Lawyers and Ruses, Oh My!

Feb 3rd, 2008 @ 4:49 PM by Alden Smith

I read with interest a commentary by a San Francisco lawyer who isn’t exactly thrilled by the new stimulus package that the Bush administration is touting as good for the economy.  Maybe it is, maybe it isn’t.  A few more bucks in your pocket is always a good thing, but at what price?

According to the lawyer, part of the package that Congress is rushing through contains a very disturbing package.  What they are doing with this package is raising the limits on loans for Fannie Mae and Freddie Mac, and giving a shot in the arm to the FHA.  Loans have been capped for a long time at $417,000.  Now, they want to push that up to $729,750.  Well and good, until you realize that these two owned or guaranteed almost 45 percent of all mortgages in America last year.  And yes, many of these were sub primes and no document loans.  Now, with new ceilings on jumbo loans, a lot of investors who got burnt by the sub prime crisis can go to Freddie and Fannie and relieve their loss.  Our grandchildren are inheriting a big mess, don’t you think?

The biggest thing that jumped out to me in the article were the ruses that lending agencies have pursued to help people with questionable credit obtains these loans.  I can believe this has happened.  One ruse has prospective buyers pay an employer to pay them a ton of money in a fake job for two months to show documentation that they are working and making good money.  Another ruse has the lender loaning money to the buyer to put in the bank to show money in savings.  I can’t testify for the reliability of these ruses.  You’d have to talk to Sean Olender about that one.  Call him in San Mateo.  I’m sure he’d love to hear from you.

The lawyer gave a rant in his article that I won’t bore you with.  It amounted to dinging all the legislative branches from here to eternity, and presented a call to arms in the end.  Not good stuff for the blog, but a worthwhile read.  Check out today’s issue of The San Francisco Chronicler for details.  Scary stuff…