FHFA Say Watt?
President Obama thanks the Senate for what he knows will be a speedy approval of Mel Watt as the new head of FHFA.
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Seems like Mel Watt becoming the new head of FHFA has kind of gone quiet for a while. We really haven’t heard much lately but that has changes. The President is already thanking the Senate in advance for Watt being appointed as the head of FHFA. Oops. Doesn’t look like that’s going to go through so easily. Here’s the bottom line. What does it matter to you as a loan officer or a real estate professional on the street?
Why would you care who becomes head of the FHFA? Each and every day you do your routine and that’s all you’re concerned about right? Yeah us too. But here’s why you should have you eye on this matter. See, DeMarco (the guy currently in charge of FHFA) doesn’t want to allow principle reductions as a means of modifications. Some on the Hill like this cause they feel that it will make investing in Mortgage Backed Securities a safer bet going forward and investors will continue to do so. But many believe that Watt will push for principle reductions as a means of modification.
The problem here is that it compromises the integrity of investing in MBS. If you invest in MBS and you know there’s a good chance that you’ll loose a significant amount of your investment on the whim of a modification, you’ll probably look elsewhere to put your money. If this were to occur you’d see rates shoot through the roof and underwriting guidelines become tighter than a gnats behind. So that’s why you may want to take some sort of interest in the possibility of Mel Watt becoming the head of FHFA.
If that happens, your job becomes very difficult and the new home buyer pays a big price for the sake of existing homeowners getting the benefit of a principle reduction as a means of modification. Call it whatever you want, but that’s just the way it is. Of course, we all have our opinions and we’d love to hear yours down below.
Have a great day!
Frank and Brian.