH is greater's picture

What could possibly go right ?

Your Good Friend's picture

Student loans or not, remember this folks......

 

If you have to borrow for 15 or 30 years, you can't afford it nor is it affordable.

 

 

 


Dragon HAwk's picture

So you made a stupid life choice, took out a loan for something that  doesn't pay you back.  But now your smarter and think you can pay off a House and the Loan..  my advise, don't forget to take out a big loan for a Boat. for in the driveway..    /s

navy62802's picture

Loan sharks will always find new and exciting ways to put other people into massive debt so that they can make a profit. How is that news? The only thing that is new here is the method of deception.

esum's picture

This is all headed right up the taxpayers ass via the wallet
Can't or dont want to pay your student loan....
That qualifies you for a home loan...
Whoever is proposing this should be executed for criminal stupidity...

sagramore's picture

Student loan debt doesn't even show up on a credit bureau anymore, this has been the case for many years. The banks are in on it.

A propos of nothing I just had one of my lines of credit I wasn't using cut in half. I think the shit is enroute to Chateau Fan.

Hongcha's picture

Man, they are desperate.  They have to let this thing take a dump, eventually.  When this pig goes tits up, be over the hill around the bend and dug in.  It will be a hellacious correction, uglier than 2007.

hendrik1730's picture

Well, you are probably right. Say 6 years ago, for practical reasons I applied for a credit card since my old outlandish cards were no longer accepted in my new home country ( I emigrated ). I had a hell of a problem getting one - THEN. 3 years later, those practical problems were solved and I scrapped the new credit card - with problems, the Cy involved would not hear of it ( and I NEVER used any credit ). So, I got rid of it in the end. TODAY, I get bombed out with credit card offers. When asked why, I said the last credit I ever took was in the mid-80ies of last century, for a mortgage that I paid back 10 years before due date. I DO NOT NEED NOR WANT CREDIT. It only enriches the banks. 

Those poor guys on the other side of the line just don't believe it. Living without credit lines seems to be "not done" today. I pity you folks who are in that position, and I was NOT born "rich". What I have, I worked for and I always saved - but not in stocks or bonds or any other paper shit. Consider this, folks. Kick out the banks, live according to your income and stop indebting yourself. It's the road to freedom.

corporatewhore's picture

What credit bureau doesn't have these lines?  I'm perplexed as I see them on Experian, Trans Union and Equifax all the time.

MrBoompi's picture

Don't these youngsters realize the only answer to a lot of debt is more debt?  Now they can all run their personal finances just like the US government!

headless blogger's picture

If someone takes out a mortgage and includes Student loan debt in it, they might not ever be able to get out of the Mortgage in the event of financial catastrophe which calls for bankruptcy.

This might be a trap into more debt a person can never get out of in the event of real hardship, just like it is now with Student loans.

DelusionsCrowded's picture

The message is that the world financial system is fucked ,so we may as well let people who need somewhere to live 'buy' a house instead of allowing masses of empty houseing delapedate .

Is pretty obvous the finacial systems going to go digital at + zero - interest rates with most of the pop on a weekly stipend /block chain currancy with useby date .

techpriest's picture

Silly solution IMO - why not just let the housing prices fall until they are affordable?

DelusionsCrowded's picture

Maybe its too late for that . The system would implode with debt ,and the market and society would be plunged into chaos of large pointless fluctuations causing huge misery .

The real factor ( I think )  in GFC was as result of  oversupply through automation . Up to a certain point economic inefficiencies in the past ment that there was alway undersupply or over demand . But now with computers and automation we've a situation of over supply and underdemand .. So the Gov has been printing money to allow people to consume in a dynamic and market orderly manner but  the Gov (bankers etc ) knew wouldn't be paid back but they have maintained the illusion that it will so finacial markets still factor in value  .Funny that Bitcoin and blockchain turned up when they did ?

 

It seems to me this is why the system has to move to emoney .Emoney can prevent hoarding of both money and goods by giving emoney a useby date ,  so that supply and demand can be properly connected; The factory knows how much milk to supply yet not over/under supply due to market speculators hoarding produce (because they have hoarded emoney)  to game the system .The factory is now supplying a commodity with few workers . Citizens who want money that Keeps--Kmoney have to supply a service , Kmoney  has +/- rates depending or market demand supply  also .Computers and blockchain can figure out how to translate between Kmoney and Emoney to keep demand and supply in kmoney stuff balanced . Having Kmoney gives people a purpose an objective to show mojo and identity , society has a pecking order at status can be displayed .

Well this is something my mind came up with . Perhaps there are better ideas . My mind is philosophically organized not mathematically so there might be a large error in this construction ......

 

DelusionsCrowded's picture

Imagine instead of having Shopping Centres we have Pleasure Centres ,that cost Kmoney to get into . In these huge Pleasure Centres are built artificle rivers and snow field bars and buskers , display shops and pickup points for things order online .

Entry cost is a yearly subscription and entry time is the key factor in subscription cost . Most convientient times are premium . etc etc . This is one solution to incentivies society .

83_vf_1100_c's picture

 "giving emoney a useby date"

Runaway inflation will force the same with paper money. You have to spend it before it is inflated away.

 

Houses Depreciate's picture

There hasn't been inflation in decades.

DelusionsCrowded's picture

Every 14days your account is recredited , if you spend it unwisely then you have to wait for new credit . Only certain things can be bought with emoney . like perisables and cloths . Since everybody has a constant supply of emoney but no more (it can't be transfered) , the things it buys are free . emoney is only a Tools for transacting and telling the machine at the factory to make some more . Whats free has no hording value .

Those who work at the factory are paid with Kmoney and emony , they have privilage thus their job is desired and they go to work with motivation.

doctor10's picture

can't let housing prices fall. Real estate is about the only collateral left in the debt ponzi. Once that starts to fall for real-why then the entire derivative house of cards detonates

techpriest's picture

I should have thrown in my /sarc tag. This is exactly why prices can't fall.

hendrik1730's picture

Because it's bad for the bankers. THEY reposses houses. And when those would need to be sold at lower prices, the BANKS bleed. It's far "better" to further indebt those poor ignorant milennials-with-college-degrees-and-no-financial-understanding up to their eyeballs so they become debt-enslaved to the banks for the rest of their lives. Debt is slavery, it is as simple as that and we are going back to the medieval feudal system. Your only "property" then was your body. Without any clothes. And no freedom to travel or to expatriate because THEN the landlord lost money you "owed" him.

I know of a couple, 35-36, 1 just finished "studying", both have college degrees in an area that makes me scratch my head ( what do you do with THAT kind of knowledge nowadays ), got recently a baby, #1 needs to find a job, #2 same thing, just lost the job, renting a small house ... well, good luck.

And they are among the "good cases", i.e. they do not carry severe debt levels ( to my knowledge ).

CHoward's picture

Of course.  Unfuckingbelievable.

Sparehead's picture

Unless this is some whacky Obama holdover's idea this doesn't smell right. The banks wouldn't want to let student debt be paid off with a morgage loan. Since Clinton/Bush, you can never walk away from student debt like you can with a mortgage. This could be used as backdoor bankruptcy for all the usless college reeducation/indoctrination debt.

Kefeer's picture

Simple - enslave via debt and transfer the student loan issue into a home loan and sell it to the pension funds while further inflating real-estate and keep the illusion alive.  

Later you default and the unsuspecting are always left with the hot-potato.

The good news is this will take a couple of years to fully play out; so we have some time to reach the lost with the good news.

Dilluminati's picture

That is a largely accurate description of the circumstance.  There is one huge problem however, the rapid rate at which job dislocation occurs in an economy with disruptive technologies.  All of the smartest copmpanies are telling us: heh brace yourselves for the disruptive technologies.  So what the old mortgage and student load debt represented was a withdrawal from the future for now under a reasonable expectation that the ROI would be made, now only the government willfully ignores the hard truths about an economy and would exasperate the cicumstances of being over levergaed.  

This is like taking student loans and sending them to the IMF.  When you search the internet for IMF success you see a few articles on the topic, but then when you look at these cases say as an example Turkey, what is happening on the spreadsheet and then in the streets are two different things.

There are different types of capital: hard currency, currency, stocks, bonds, and human capital.  Of the list and you should be diversified one of the items I have been thinking about recently is human capital and managing your life so to maximize that ROI and prepare for the disruptive technologies.  Again the actual root cause of the problem with education debt is not addressed, the actual facts and conditions are just being altered for short term spreadsheet results.  I was fortunate to work with DOE and Arnie Duncan (A person I respect) and I endorsed allot of what he did while in charge in respect to closing obsolete portfolios, I voluteered to go first with the one I was in charge of, and the 5 years allowed me to think long and hard about student debt especially when we modified the tuple for total debt a digit larger about 7 years back.  

But some of this debt simply goes bad.  Some of it is at a time when the onset of mental illness becomes readily apparent, or there is physical disabilty, or in the future their is a destruction of career either by greed, technological obsolete position, or macro economic forces.   Sure allot of the bad debt is due to poor choices like spending money on spring break and designer fashion furbies, even beer and pizza.. but there will be an increasing percent of non-performing loans that are in effect unavoidable and the costs of that moral hazard in lending will also be born upon those capable of producing.

This isn't some new economic process, people could and have always refinancced debt.  This is as you describe it, the bundling of bad debt and the wholesale distribution of that into retirement accounts.  Again take a look at the supposed IMF wins, then look at the balance sheet and then the street conditions.   Calling Turkey a success is similar to simply ignoring lead in water, not seeing a Hillary defeat in the data, or claiming the punch with the turd in the punchbowl is fit to drink or these CDO's investment grade.  The mark to market is distorted and while these antics can go on for quite some time, and I selfishly hope they do, I'll nonetheless invest into categories of capital and avoid these products as much as possible.

I have accepted the fact that I'm on my own in respect to my future, I accept that I came into the world by and large alone, and will leave it the same way.  Allot of buyers of education will do so impulsively, will purchase homes impulsively, wll marry impulsively and over 50% will regret that impulsive behavior.  People are weak, greedy, lazy, and stupid by and large.  Ipso Facto, so loans like this rarely work out.

artichoke's picture

Obama was about slavery -- your slavery, esp. for white males, but many others too.

Trump is more about freedom.  If this cheats a bit to get students out from lifelong debt, he'll do it.

And those are votes in 2020 and beyond, for the ones that really helped -- Trump and his crew.

Last of the Middle Class's picture

Just sold a house to a guy who didn't go to school Got a skill, saved some money, and put it down on a house. Funny how that works without the massive student debt for worthless education scam going on these days.

To Hell In A Handbasket's picture

The Ponzi scheme needs more dupes to come in at the bottom, to keep the game going. This is not "kicking the can down the road". It's just stupidity. Is there not a cross party consensus of politicians, willing to stand up and say "Stop this game, enough is enough"? Who the fuck are looking after the interests and well being, of our future generations, if not our politicians, elected on the basis to do such a thing?

DelusionsCrowded's picture

We are heading full throttle to a fully automated economy . Best to start thinking in a new pardigm . This requires deep anaysis of human nature and self understanding of motives .Why do humans do the things they do ? How plastic are the values the we consider fixed ?

Imagine when everyone has a personal human looking robot a 'human' much smarter and more perfect than you , yet under your comand . So what worth does a real human place on her self , how can a person show talent when the human machine is much more talented ?

Were looking at a very profound sociological consideration . Infact an identity crisis for the human race .

Dilluminati's picture

I have been giving that allot of thought.  One of the ideas that came to me was that history is a pile of rocks, really no connection to the present beyond anecdotal myoptic and unreleated fact, at the rate of change currently when in the past it was an almost miletsone.  Be sure to travel as an example to France to look at their culture as an example, their rocks and castles, the pyramids, wtf does any of that have to do with tody's realites?  

Then there is the obsession with brand marketing or media brainwashing, similar google the video on Youtube of some peasent crying and thanking dear leader in north Korea for a fish.

https://www.youtube.com/watch?v=TmDJqR3Q2VI

You know one of the best books I have read was the true believer by Eric Hoffer

http://evelynbrooks.com/wp-content/uploads/2011/10/The_True_Believer_-_E...

Like so much it is free, but gets peopel to examine objectively their beliefs

then there is zen and the art of motorcycle maintenance which examines "quality"

http://www.arvindguptatoys.com/arvindgupta/zen-motorcycle.pdf

and then finally  Lila: An Inquiry Into Morals

http://www.iamronen.com/wp-content/uploads/2010/05/ReadingLila.pdf

which describes how larger groups consume smaller ones and is very pertinent to the age of disruptive technologies and age of discontent.

Were looking at a very profound sociological consideration . Infact an identity crisis for the human race .

I suggest reading viktor frankl man's search for meaning

We have entered the age of discontent

DelusionsCrowded's picture

 Be sure to travel as an example to France to look at their culture as an example, their rocks and castles, the pyramids, wtf does any of that have to do with tody's realites?

 

Thats what it means to be human . Identity comes from tribe as much from family .Both have monuments and memories that establish our ego's in a social structure . A persons pride rests not only on the things they do but with the things other members achieve . Those winners (as interpreted by the tribes beliefs and realities)  are given elevated social status . Infact when we look at why people do many things it is to become a 'winner' and be elevated.

Farqued Up's picture

QE Forever and glub, glub, delicious Ponzi Koolaid. What can go wrong?

The Ponzi is the Tasmanian Devil of our debt slavery.

Bemused Observer's picture

Yeah, I guess it would be nice if all those future defaulters had actual assets worth seizing...LOL!

 

A day late and a dollar short. Nice try, but fuck off. Really. Those student loans are gonna self-destruct, with nothing left in the aftermath. And there's not a goddamned thing anyone can do about it. And the lenders are just going to have to eat it, as there's nothing to take, and no appetite for bail outs.

Davidduke2000's picture

I am going to use a Reagan favorite  "HERE WE GO AGAIN"

Ban KKiller's picture

Try to validate student debt, or any debt, with a qualified written request. Servicer can not validate the debt in many cases as the debt has passed through so many hands with original documents shredded long ago. 

ThanksIwillHaveAnother's picture

Its gonna end in hyperinflation globally.  A first for humanity.

RathdrumGal's picture

We sold all our baby goats in a week, the mom's are producing nicely and I will be freeze drying yogurt and chevre this week.  The hens are at max production and we have already freeze dried a load of eggs.  The pasture is greening nicely and our feed costs of down.  My early lettuce is coming up, the pears and apple trees are in bud.  Our hard winter may have killed my asparagus and damaged my grapes, but all in all, I should have a good season.  Oh, sorry, ....... you were saying something about hyperinflation?

artichoke's picture

Inflation yes, hyperinflation no.  Hyperinflation only happens when you owe debt in a currency you don't print.  As reserve currency, there will be no hyperinflation in USD.

waspwench's picture

You think we will be a reserve currency forever?

oldguyonBMXbike's picture

Yep, it's all fraud. When someone buys my debt, I thank them. 

corporatewhore's picture

my advice, when you challenge any proof of debt: mortgage note, car, student loan is to live in a state where the judiciary has not been bought and paid for by the banks or "contributions" made to reelection campaign or publication of self help book or memoirs by the judge.

my experience, in my state, is a glaring look /deer in headlights and lack of interest in the argument or feigned disbelief.

good luck.

mo mule's picture

World War 3 between North Korea, US, and Russia begins in earnest May 13,2017. When this is over in Oct, 2017 there won't be much left of the US or North Korea but most of the Russia's will be able to return to there homes.  This new deal for the kids is not something that matters much in the long run.

Rjh's picture

Next time, you should try typing a comment without a Russian cock in your mouth.