Does anyone know what a GSE-guarantee entails?

[TheBreeze]

As I understand it, Fannie Mae and Freddie Mac each guarantee mortgages up to $417,000. Does anyone know exactly what this entails? Does the guarantee cover both principal and interest? Does the home buyer have to put any money down? Does the home buyer have to meet any sort of income threshold? Do Fannie and Freddie insure stated income loans?

What if the lender and the home buyer are in cahootz? Say the home buyer agrees to a $417,000 mortgage with a 12% interest rate. Assume the lender finds an appraiser to submit a fraudulent appraisal that values the house at $417,000 and the borrower meets whatever minimal requirements the GSEs require for their guarantee. If the borrower defaults on the first payment, is the GSE on the hook to repay this loan to the lender at that 12% interest rate until the loan is paid off?

I’d really like to see the GSE guarantees tightened up. If they’re not already doing it, the GSEs should only insure the principal up to 80% of the appraised value. Unscrupulous lenders could still defraud the GSEs, but it would be much tougher if the GSEs only guaranteed a fraction of the principal (interest would not receive a guarantee).

[tickets]

The guarantee covers principal and interest. The way it works is that Fannie or Freddie (the Home Loan Banks operate differently) agree to buy the mortgage for the unpaid principle balance, plus accrued interest, when the loan is 120 days delinquent. They put the guarantee on securities backed by loans that met their underwriting standards, so it’s possible for a loan to be in a guaranteed pool without a down payment, but there aren’t many of them. Their’s no income limits. They do stated income. If the case of fraud, they have the right to demand that the seller of the loan buy it back from them. That is, of course, if the seller is still in business. Their is a lot of detail on their loan characteristics, such as % stated income, average LTVs and credit scores, etc., in the quarterly filings they did last month, available on their websites.

[tickets]

The guarantee covers principal and interest. The way it works is that Fannie or Freddie (the Home Loan Banks operate differently) agree to buy the mortgage for the unpaid principle balance, plus accrued interest, when the loan is 120 days delinquent. They put the guarantee on securities backed by loans that met their underwriting standards, so it’s possible for a loan to be in a guaranteed pool without a down payment, but there aren’t many of them. Their’s no income limits. They do stated income. If the case of fraud, they have the right to demand that the seller of the loan buy it back from them. That is, of course, if the seller is still in business. Their is a lot of detail on their loan characteristics, such as % stated income, average LTVs and credit scores, etc., in the quarterly filings they did last month, available on their websites.

[tickets]

The guarantee covers principal and interest. The way it works is that Fannie or Freddie (the Home Loan Banks operate differently) agree to buy the mortgage for the unpaid principle balance, plus accrued interest, when the loan is 120 days delinquent. They put the guarantee on securities backed by loans that met their underwriting standards, so it’s possible for a loan to be in a guaranteed pool without a down payment, but there aren’t many of them. Their’s no income limits. They do stated income. If the case of fraud, they have the right to demand that the seller of the loan buy it back from them. That is, of course, if the seller is still in business. Their is a lot of detail on their loan characteristics, such as % stated income, average LTVs and credit scores, etc., in the quarterly filings they did last month, available on their websites.

[tickets]

The guarantee covers principal and interest. The way it works is that Fannie or Freddie (the Home Loan Banks operate differently) agree to buy the mortgage for the unpaid principle balance, plus accrued interest, when the loan is 120 days delinquent. They put the guarantee on securities backed by loans that met their underwriting standards, so it’s possible for a loan to be in a guaranteed pool without a down payment, but there aren’t many of them. Their’s no income limits. They do stated income. If the case of fraud, they have the right to demand that the seller of the loan buy it back from them. That is, of course, if the seller is still in business. Their is a lot of detail on their loan characteristics, such as % stated income, average LTVs and credit scores, etc., in the quarterly filings they did last month, available on their websites.

[tickets]

The guarantee covers principal and interest. The way it works is that Fannie or Freddie (the Home Loan Banks operate differently) agree to buy the mortgage for the unpaid principle balance, plus accrued interest, when the loan is 120 days delinquent. They put the guarantee on securities backed by loans that met their underwriting standards, so it’s possible for a loan to be in a guaranteed pool without a down payment, but there aren’t many of them. Their’s no income limits. They do stated income. If the case of fraud, they have the right to demand that the seller of the loan buy it back from them. That is, of course, if the seller is still in business. Their is a lot of detail on their loan characteristics, such as % stated income, average LTVs and credit scores, etc., in the quarterly filings they did last month, available on their websites.

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