Homeless Man Buys Five Houses:

All with Fannie Mae loans, of course. Details at the Housing Bubble Blog. The time for lawmakers to make it clear that they are not going to bail out Fannie is now. The time to abolish Freddie and Fannie is also now.

UPDATE: Does the existence of Fannie make fraud more likely? Yes, because Fannie gets its political support by claiming that it is responsible for the ever-growing percentage of Americans who own their own homes. If that percentage doesn't keep growing, Fannie loses its key p.r. point. Therefore, Fannie has the incentive to look the other way regarding loose lending standards, fraud, etc., to ensure an ever-growing mortgage market. A day of reckoning will come some say, but everyone seems to expect that the taxpayer will bail Fannie out.

It is not clear that the ability to defraud Freddie and Fannie implies that they should be abolished. What government agency cannot be defrauded?

You really have to read the newspaper article, not the blog entry. The homeless guy was a front man for a mortgage fraud scheme.

Reading through Moon's probation record, Don Russell, division chief for the county probation department at the Salvation Army, concluded that Moon may have been used by someone else to front for real estate deals.

"If this guy walks into a bank with this background, they're not going to give him any kind of money," said Russell. "It looks like someone just used this man's name to get mortgage loans."

Evidence mounting since Moon's death suggests he may have been the latest straw man used in what the FBI says is a national epidemic of mortgage fraud.


Among the four properties Moon bought in November 2003 was a white frame home at 2714 12th St. N in Ybor City. The seller was a land trust controlled by Chuong X. Dam, a Vietnamese businessman who was indicted by a federal grand jury in February on conspiracy and bank fraud charges. Dam is accused with others of using straw buyers to apply for fraudulent mortgage loans, though none of the charges involve the 12th Street home.
4.11.2006 12:13pm
A government agency that has been unfunded and deleted cannot be defrauded. And cannot waste taxpayer's money.

This is the answer to many government-caused problems.
4.11.2006 1:31pm
Justin (mail):
lpdbw, right, but that's not the question. The question, AT BEST, is whether the benefits of a government agency outweigh the costs. That costs exist does not solve this question. Certainly, to the degree the answer to that first question is "yes", then unfunding and deleting the government agency is in itself a huge cost.
4.11.2006 1:34pm
Per Son:
First, Fannie and Freddie are not givernment Agencies. Second, they do a great job of protecting local banks by spreading risk. That is, after Katrina - very few banks in the region were hurt, because most mortgages had already been sold to Fannie and Freddie.

I guess banks should be outlawed since they can be defrauded.
4.11.2006 1:40pm
I find it amusing that the blogger chooses to omit from the source article the evidence that this is likely a mortgage fraud case. Instead he implies this is an example of lenders throwing money at anyone with a pulse. While that may be true, this does not appear to be an example of it.
4.11.2006 1:52pm
Ghost_of_Solon (mail):
Even if Moon were used as a "straw man," somebody should have done enough digging to figure out that he should never receive a mortgage. Given how highly regulated the industry is (particularly in order to comply with the Patriot Act), it is quite shocking he fell through the cracks.
4.11.2006 2:17pm
Arthur (mail):
The claim is of course impoissible, siunce after he bought his first home, he wasn't homeless.

Fannie Mae is not a for profit corporation, not a government agency, and is not subsidized by the government. Fraud is a cost of doing business. Fraud prevention is also a cost. Rational businesses make cost efficient investments in fraud prevention, and stop paying for more when the cost of prevention exceeds the cost of fraud. Unless you can demonstrate that fraud is more common at Fannie Mae than elsewhere, you have no point.
4.11.2006 2:17pm
Per Son:
The problem with mortage fraud (do a search for "property flipping") is that typically there are multiple parties acting unlawfully - including (all or some of the following) the initial buyer, title agency, guarantor, and appraiser.
4.11.2006 3:01pm
Houston Lawyer:
A government backing of your credit is a subsidy.

If you know you can eliminate your risk on a transaction by selling your loan to another party who is backed up by the full faith and credit of the government, you have a moral hazard situation. We saw this in spades in Texas in the early 80s and it resulted in the government owning almost all of the local banks.

I would like to know how much government money is going to rebuild houses in areas prone to storm surges. That is not a wise allocation of scarce resources.
4.11.2006 3:05pm
Ned Pike:
Other than FHA and VA loans, there is no explicit US Gov't full faith and credit guarantee of mortgage loans or the securities created by packaging mortgage loans into pools. Yes, there is the implied (and many would say implicit) guarantee of Fannie/Freddie, the explicit revocation of which would be a Good Thing.

What intrigues me is the apparent belief that the existence of the secondary market in general makes fraud more likely. Do people really wish to eliminate the secondary market? If so, are people ready for the vast diminuition in available funds for mortgage lending?
4.11.2006 3:35pm
Anon1ms (mail):
DB, did you even read the Times article? It paints a vastly different story than what you are trying to peddle.
4.11.2006 5:11pm
Smitty18 (mail):
I believe the original charter for FNM's purpose was to fund rural homeowners who had difficulty obtaining loans from non-existant local banks-NOT a RACED BASED SOCIAL ENGINEERING TOOL.

The internet has obliterated the original need for FNM.

Now they're promoting "diversity" (AKA ethnic change), that's just the state trying to ram foreign invasion down the citizenry's throat with peril of personal prosection for non-compliance with state santioned invasion, giving preferences to fellow citzens rather than foreigners is now a crime.
4.12.2006 7:01pm
FNMA and FHLMC are "too big to fail." Failure would cause catastrophic instability in the financial markets. The government therefore cannot credibly promise not to bail them out. Analogy: Peso and S&L crises.

Nobody believed Greenspan on this point. We should just nationalize them and be done with it.
4.12.2006 11:19pm