David Stockman’s Note: Tonight, I’m streaming a live video broadcast from my home in Aspen, CO. I believe the most popular investment of the 21st century is about to implode. The collapse of this $3 trillion bubble could be the “final nail: in your retirement if you’re unprepared. But, if you invest in a discreet alternative investment right now your savings could be spared… and you could actually make up to 300% by July. That’s why I’m hosting this live video training from my home. I’ll lay out all of these details and more for you. All you need to do is RSVP right here before your spot is taken. There’s nothing to buy in order to get access — it’s free.]
Here we go again.
The US suffered from a near catastrophic housing price bubble burst in 2008 and home prices kept falling until 2012. That is, until The Federal Reserve unleashed its third round of asset purchases of US Treasuries and Fannie, Freddie, Ginnie Agency mortgage-backed securities.
With home prices getting more and more expensive since 2012 and real median household income still below 2007 levels and mortgage purchase applications below 2007 levels (partly because exotic ARMs are no longer in vogue). The only product that is still in vogue, at least recently, is low down payment mortgages.
Now we have Bank of America jumping into the pit of fire once again, along with Freddie Mac and a credit union named Self-Help Federal Credit Union (a Durham NC lender who was quite active before Fannie and Freddie were put into conservatorship.
The good news is that Bank of America will not retain any risk if the loans default. The bad news is that Freddie Mac and Self-Help Federal Credit Union will be on the hook for the risk.
With the Cleveland Fed Financial Stress Index at the second highest since the financial crisis, it is a gutsy move … by Freddie Mac and Self-Help.
To be sure, with The Fed pumping air into housing prices and declining real median household income, more and more households find themselves priced out of the home purchase market. Wait. Isn’t this what happened in 2005-2007? At least there aren’t NINJA and Pick’a’pay ARM loans anymore (to speak off).
There is no doubt that Freddie (and Fannie) are feeling some pressure for their affordable housing mission. Particularly since FHFA Director Mel Watt is an attorney from Charlotte NC, the home of Bank of America.