SOLO-U.S. Press Release—Fire Fannie and Freddie!

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Submitted by mvardoulis on Wed, 2007-09-12 23:34

SOLO-US Press Release


Sept 11th, 2007, Irvine, CA

"Fannie Mae and Freddie Mac are the Bonnie and Clyde of the mortgage industry," says SOLO-US Coordinator and former mortgage loan officer Michael Vardoulis concerning the quasi-governmental agencies designated to 'maintain standards' for mortgage-lending in the United States.

"In light of the recent sharp decline in non-prime, and eventually prime, mortgage loan activity beginning in February of this year," adds Vardoulis, "I'm reminded of an analysis of the Great Depression' of 1929 provided by Nathaniel Branden in the essay, 'Common Fallacies About Capitalism: Depressions' from Ayn Rand's Capitalism: The Unknown Ideal: ‘...when an individual businessman makes an error of economic judgement, he (and perhaps those who immediately deal with him) suffers the consequences; in a controlled economy, when a central planner makes an error of economic judgement, the whole country suffers the consequences.’

In the case of the United States government's 'sponsored enterprises' the Federal National Mortgage Association (FNMA or 'Fannie Mae') and the Federal Home Loan Mortgage Corporation (FHLMC or 'Freddie Mac'), acting as a central planner for the U.S. mortgage economy, have managed to pass the credit extension errors of some mortgage-lending banks to the whole mortgage industry, including international investors.

"What Fannie (a product of Roosevelt's 'New Deal') and Freddie do," adds Vardoulis, "is set direct and indirect requirements on 'bundled packaging' of mortgage loans on the 'secondary market,' where Wall Street trades the bundled loan packages. Mortgage banks with questionable underwriting practices and failure to anticipate real estate market corrections are mixed together with mortgage banks with credible underwriting practices and more accurate market anticipations. As with all examples of a 'mixed economy' the resulting mixture is eventually disastrous I personally, along with all my colleagues in the mortgage loan profession, am experiencing this disaster today, now that all credit-challenged mortgage loans ('non-prime' or 'sub-prime') have been eliminated and even strong credit 'prime' loans are nearly frozen with inactivity.

"Since the whole U.S. mortgage industry is being 'punished' for the mistakes of specific mortgage banks, by way of Fannie and Freddie's controls, many talented mortgage professionals including myself are looking for other lines of work as of the middle of the year," adds Vardoulis candidly.

"The only conclusion one can draw from this experience is to remove government control of the mortgage economy," says Vardoulis. "In other words, FIRE FANNIE AND FREDDIE; let mortgage banks take on their risks individually instead of 'collectively' as an industry! Similarly, abolish all limits to fees and rates for new mortgage loans!"

Michael Vardoulis—


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