Fannie and Freddie are taking on more risk than anyone is admitting, private lender says
Glen Weinberg (pictured top), COO and partner of Fairview Commercial Lending, is worried that Fannie and Freddie may be taking on too much risk. He believes credit score shopping between FICO and VantageScore, increasing loan-to-value ratios, and reduced interest rate hedging are all in play.
“Both parties are going to be pushing Fannie and Freddie to take more risks to lower housing costs,” Weinberg told Mortgage Professional America. “They’re basically looking at Fannie and Freddie as a risk-free way to lower housing costs. Just make it easier for people to qualify — allow credit score shopping so you can use a VantageScore instead of FICO. You have a phone bill? Now you can go get a mortgage at 90% or 100% loan-to-value.”
A predictable path
For Weinberg, the endpoint is not hard to read. He is skeptical that the government getting more involved in the mortgage business is going to end well.
“We know how this ends,” he said. “We saw it. The government is terrible at risk management. We can see that in anything the government touches. This is going to end with higher highs and lower lows when it hits the fan.”
The problem, Weinberg believes, is that improving one side of the affordability equation will only cause issues on the other side. He said that for things to get better, either wages have to do a better job of keeping up and exceeding inflation, or home prices need to drop. Both of those have challenging side effects.
