If Cal Thomas is to be believed, this country is on the precipice of another housing crisis.
Thomas, who is apparently “America's most widely syndicated op-ed columnist,” penned a syndicated column that appeared on FoxNews.com and in scores of newspapers from coast to coast this week, in which he writes that the creation of the HomeReady program by Fannie Mae is one giant step towards another housing apocalypse.
But after reading Thomas’ column, rereading it, and rereading it again with mouth agape, one starts to see Thomas’ true colors shine through. Instead of providing “expert” analysis of an issue, he ascribes tired political ideologies onto it, turning Fannie Mae’s program, and housing in general, into just another political football.
And on top of that, he proves that he knows nothing about how housing finance works in this country.
Thomas tells you all you need to know about his knowledge of housing finance in the second paragraph of his misguided screed.
Here it is presented in its entirety:
The Federal National Mortgage Association (commonly referred to as Fannie Mae) plans a mortgage loan reboot, which could produce the same insane and predictable results as when the mortgage agency loaned so much money to people who had neither the income, nor credit history, to qualify for a traditional loan.
Did you spot it? It’s right there in between the two commas.
“when the mortgage agency loaned so much money”
Cal, I’ve got some news for you buddy. Fannie Mae is not now, nor has it ever been, a mortgage lender. Fannie Mae and Freddie Mac don't write loans, they securitize mortgages on the secondary bond markets.
So not only does Thomas not know what he’s talking about, he goes on to out himself as a fear-mongering doomsayer.
Thomas doesn’t let simple, bedrock facts about the country’s housing finance system get in the way of his excellent hypothesis, which is basically that all the “immigrants” (and when he says immigrants, he really means Mexican immigrants) currently running free in this country are going to destroy our financial system with the Obama Administration’s help because they have the audacity to want to own their own home.
According to Thomas, the big bad Obama Administration proposed Fannie Mae’s HomeReady program, which is in Thomas’ words is “largely targeting high-risk immigrants,” as part of a plan to court Hispanic votes.
In Thomas’ words, citing an equally idiotic (and decidedly more racially abrasive) editorial posted on Investors.com, Fannie Mae’s new program is “no credit, no problem.”
Here’s Thomas again:
Under the latest mortgage proposal, it’s no credit, no problem. An immigrant can qualify with a credit score as low as 620. That’s subprime. And the borrower has only to put 3 percent down.
Apparently in Thomas’ mind, 3% down is the same as 0% down, no-income, no-documentation loans.
Thomas cites Investors.com on this issue, which in its un-authored editorial posits that HomeReady and other programs like it are just one step away from a return to NINJA loans.
Here’s Thomas again:
The administration apparently believes that by changing the dirty words “subprime” to “alternative” mortgages, the process will be more palatable to the public. But, as Investor’s notes, instead of the name HomeReady, which will offer the mortgages, “It might as well be called DefaultReady, because it is just as risky as the subprime junk Fannie was peddling on the eve of the crisis.”
Thomas’ main issue, other than all those illegals getting mortgage loans, is that Fannie Mae’s program will allow for the income of a non-borrowing household member to be considered when underwriting the loan.
According to Fannie Mae, under the HomeReady program, income from a non-borrower household member can be considered to determine an applicable debt-to-income ratio for the loan.
Fannie Mae said that this will help multi-generational and extended households qualify for an affordable mortgage. According Fannie Mae’s research, these extended households tend to have incomes that are as stable or more stable than other households at similar income levels, positioning them well for homeownership.
Other HomeReady flexibilities include allowing income from non-occupant borrowers, such as parents, and rental payments, such as from a basement apartment, to augment the borrower’s qualifying income.
Now, allowing income from people (especially non-occupants) not on the note to be considered as part of the debt-to-income ratio for a loan is not without its potential pitfalls.
What happens if a loan goes into foreclosure? Would the borrower’s parents also be at risk of losing their house?
The program is not foolproof, but it’s also a very small part of Fannie Mae’s portfolio, and loans with a high loan-to-value ratio from Fannie Mae (and Freddie Mac) make up an even smaller part of the total number of high-LTV loans.
According to recent analysis from Black Knight, high-LTV loans (loans with LTV’s above 95%) from Fannie Mae and Freddie Mac accounted for less than 3% of the total number of high-LTV loans originated in 2015.
And overall, high-LTV loans represented only approximately 1% of the total Fannie and Freddie-backed originations in 2015 as of early December.
According to Black Knight’s report, loans insured by the Federal Housing Administration or the Department of Veterans Affairs still account for more than 90% of the total number of high-LTV loan originations – a figure that has held steady above 90% since 2009.
But Thomas doesn’t let that get in the way of his narrative that Fannie, Freddie and the Obama administration are the big bad boogeyman that are piloting the U.S. economy right into a hurricane.
Now it’s not surprising that Thomas’ nonsensical ramblings appeared on FoxNews.com, especially considering Fox News’ general disdain for all things Obama, Democrat, and “immigrant.”
But Thomas manages to shoehorn all those tired right-wing talking points into an incoherent and disconcerting diatribe about the “looming housing crisis.”
What Thomas conveniently neglects to mention is just a few relevant points, like the fact that underwriting standards are vastly different now than they were before the housing crisis, or the fact that the HomeReady program and 3% down mortgages in general make up an incredibly small portion of Fannie Mae’s portfolio.
Given the number of protections that exist now to help avoid repeating the sins of the past, like the existence Consumer Financial Protection Bureau and its various mortgage rules, as well as increased oversight from Congress, increased attention from both the media and public at large, do people really believe that the mortgage industry is just going to slide right back to doing the “same ol’ thing” all over again?
But why include facts that don’t fit the narrative you’re trying to push? Where’s the fun in that? Isn’t it better for the Republican crowd to have a well-known Republican predict a housing crisis right as we’re entering election season?
Who cares if it’s irresponsible, empty political bluster?
And here’s why this kind of misinformation is dangerous and damaging: The Fox News version of Thomas’ misguided diatribe has been shared hundreds of times (or more) on Facebook and generated more than 150 comments, just on FoxNews.com alone.
But that’s nothing compared to Thomas’ source material, the post on Investors.com, which has received 6700 likes on Facebook and spawned 434 comments (as of 4:12 p.m. Eastern on Friday, Jan. 22.).
That’s a whole lot of people lapping up idiocy masquerading as intellect.
A quick scan of the comments finds people posting things like “Why should this surprise anyone. I mean what changes did we make. All we did was give the junkie another fix” and “Those who fail (Obama) to learn (Obama) from history (you would think he would be sensitive to historical events because of -- you know) are doomed (taking everyone else along with him) to repeat it.”
Let’s be clear on something: HomeReady or other low down payment loan programs are not the same “subprime junk Fannie was peddling on the eve of the crisis,” no matter how much Thomas wants you to believe that it is.
Low down payment lending and/or lending to borrowers with less than perfect FICO scores can be done responsibly.
Subprime lending, if that’s what you want to call it (which it's not), didn’t magically appear in 2006.
Lending to those without the ideal credit profile has been around for quite a while and it can be done safely without blowing up the economy.
With the involvement of the secondary market through risk-sharing programs from Fannie and Freddie, as well as increased protections against repeating the sins of the past, we can sensibly expand the credit box and serve borrowers who aren’t being served now.
But in writing his column, Thomas commits the exact same sin he accuses Obama and the Democrats of doing, politicizing housing in an attempt to light a fire under your preferred voter base.
Getting up on your soapbox and co-opting housing to use as another political talking point is wrong, dangerous and reckless.
This country has serious housing problems and we need serious people to fix them, not blowhards like Cal Thomas.
Thanks for playing Cal. Do not Pass Go and do not collect $200. You didn’t earn it.