Freddie Mac, a company responsible (along with the other GSE, Fannie Mae) for the sound underwriting standards of conventional, prime mortgages, decided last week to tighten it’s underwriting. This Freddie Mac tightening of underwriting standards is probably too little, too late.

In the wake of the decision to allow the GSEs to underwrite and insure loan outside their area of expertise, “jumbo mortgage” products above $417,000, maybe Freddie Mac came to it’s senses deciding to limit it’s risk.

When President Bush signed the Economic Stimulus Act into law making jumbo mortgages GSE insurable, he may have unwittingly pushed our GSEs, Fannie Mae and Freddie Mac, already on tilt, over the edge. If you think we have a housing crisis now, wait until you see what the demise of the GSEs and subsequent secondary mortgage market would do!

Mortgage Insurance giants PMI, MGIC, and Radian, are on the verge of collapse as claims surge. Mortgage insurance companies stock losses are the possible trigger to another stock market crash.

Mortgage Insurance Company Demise Discussed

New York Governor and former consumer champion, Eliot Spitzer discuss the demise of the big mortgage and bond insurance companies on Jim Cramer’s Mad Money last Friday,

“Without capital infusion, these insurers could collapse and create a ‘tsunami’ in the market.”

Spitzer goes on to say,

Mortgage brokers heard rare support from the nation’s top banking regulator, John M. Reich at the National Association of Mortgage Brokers Legislative & Regulatory Conference in Washington, D.C..

Some of the nice things said by Mr. Reich about mortgage brokers were:

“First, I want to say I believe that mortgage brokers have made significant contributions to help fulfill the aspirations of people to own homes in America. The most recent studies show that, all combined, mortgage brokers accounted for 58 percent, or $1.7 trillion, of all home loans made in 2006.

On Friday, the government unemployment report proves a housing crisis created recession is upon us. A housing crisis triggered recession, sadly, I’ve been predicting for years.

This new unemployment report showed Americans out of work for at least six months (called long-term unemployed) increasing - attaining levels more indicative of recession than a “soft landing” or economic “slow down”.

This is really bad news for those optimists hoping to escape a recession in favor of a “soft landing”. Many pundits (usually paid economists for home building, mortgage banking, and real estate industry lobbies) have pointed in the recent past at strong employment as support for their optimistic take on our economic future.