July 18, 2008 > Mortgage Bankers Association
Myth:
The Treasury Plan is just a taxpayer-funded bailout of Fannie Mae and Freddie Mac

Reality:

In fact, the Treasury plan is simply a backstop to help restore confidence in the GSEs.  These backstop measures would support the capital the GSEs are required to hold as protection in dire circumstances (keeping in mind that their regulator has already said they are currently well capitalized). Treasury’s plan is comprised of two parts – a temporary increase in the existing line of credit the GSEs currently have with Treasury in the form of a temporary authorization for Treasury to buy stock and other obligations in Fannie Mae and Freddie Mac and additional oversight authority over the two companies by the Fed.  None of these measures is a taxpayer-funded bailout.  The GSEs already have a line of credit with Treasury (which they have not used), Treasury simply wants to make sure it is sufficient to serve as a backstop if needed.  As to the stock purchase, if Treasury were to buy stock in the either or both companies, it would most likely negatively impact existing shareholders (and thus not be bailing anyone out).
February 28, 2008 > Mortgage Bankers Association
Myth:
There is disagreement over whether allowing bankruptcy cram-down on primary residences will result in increased mortgage costs for consumers.

Reality:
The Congressional Budget Office, independent economists and consumer advocates all agree that bankruptcy cram-down will raise mortgage costs for consumers.
February 12, 2008 > Mortgage Bankers Association
Myth:
Mortgage lenders are not doing enough to help distressed borrowers.

Reality:
The mortgage lending industry is engaged in an unprecedented effort to assist distressed borrowers.  In the second half of 2007, servicers helped 869,000 homeowners through repayment plans and loan modifications. For more information, see our status report, "Help For Distressed Borrowers."
January 31, 2008 > Mortgage Bankers Association
Myth:
Borrowers who qualify for prime loans only end up with subprime loans if lenders deceptively steer them into such loans.

Reality:
Many borrowers who might qualify for prime loans knowingly select subprime loans for reasons that include:
  • A desire to put little or no money down.
  • A desire to not have to document income, either to speed up the deal or to defraud the lender.
  • A desire to take out a larger loan than the borrower could qualify for under prime terms.
January 30, 2008 > Mortgage Bankers Association
Myth:
Bankruptcy is an easy process that consumers should use.

Reality:
It is apparent that groups such as the Center for Responsible Lending and some Members of Congress advocate that people enter into bankruptcy rather than focus on other more effective and less burdensome ways to help consumers. They fail to understand the very real and severe consequences for consumers who declare bankruptcy.
  • Bankruptcy stays on a consumers' credit report for 10 years, making it difficult to acquire future credit, especially in a tighter credit environment.
  • Bankruptcy makes it more difficult for borrowers to get credit cards, buy a home, car or hazard insurance and in some cases, obtain employment.
  • Bankruptcy costs consumers about $3,000 in attorney and court fees.
  • Finally, nearly, two-thirds of bankruptcy repayment plans fail and repayment plans do not take into account new expenses that an individual incurs, such as unanticipated health related costs or emergencies.
January 30, 2008 > Mortgage Bankers Association
Myth:
Congress should reform the bankruptcy laws to help troubled borrowers.

Reality:
An MBA analysis demonstrates that rates on mortgages will rise at least 1.5 percent for future homeowners and anyone looking to refinance if bankruptcy legislation (H.R. 3609) is enacted. In fact, MBA recently launched the Bankruptcy Resource Center where individuals and policymakers can go to see how much the average 30-year fixed-rate mortgage would increase at the state and county levels.