Pete the Banker: The Feds Risk Killing Housing Market to Cover Up Future Student Loan Catastrophe

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I guess the Administration and Congress weren’t satisfied with using fees from home loan guarantees to fund the social security payroll tax cuts, now they want to rob the home loan GSE’s such as Fannie and Freddie to pay down student loans.

However not to be deterred, they are now proposing to use loan guarantee fees to bail out their failing student loan program.   When are they going to use them for the legitimate purpose to increase GSE and FHA loan loss reserves to protect against future loan defaults which are coming?

 GSEs to be the piggy bank?

   Lawmakers are mulling a plan to fund student loan relief with increased
   guarantee fees that Fannie Mae and Freddie Mac charge to mortgage
   lenders.

What’s worse? A Student Loan Bubble
   According to a Reuters [4]story, industry lobbyists are trying to push
   back even though the GSEs are pushing for higher fees themselves to
   help their own finances.”
What could possibly go wrong? For openers: higher mortgage rates which would stall out a mortgage market and make worse the upcoming student loan bubble.

From Reuters:

Congress’s last-minute deal in December tapped a 10 basis point increase in the G-fees to the tune of $37.5 billion over 10 years. The Mortgage Bankers Association, an industry group, calculates that the fee increase led to a 1/8 percentage point rise in mortgage rates, adding about $14 to the monthly payment on a $200,000, 30-year fixed-rate mortgage, or some $5,000 over the life of the loan.
Very low interest rates have helped mask the impact.

No Lock Box

Apparently political expediency trumps fiscal responsibility for the Obama
Administration and Democratically controlled Senate who came up with this idea:

“It’s one of the options,” said Democratic Senator Bob Casey, who authored the December compromise with encouragement from the Obama administration. “It’s another place to go look for some revenue.”

This is just another way to implement a “hidden” taxpayer bailout and a barrier to financing/refinancing of residential property.
Remember how the Republicans wanted to pay for the buy down of student loans? They were pilloried by the left for engaging in a phony “War on Women.” So this plundering of the GSE’s was passed instead. Even Jon Stewart makes light of it below. What will happen when this whole house of cards falls down?

 

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