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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Bernardo Gui's picture

The official remedy for excessive debt is always . . . more debt.

oldguyonBMXbike's picture

Higher education is systemic fraud. No one should have to pay for that BS. Let the education indusyry, bankers and government eat the loss.

DrSyn's picture

What's the difference between being accused of "red lining" and "preditory lending?"  Answer: about 1 year.

 

Davidduke2000's picture

It's like a free house, no need to make a single payment , the central bank will buy the mortgage even the loans are inactive the snowflakes can live for free no harm done it's money printed out of thin air and very good for the real estate market and the economy .

the us is beating nigeria when it comes to financial fraud. 

corporatewhore's picture

I just knew they'd do this.

So now I can count all my relatives who don't live with me for income qualification, I can disregard college loans in my dti calculations, and I only have to put zero with USDA or 1% down at quicken (who gives me a grant to make the dp 3%).  Everything is awesome again!!! /sarcasm

I am trying to find articles written in 1929 about how great everything was since I think this is exactly what will repeat.  It is truly insane.

83_vf_1100_c's picture

There must be a few good booke on the crash of '29. In the text for Alcoholics Anonymous Bill Wilson briefly discusses it. Everone is exuberant and making money hand over fist. He drinks to celebrate the good times. Then the crash, he drinks more.

Don't forget to stack cases of your drink of choice. I am on the wagon myself but I do have some good strains of seeds stashed away.

Grandad Grumps's picture

Why not, since independence for anyone, including the oppressor class, is increasingly becoming illegal?

Why not just submit to the beast system and depend on it to take care of you? The price is only you soul ... something that many people do not even believe in.

A useful thing they could do is get rid of the $3000 cap on investment losses. Even I (sworn off of giving my money to the rigged system) might put money back into the system.

johnwburns's picture

Rejoice citizens! The glorious morning of Next Tuesday is here!

Millenial children are like lampreys, you have to pry them off of your bank account. 

BSHJ's picture

So let's see if I understand this....virtually no existing debt will be considered when determining a credit rating or reasonable limit to the amount for new lending so.......i can see future House Hunters episodes......after viewing three homes, the young new buyers with their $600,000 'budget' will chose the home priced at $675,000 and then they will offer $825,000 after including $150,000 outstanding student loans.  The show will end with the happy couple showing off their new dream home to the viewers and equally happy family and friends who no longer have to worry about the prior loans they had co-signed on.....everything is beautiful.  

artichoke's picture

This raises a very good point: the risk of a cash kickback that pays off the student loan.

THEN you can walk away from the real estate, no longer indebted.

FinsterF's picture

The GSEs need to lose their government backstop now. They're clearly incapable of learning from past mistakes.

Non-Corporate Entity's picture

Hey Fannie and Freddie, how about calling out Obomber for stealing your funds to prop up his fraudulent ObomberCare? That would be really innovative!

rpboxster's picture

From borrower's pov, wouldn't it be smarter to replace non-extinguishable student loan debt with mortgage debt that you could walk away from?

artichoke's picture

That's what I thought at first, but then I realized it how clever the scheme is.  You can't do that.

If you default on the mortgage, you don't get cash back.  If you sell the property, the mortgage gets the cash before you do.

You can rent out your property and use the rent to make student loan payments, but then you're paying the mortgage and maintaining a business.  Not a bad thing at all.

Archive_file's picture

Musical chairs, people. Musical chairs...

Angry White Guy's picture

Forever a part of Colorado lore :) love that guy.

ptoemmes's picture

Where's the Zero down 200% LTV?

The Gladiator's picture

This reads like a late night GMAC commercial. Look! Here's what our new program will do for YOU!.

(This one sentence sums it all up): "and, in turn, allow lenders to serve more borrowers".

In a debt based system, that, after all, is the only thing that matters.

Robert Trip's picture

The Shylocks are certainly getting their pound of flesh from our youngsters from credit card kiosks on campus to easy loan education money.

Jesus threw them out of the Temple and the fuckers ended up in the United States, big time.

Sure, our youngsters are partly to blame for their debt but when you have easy money continually waved in your face when you're 17 or 18 years old I put most of the blame on those fast-talking blood-sucking Shylocks.

The Fuhrer knew how to handle them.

Angry White Guy's picture

That's funny, b/c when I post some honest truth like the above the down voters and anti-Nazi crowd come out with pitchforks.

Must be my name...

SmedleyButlersGhost's picture

OK - I think I understand.  After the kid gets the new house and moves out of the parent's basement, the parents can bail out of their underwater mortgage (caused by the student loan guarantee) and move into the kids' basement.  Probably should just do the whole transaction on the original house to save all the moving etc etc.

Tachyon5321's picture

neutralization theory holds that criminals are able to neutralize values that would otherwise prohibit them from carrying out certain acts by using several methods of justification: "denial of responsibility," "denial of injury," "denial of the victim," "condemnation of the condemners," and "appealing to higher loyalties.

 

Is Jonathan LawLess a criminal using the neutralization theory to justify doing this? 

 

 

UndertheDRADIS's picture

Most of the criminals I interviewed usually claimed that the two pounds of coke under the passenger seat belonged to their cousin.

ropeknot's picture

Where's my bailout?

Oh yeah, it's called the soup line.

oldguyonBMXbike's picture

The bailout is coming, unless you're a Boomer or a millennial...

 

Boomers are all going to die soon from old age/lousy healthcare and the Millennials will be sent off to slaughter in wars.  The rest of us will live like kings. Lmfao

moonmac's picture

Buy a house never make a mortgage payment and live rent free for 5 years saving all your money to pay off your student loans.

foytik's picture

Bullish! The credit rating agencies will get big payoff to rate these loans AAA, they get bundled into great real estate default swaps, everybody wins!

oldguyonBMXbike's picture

A third of millennials live at home with their parents. The truth is, if they didn't, their parents would be homeless too.

Harry Paranockus's picture

Yes sir. We are raising your debt ceiling. You can now borrow up to $500,000 for a home as long as your debt to income ratio doesn't go over 99.999%.

mary mary's picture

A 5th-wheel makes an excellent house.  Park it in your parents' back yard.  Just make sure you tell them that, in return, you are going to do ALL of the yard work.  And if they cook, you will do the dishes.  And as a bonus, tell them they can borrow it 4 weeks a year to go travelling, during which time you will watch (and clean) their house.

Families, not government, are the solution.

oldguyonBMXbike's picture

I was considering buying a super cheap house,  because the mortgage would be cheaper than renting.

Then instead of paying school/property taxes, I'll just invest in guns and ammo.

Falling Down's picture

Never go full retard...

Dg4884's picture

A government shut down would be great right about now.

LawsofPhysics's picture

Great, another financial "product" of mass destruction...

fuck em!

BSHJ's picture

If each of you will pay me $10.00, you can use my name for 'Debt paid by Others'.  Go ahead, start sending me the money......

run2thebank's picture

unless i'm missing something this is not new. you could always exculde debt if paid for by others. needed 12-24 months canceled checks or bank acct withdrawls from that other party. which is usally were the issue comes cuase it is cash, half payents, they lied, or mixture of both. if the credit show'd  any 30-60-90 day lates nope it is inculded. Cash refi to payoff student debt sure it is fixed end terms not revovling debt, grant some banks allow revloving debt to be paid and not inculded. if you cash out to payoff your car do they ding you for that debt, nope. as for fixed term debt, payoff balance and payoff requested/processed thru title/escrow. using credit report to show payment is crazy, i have seen huge dfferances when getting payment coupons. with all this said, I beleive they will do everything they can to push this bubble higher and higher.....gonna be ugly...but hey they al ready appoved the bailout thur FHA, USDA, VA, the ole GSE's, 

We Are The Priests's picture

When "creative" financing reaches the point of willful stupidity at a rediculous level, you know the crash is near.  But don't worry, this situation only exists in the mortgage market, therefore, any "corrections" will be contained to the sector.

Oh wait, what's that you say?  Bubbles everywhere?  Ha! Nonsense.

corporatewhore's picture

"There'll be tanks in the streets if we don't bail out the banks!"

wasnt that said by Hank P?

UndertheDRADIS's picture

I had to qualify for a cash out on my house based on making FULL PAYMENTS on my student loans. How the hell are the Snowflakes with Hobby Degrees going to qualify for a house when they have a student loan payment that is theoretically larger than their income as a Barista?

corporatewhore's picture

you only pay ten percent of your income on income based repayment plans.  most aren't aware this is available and the servicing companies aren't required to my knowledge to inform of this.

the websites of the servicers of the loans range from awful to incomprehensible.  It is very confusing to try to get the repayment set up correctly.  Navient is awful and you're talking to Nancy in Mumbai.

artichoke's picture

Indeed they aren't required to tell you.  Navient has been in the news lately for not bothering to tell borrowers about this.  Their excuse was that it costs them more hours to set up income based repayment, and why do a hard thing when they nominally fulfill their obligation by doing an easy thing.

The person who loses their house, is divorced etc. because Navient wouldn't spend another $100 worth of their precious time setting up the right plan for them will sure appreciate that.

24Richie's picture

The details of this are not yet out but the elimination of debt paid by others is not likely to be a "wink-wink" thing but rather will require 12 months cancelled checks or bank statements showing that those debt were indeed paid by others.