#nonperformingnotes

By Kevin Shortle

Don’t know Mel Watt? He became head of the Federal Housing Finance Agency (FHFA) in January. This powerful agency oversees regulations for Fannie Mae and Freddie Mac. His nomination met resistance in Congress. In fact, after a filibuster, Harry Reid changed the senate rules to force him through.

Congressmen who opposed this nomination were fearful that Mr. Watt would bring us back to the lending practices of the mid 2000’s. This fear was with good cause. Watt has been a longtime advocate of loans for high-risk, less then creditworthy borrowers. In addition, Watt worked hard with Barney Frank to appose limiting Fannie and Freddie loan exposure in 2007-2008.

Just a few days ago those fears may have turned into reality. Mr. Watt announced that Fannie and Freddie would begin purchasing loans that have as little as 3% down. Credit guidelines and lending practices will be adjusted to accommodate lower income buyers. In addition they will create guidelines that don’t hold banks as accountable as much as they do know.

So while the policies of the former head of FHFA allowed these two entities to begin to repay the taxpayers for their bailout, it appears that the new policies will put us right back into loose lending guidelines.