Spot on, SDR! This just allows the GSEs to wade in deeper. They want to, and they are being told to. They will wade in deeper.
If and when they stumble and are in danger of getting submerged, the federales will arrive. There will be shock, absolute shock, at the discovery that 80-95% non-recourse loans that were made at today’s So Cal prices are going bad. Since no one could have known that, there will be a rescue for the good ol’ Fannie and Freddie brownies/boy scouts, and the homeowners and investors all. It’s so patently obvious what’s happening.
