When In Doubt, Blame the Lenders

According to the National Association of Realtors, home sale contracts are falling through at twice the rate of last year. And who does the trade group blame? Answer: lenders for turning down applications, and (of course) appraisers. I won't address the appraiser issue in this missive, but if NAR really wants to be accurate it should come out and provide the real culprit: Fannie Mae and Freddie Mac. Unless it's a jumbo loan or ARM, almost every single mortgage being funded today winds up in MBS guaranteed by Fannie, Freddie or GNMA. Fannie and Freddie determine those “credit” standards that NAR alluded to in recent comments made by the trade group's top executives. (See related story on the NMN website.) But when we ponder the issue further, we know that it's not really the GSEs, but their regulator/conservator: the Federal Housing Finance Agency. FHFA is caught between a rock and a hard place: making sure the GSEs, going forward, do not purchase any loans that might go south, and going along with the White House in some type of plan to aid a housing recovery. In short, the agency serves two masters – but rarely at the same time.