I have a Serious Question for Fannie Mae and Bill Pulte

I have a serious question: Scotsman Guide News (the mortgage news agency) sent me an email today summarizing 3 headlines.

The first headline is: Fannie Mae reports $4B profit in second quarter as net worth tops $116B

The second headline is: Mortgage applications tumble as rates hit highest level in nearly a year. 

The third headline was regarding Warsh punting interest rate relief into the fall.

My head is spinning. Fannie provides market liquidity for the conventional/conforming mortgage market, among other things. Borrowers pay LLPAs (loan-level price adjustments) to the lenders, who pass them to Fannie. Fannie, in turn, provides a safe haven for investors and supposedly affordable market liquidity to qualified borrowers.

These LLPAs that borrowers pay are absolutely a tax. Should Fannie price in a risk-based charge? Absolutely. Should Fannie generate 20% YOY growth and huge profits? Absolutely not. 

Fannie is not producing anything - Fannie is redistributing hard-earned wages earned by borrowers as a tax in the form of an LLPA. These hard-earned wages, mind you, are earned in a ridiculously inflationary environment caused in large part by an ineffective, flawed data-dependent Fed.

 While there is certainly a benefit to the greater good of the real estate industry and homeownership for this tax, record profits are absurd.

My question is this: @RandPaul
@pulte
@realDonaldTrump
@barryhabib
@MBSHighway

What is the connection between these two headlines in our current market? Why is Fannie reporting record profits while mortgage apps are tumbling? Fannie's goal is not profit; it is risk mitigation while safely providing liquidity - I want an answer. Government or a GSE (whatever that is) making a record profit is the government effectively abusing its taxing authority on citizens. 

Mike Nelson, CEO - Efficient Lending, Inc                                720.419.3016 | mike@efficientlending.net | @mike_lending                                NMLS: 1876539 | NMLS: 1314188

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