Fannie Mae has announced that it is going to become a landlord. To avoid foreclosing, Fannie will allow some homeowners to rent. Fannie has a precise formula to determine who is eligible:
Tenants interested in a lease... must be able to document that the [rent] is no more than 31% of their gross income.
31%. If it weren’t our money, it would be funny watching bureaucrats come up with these precise formulas.
Why is Fannie getting into the rental business?
"If they can keep the property occupied and have at least some positive cash flow, that may end up being less worse than going the route of kicking them out and having a vacant home," Thomas Lawler, an independent housing economist based in Leesburg, Va., told the WSJ.
It’s another gamble with our money. Just 6 years ago, Barney Frank said this about Fannie Mae and Freddie Mac:
We see entities that are fundamentally sound financially and withstand some of the disastrous scenarios. And even if there were a problem, the Federal Government doesn't bail them out.
Oops, this year Congress bailed them out with 100 billion of your tax dollars. And congress has promised Fannie and Freddie CK... another $300 billion in guarantees.
Fannie says that its leases will be issued for "up to 12 months, with the possibility of… month-to-month extensions."
Month to month and year to year? Will the renters ever leave? I doubt it, given government’s track record.
After Hurricane Ike hit Texas, so FEMA promised “temporary” housing in trailers. Recipients signed contracts promising to “diligently seek and obtain permanent housing” – but they haven’t, yet. Now, more than a year later, almost 2000 people live in free FEMA trailers.
FEMA even sent $17 million in rental assistance to families who were living in free FEMA trailers.
And while you could buy a trailer for $30,000, FEMA spends as much as $229,000.
We already have a huge public housing bureaucracy-- 3,200 different public housing authorities. Now the monstrous Fannie Mae is diving in. Give me a break.
Fannie should become a broker, sell the houses to cash investors at a price = a 12% cap rate on the lease payment, and require the purchaser to grant the seller (tenant) a 12 month lease with a one 12 month extension with a rent increase capped at CPI. Fannie gets out of the loan (with a haircut) the homeowner/tenant is not on the street and has a payment he can afford and the investor gets the property at a reasonable price. Seems like a win-win-win to me. I'd be in for a couple fo those.
November 9, 2009 at 3:33 pm
Carolyn Johansen
Governments are lousy landlords. They build layers of red tape and do not do repairs. I rented a house from a VA county. A 60 ft. pine tree fell on the roof. It was nearly a month before they got around to trying to get it off. In the meantime the roof leaked and soaked the drywall in the living room. I refused to pay the rent and moved. When they took me to court--I showed the judge the photos of the tree an the damage. I won the case and they were out 3 month's rent.
November 9, 2009 at 5:54 am
Betty Colvin
Why doesn't anyone comment on the fact that many of the bills that have passed will not go into effect until 2013! Looks like the President and congress do not want Anerican to know just how much their taxes have gone up until they are hopefully reelected? Also why is nothing being said about the YouTube videos showing Obama admitting he is Muslim? How can that be? Pharoahs in early Christian history made them give everything they owned including grain making Christians bondservants to them.
November 8, 2009 at 7:09 pm
Richard Bobo
Until the taxpayers truly unite, we do not have a prayer of changing the system. The US Stakeholders Movement could turn things around once the word gets out there.
usstakeholders.org is about fixing the disconnect between taxation and representation.
November 8, 2009 at 10:39 am
Tanner
Mr. Stossel, just ran across this article and I'm sure you've seen it but its worth looking at-its proof that free markets not only work but that they provide a sold foundation for countries.
http://news.yahoo.com/s/ap/20091107/ap_on_re_as/as_pakistan_improving_the_schools
November 7, 2009 at 1:14 pm
Scott
John is right again. Any time a government entitlement program is funded, the taxpayers lose and it becomes a permanent drain on our system.
Government is not the solution.
Government is the problem.
Ronald Reagan said "Government does not solve problems; it subsidizes them".
Enough said.
November 7, 2009 at 12:07 pm
José
Barnie Frank is nothing but a communist in drag . . .
November 7, 2009 at 12:06 pm
Armand LaMountain
We were part of the Wolfe Pizza machine scam late 80's early 90's. We are curious as to what has happened to Wolfe and his partners after they were arrested and I hope went to jail forever, but probably only for a month or two.
Thank you, Armand LaMountain
November 7, 2009 at 10:47 am
Richard Smith
The biggest form of housing welfare in this country is the federal tax deduction on mortgage interest and property taxes and the $250K/$500K exemption on capital gains taxes when selling a primary residence. For wealthier Americans, the federal government ends up paying for 20% and 30% of their housing costs. Particularly troubling, is the tax deductions are also available for vacation homes.
Phasing out these handouts would be a good way to get the government out of public housing business.
Is there any effective entitlement program?
Granted, people really need help right now so I at least hope they are adjusting the rents to something affordable.
I suspect the reason for renting is to enable Fannie to continue to pay interest on the mortgage backed securities they've issued.
November 7, 2009 at 9:33 am
Liberty Lover
Hi John,
So what are you for on this issue?
November 7, 2009 at 8:45 am
Aardvark
Not only may the "tenants" never leave but who becomes responsible for maintenance and upkeep? Since the "owners" no longer have any skin in the game, they may just decide to live in the homes and allow maintenance to fall by the wayside. If the government takes over all maintenance then who covers that added expense?
I remember when I lived in an apartment, maintenance was the job of the landlord since it was his property not mine. I paid the rent on time and he fixed whatever broke.
November 7, 2009 at 8:30 am
Mike
I'm so glad John moved to Fox. What will ABC do now, however, now that they have lost their one true journalist?
November 7, 2009 at 7:00 am
jim
john knows his stuff
November 7, 2009 at 1:25 am
aboutthis blog
John Stossel joined FOX Business and FOX News in October 2009. He is the New York Times best-selling author of Give Me A Break and Myths, Lies and Downright Stupidity. His "Give Me a Break" commentaries take a skeptical look at a wide array of issues, such as education, the economy, parenting, and more.
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Jim C
Fannie should become a broker, sell the houses to cash investors at a price = a 12% cap rate on the lease payment, and require the purchaser to grant the seller (tenant) a 12 month lease with a one 12 month extension with a rent increase capped at CPI. Fannie gets out of the loan (with a haircut) the homeowner/tenant is not on the street and has a payment he can afford and the investor gets the property at a reasonable price. Seems like a win-win-win to me. I'd be in for a couple fo those.
Carolyn Johansen
Governments are lousy landlords. They build layers of red tape and do not do repairs. I rented a house from a VA county. A 60 ft. pine tree fell on the roof. It was nearly a month before they got around to trying to get it off. In the meantime the roof leaked and soaked the drywall in the living room. I refused to pay the rent and moved. When they took me to court--I showed the judge the photos of the tree an the damage. I won the case and they were out 3 month's rent.
Betty Colvin
Why doesn't anyone comment on the fact that many of the bills that have passed will not go into effect until 2013! Looks like the President and congress do not want Anerican to know just how much their taxes have gone up until they are hopefully reelected? Also why is nothing being said about the YouTube videos showing Obama admitting he is Muslim? How can that be? Pharoahs in early Christian history made them give everything they owned including grain making Christians bondservants to them.
Richard Bobo
Until the taxpayers truly unite, we do not have a prayer of changing the system. The US Stakeholders Movement could turn things around once the word gets out there. usstakeholders.org is about fixing the disconnect between taxation and representation.
Tanner
Mr. Stossel, just ran across this article and I'm sure you've seen it but its worth looking at-its proof that free markets not only work but that they provide a sold foundation for countries. http://news.yahoo.com/s/ap/20091107/ap_on_re_as/as_pakistan_improving_the_schools
Scott
John is right again. Any time a government entitlement program is funded, the taxpayers lose and it becomes a permanent drain on our system. Government is not the solution. Government is the problem. Ronald Reagan said "Government does not solve problems; it subsidizes them". Enough said.
José
Barnie Frank is nothing but a communist in drag . . .
Armand LaMountain
We were part of the Wolfe Pizza machine scam late 80's early 90's. We are curious as to what has happened to Wolfe and his partners after they were arrested and I hope went to jail forever, but probably only for a month or two. Thank you, Armand LaMountain
Richard Smith
The biggest form of housing welfare in this country is the federal tax deduction on mortgage interest and property taxes and the $250K/$500K exemption on capital gains taxes when selling a primary residence. For wealthier Americans, the federal government ends up paying for 20% and 30% of their housing costs. Particularly troubling, is the tax deductions are also available for vacation homes. Phasing out these handouts would be a good way to get the government out of public housing business.
'Em
Is there any effective entitlement program? Granted, people really need help right now so I at least hope they are adjusting the rents to something affordable. I suspect the reason for renting is to enable Fannie to continue to pay interest on the mortgage backed securities they've issued.
Liberty Lover
Hi John, So what are you for on this issue?
Aardvark
Not only may the "tenants" never leave but who becomes responsible for maintenance and upkeep? Since the "owners" no longer have any skin in the game, they may just decide to live in the homes and allow maintenance to fall by the wayside. If the government takes over all maintenance then who covers that added expense? I remember when I lived in an apartment, maintenance was the job of the landlord since it was his property not mine. I paid the rent on time and he fixed whatever broke.
Mike
I'm so glad John moved to Fox. What will ABC do now, however, now that they have lost their one true journalist?
jim
john knows his stuff