Ex-Fannie Mae Exec. on New Rental Program

" And they may allowing homeowners facing foreclosure to -- their homes for up to one year and a new program called -- for at least. But rents are going to be nowhere near most mortgage payments and you may not always sitting on about 63000. Properties. So is this program this going to cost taxpayers even more money joining us now on the phone is former Fannie Mae chief credit officer. Ed -- Ed is this hay -- out or Fannie may to prevent it from realizing steep losses trying to sell these foreclosed homes. A bailout for the people in the homes or. --"

" Aggregation point Brian I think it probably boat. It is really continuation. Of a long line of Apollo initiatives that are just kicking and down the road. In an effort to avoid taking. The big hit. A -- and and pushing down into the future. And Fannie Mae. Is uniquely qualified try to do that. They can borrow money very cheaply. Given that their government agency. And that they're going to reach 20000 turn themselves -- acute landlord. And going to competition with -- work around the country but Fannie and Freddie have a big advantage. They can borrow it government rate and take the losses on the rent."

" Then move forward. And it's Brian what's the key people from cheating the system money we know that the government has not been very good about document he's mortgage rework programs and people getting benefits. That they may not even need. If I'm a struggling homeowner with a Fannie backed mortgage what's to keep me from just saying hey I can't afford to make my payments you better bring me back my house of a lot of water. You know by a hundred grand look at it ten years of negative equity. And I can cut my payment in half. Half because rents are less than mortgage payments why wouldn't somebody do that only the taxpayer on the hook."

" Right absolutely. That the big rip it you know call the moral dilemma. And every one of these initiatives have been undertaken as future exposures to moral dilemma of something taking note I decision. I think. You've got a situation today where you have people buying homes getting FHA loan. As you know extraordinarily high loan -- values. And down payment assistance the better you have people who are getting modification program that are working. And allow them in their home basically rent free. And that you have any coming out with a program that allows. People do that -- of all this has been our home. Per year at presumably very low -- And lastly you have any is also -- a program called home -- Where they finance they error. Real estate that they're taking and they finance the new buyers. At very lenient. Term that began just eating on the problem that got it -- the that in the first what."

" his -- Fannie Mae and and Freddie Mac as well are they going to wind up big landlords. Because this problem Fannie Mae has announced is for a year. Do you think it'll last longer than that because that seems to be the trend in government."

" That the -- government has everything's temporary -- when have pushed -- I think again it is just part of the overarching problem of not wanting a -- I'm mad at them now everything is getting pushed out into the future. And that the the modification firms are doing their reduced interest rates up -- they're -- working and that are going to be new wave of foreclosures I mean. 121824. Months from now like why they're putting these individuals -- to. The home keeping him in the home that rhetoric that -- belt all want the home is right that the twelve months it -- effectively pick off the market. I would make out like a solution yet but in the end -- is again kicking the can down the road what happens in twelve months what -- eighteen months. That are and that's probably what they we have to -- better and at some point yeah nobody in."

" Want to be and we Atlanta we got a -- we have learned from Oliver Wyman the research firm that one in every five to falters is a strategic default or somebody paying all their other bills still employed. Not paying a mortgage if you got a 4000 a month mortgage. The market rents to grant you give every working not 50% off your payment at the end of the year paying often and see how long it takes for the government to come in and try to evict you from now. Formerly owned home that you're living in. Basically probably rent free."

" You're looking at probably two to three years and that all brought the."

" Save a lot of money that time all on the taxpayer's dime."

" Unbelievable Ed thank you you're Robert are you going to talk to Ed -- former Fannie Mae chief credit arm."