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Obama failed to mention that the banks were required (mandated) by law to make those loans.
The CRA (Community Reinvestment Act — Jimmy Carter) was the piece of legislation that required banks to make loans in low income neighborhoods, without qualifying the applicants (no income verification, etc.).
This was greatly expanded under Pres. Clinton, because Democrats believe everyone has a 'right' to own a home.
These bad loans were then bundled and sold to Fannie Mae, and Freddie Mac (so that the banks could get them off their books), who resold them to investors as "Mortgage Backed Securities".
Basically, this was government medling in the private sector that caused the problem.
The Republicans held hearings, warning of the looming disaster, but Democrats insisted there was nothing wrong,and that Fannie Mae and Freddie Mac were doing just fine (there have been videos all over YouTube of these hearings, where you can hear Maxine Waters and others, scolding the Republicans for asserting that there was a looming crisis, accusing them of trying to win political points).
But he didn't criticize his own regulators or the governnent agencies that allowed that ?
Subprime mortgages are not AAA material no matter how hard you try.
The banks didn't rate them AAA.
Spin it however you want, the banks did operate within the law. It's just that the law was laxed to allow it.
And banks don't change the law.
Actually he said lenders: "Lenders sold loans to families who couldn’t afford them". Many of the sub-prime loans were not being generated from banks. There are many lenders who have already had to payoff on lawsuits based on their activities in generating loans.
Unfortunately, most sub-prime loans were being sold as AAA investments through the alchemy of securitization.
The banks (or financial companies) may not change the law, but they do influence the way the laws are changed and as John Reed recently pointed out they do it with a loud voice.
JOHN REED [former Citigroup Chairman] : I'm quite surprised that the political establishment would listen to groups that have been so discredited. BILL MOYERS: You're saying despite what happened in 2008, Wall Street still has too much power? JOHN REED: They have too much voice.They certainly are being listened to. I find it incredible. I would have guessed that society, at large, would have said, "Hey, we made a mistake. Let's get some rules." You know? I used to tell my kids, "Why do you think a car has brakes?" And they all would say, "To stop." And I'd say, "No, a car has brakes so that you can drive fast. If you got into a car that had no brakes and you knew it, how fast do you think you would drive? You wouldn't drive very fast at all." And that's the same reason we have rules. You want the private sector to be free to be creative and exuberant and whatever, within a framework, okay?
Obama failed to mention that the banks were required (mandated) by law to make those loans.
The CRA (Community Reinvestment Act — Jimmy Carter) was the piece of legislation that required banks to make loans in low income neighborhoods, without qualifying the applicants (no income verification, etc.).
This was greatly expanded under Pres. Clinton, because Democrats believe everyone has a 'right' to own a home.
Reagan shared Carter's view when he said he wanted a house on every lot. But of course we all know that Bush took it to heights never seen before, and it destroyed the economy.
Ameriquest, the nation's largest subprime lender, faces numerous lawsuits filed by customers who said the subprime lender charged them excessive fees or changed the agreed-upon terms on refinancing loans when they arrived to sign the final documents.
Like i said there is a lot of blame to go around, a lot. Speaking about Ameriquest, i think there is pending law suits going on with them, they are just as bad as anyone else out there, charging the crazy hiked up fees and changing fees.
There is more then one person to blame for this, years ago we saw this coming anyone in real estate.
Obama failed to mention that the banks were required (mandated) by law to make those loans.
The CRA (Community Reinvestment Act — Jimmy Carter) was the piece of legislation that required banks to make loans in low income neighborhoods, without qualifying the applicants (no income verification, etc.).
This was greatly expanded under Pres. Clinton, because Democrats believe everyone has a 'right' to own a home.
These bad loans were then bundled and sold to Fannie Mae, and Freddie Mac (so that the banks could get them off their books), who resold them to investors as "Mortgage Backed Securities".
Basically, this was government medling in the private sector that caused the problem.
The Republicans held hearings, warning of the looming disaster, but Democrats insisted there was nothing wrong,and that Fannie Mae and Freddie Mac were doing just fine (there have been videos all over YouTube of these hearings, where you can hear Maxine Waters and others, scolding the Republicans for asserting that there was a looming crisis, accusing them of trying to win political points).
Most of the subprime loan originations were not done to fulfill a government mandate.
Using loan origination data obtained pursuant to the Home Mortgage Disclosure Act (HMDA), we find that in 2005 and 2006, independent nonbank institutions—institutions not covered by the CRA—accounted for about half of all subprime originations. (See Table 1.) Also, about 60 percent of higher-priced loan originations went to middle- or higher-income borrowers or neighborhoods, populations not targeted by the CRA. (See Table 2.) In addition, independent nonbank institutions originated nearly half of the higher-priced loans extended to lower-income borrowers or borrowers in lower-income areas (share derived from Table 2).
In total, of all the higher-priced loans, only 6 percent were extended by CRA-regulated lenders (and their affiliates) to either lower-income borrowers or neighborhoods in the lenders' CRA assessment areas, which are the local geographies that are the primary focus for CRA evaluation purposes. The small share of subprime lending in 2005 and 2006 that can be linked to the CRA suggests it is very unlikely the CRA could have played a substantial role in the subprime crisis. .... Another way to measure the relationship between the CRA and the subprime crisis is to examine foreclosure activity across neighborhoods that are classified by income. Data made available by RealtyTrac on foreclosure filings from January 2006 through August 2008 indicate that most foreclosure filings (e.g., about 70 percent in 2006) have taken place in middle- or higher-income neighborhoods. More important, foreclosure filings have increased at a faster pace in middle- or higher-income areas than in lower-income areas that are the focus of the CRA.9/ (See Table 7.)
Two basic points emerge from our analysis of the available data. First, only a small portion of subprime mortgage originations is related to the CRA. Second, CRA-related loans appear to perform comparably to other types of subprime loans. Taken together, the available evidence seems to run counter to the contention that the CRA contributed in any substantive way to the current mortgage crisis.
Obama failed to mention that the banks were required (mandated) by law to make those loans.
The CRA (Community Reinvestment Act — Jimmy Carter) was the piece of legislation that required banks to make loans in low income neighborhoods, without qualifying the applicants (no income verification, etc.).
That is a complete fabrication, the community reinvestment act addressed red-lining in inner city neighborhoods, they did not require banks to do away with income verification. Red-lining was a practice of discriminating against loans in inner city neighborhoods.
By the way seems like a good part of the mortgage defaults ocurred in Florida and Nevada. There was plenty of blame to go a around, bankers, real estate agents, wall street, the government, take your pick.
The CRA followed similar laws passed to reduce discrimination in the credit and housing markets including the Fair Housing Act of 1968, the Equal Credit Opportunity Act of 1974 and the Home Mortgage Disclosure Act of 1975 (HMDA). The Fair Housing Act and the Equal Credit Opportunity Act prohibit discrimination on the basis of race, sex, or other personal characteristics. The Home Mortgage Disclosure Act requires that financial institutions publicly disclose mortgage lending and application data. In contrast with those acts, the CRA seeks to ensure the provision of credit to all parts of a community, regardless of the relative wealth or poverty of a neighborhood.
The fundamental problem was uncontrolled and untracked (and even untrackable) securitization, and the development of exotic debt instruments swapped back and forth between huge financial institutions.
For instance, the two big financial firms that collapsed in 2008 (Bear Stearns and Lehaman Brothers) were not "retail" banks. They did not extend home mortgages. But bits and pieces of mortgages were scattered all throughout the various "instruments" they chose to hold in their portfolios.
The CRA could come or go, but without the demise of Glass-Steagall and other laws like the CFMA, it wouldn't have meant anything.
You're spinning your wheels if you think one party alone was responsible for it.
Both were in their own ways. Greed and corruption has no party affiliation.
I've read up on the Community Reinvestment Act and it was not the primary cause of the housing bubble and subsequent collapse. The housing bubble was driven by firms not even under the CRA mandates.
As Levitin and Wachter have reported on the basis of their careful survey of all the relevant research data, “there is little evidence that the CRA contributed directly to the bubble. CRA subject institutions made a disproportionately small share of subprime mortgage loans,” and “relatively few subprime loans even qualified for CRA credit ,either because they were made outside CRA assessment areas or were made to higher income borrowers.”[7] The findings of the Federal Reserve staffers Avery and Brevoort’s were similar: that “areas covered by the CRA experienced lower delinquency rates and less risky lending,”[8] not higher ones. “According to recent Fed data, 75 percent of higher-priced loans made during the peak years of the subprime boom were made by independent mortgage firms and bank affiliates not covered by the act.”[9] “Only 6% of…subprime loans had any connection to the law. Loans made by CRA-regulated lenders in the neighborhoods in which they were required to lend,” the Financial Crisis Inquiry Report noted, “were half as likely to default as similar loans made in the same neighborhoods by independent mortgage originators not subject to the law.” Which is presumably why the Report could definitely conclude, as it did, that “the CRA was not a significant factor in subprime lending or the crisis.”[10]
You miss the point.. The beginning of all things related to the subprime mortgage began with the CRA. Regardless of whether or not a bank was under the CRA umbrella. The beginning can clearly be seen as starting with the CRA.. Prior to the CRA if you tried to get a home loan and were subprime you would not get one. When the government mandated banks loan to subprime lenders they opened the door for everyone. It boils down to greed on behalf of the banks and greed on behalf of the jerk offs in Washington. To stand in front of the American people and look them in the eye and tell them the Government had no hand in it is deceitful and a flat out lie no matter how you slice and dice it..
It was a vehicle to buy votes from the people who could not afford housing and should not have been given loans. Our "leaders" are riddled with deceit and deception. As far as I am concerned you good get rid of everyone in government and start over from scratch.
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