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Which private loan originator and holder/seller comprised 40% of the mortgage market? Hint: None of them did.
No, it is not immaterial. The credit rating agencies take into account the fact that loans are "conforming" according to GSE lending standards when they assign credit risk.
And yet they were assigning triple A status to CDOs knowing full well they were largely made up of non "conforming" loans.
Eric Holder himself said that not having a job should not be a denying factor in getting a mortgage in his rant against the banks.
It was DISCRIMINATION folks..plain and simple. The minorities have no money so banks had to change their laws.
And the USG "unofficially" backed all those loans and hence the bailouts.
And yet they were assigning triple A status to CDOs knowing full well they were largely made up of non "conforming" loans.
No that went to a third party. Banks can't assign ratings themselves.
It was a huge ponzi scheme that started right after Glass-Steagall got repealed.
It was greed over the years..wanting more and more that led to the housing bust.
When a migrant worker qualified for a $750,000 home in CA you know they went overboard.
You must have missed my post in which I showed that Fannie Mae called Countrywide one of their "best lenders" and allowed Countrywide to lower their lending standards for so-called "conforming" loans: http://www.city-data.com/forum/37612767-post39.html
Fannie Mae then sold their compromised loans as GSE-issued MBS worldwide, the likes of which Rep. Sherman correctly stated the bailout bill would go to reimbursing foreign investors and financial institutions for their losses:
The lawsuit against Citigroup was that they issued loans that did not conform to Federal Standards, Countrywide was the major player in subprime loans, they had little oversight and what amounted to fraud. Countrywide had no standards other than to make sure they increased the volume of loans
No that went to a third party. Banks can't assign ratings themselves.
It was a huge ponzi scheme that started right after Glass-Steagall got repealed.
It was greed over the years..wanting more and more that led to the housing bust.
When a migrant worker qualified for a $750,000 home in CA you know they went overboard.
The "they" in my comment was referring to the 3rd parties (ie the credit rating companies), not the banks. My response was to InformedConsent statement that "The credit rating agencies take into account the fact that loans are "conforming" according to GSE lending standards when they assign credit risk."
I stand by my assertion that Credit Rating agencies were handing out triple-a ratings to CDOs they knew contained non "conforming" loans.
While the repeal of Glass_Steagall contributed to the collapse, it did not enable the growth of the mortgage derivative market place.
Even those who had profited from the growth of nontraditional lending practices
said they became disturbed by what was happening. Herb Sandler, the co-founder of
the mortgage lender Golden West Financial Corporation, which was heavily loaded
with option ARM loans, wrote a letter to officials at the Federal Reserve, the FDIC,
the OTS, and the OCC warning that regulators were “too dependent” on ratings
agencies and “there is a high potential for gaming when virtually any asset can be
churned through securitization and transformed into a AAA-rated asset, and when a
multi-billion dollar industry is all too eager to facilitate this alchemy.”
Page 194.
On October 6, 2006, James Grant wrote in his newsletter about the
“mysterious alchemical processes” in which “Wall Street transforms BBB-minus-rated
mortgages into AAA-rated tranches of mortgage securities” by creating CDOs. He estimated
that even the triple-A tranches of CDOs would experience some losses if national
home prices were to fall just 4% or less within two years; and if prices were to
fall 10%, investors of tranches rated AA- or below would be completely wiped out.
The old adage is apparently true. "Them that has gets." Even if they have to rewrite the law and rules to do so. they keep the speculative profits and pass the losses on to everyone else. This has been going on since some prehistoric genius invented money and the money changers invented debt and speculation. We tried to control this in the mid 20th century by the manipulators considered these laws to be an impediment to their speculative profits and have managed to change the laws to their benefit and our losses. This is what happens when a society allows the speculators purchase the government mostly using government loans.
We have just been presented with an equity line of credit worth nearly all the equity we have in our home. As we have no direct heirs to leave it to I am tempted to take the loan and literally party 'till we die and let the executor with the problem of figuring out how pay off the loan.
Best part is she knows what she is talking about. Someone needs to stand up for the country as a whole for a change.
Even the GOP is not standing behind this as a problem, voters need to be made aware who has voted to pass this thing.
Everybody had their chance with Ron Paul. We blew it.
END THE FED! and you end this ponzi scheme, to make the rich richer.
Corporate america exists, because government created them, to reap the benefits of commerce.(fascism)
We have lived in Communist america, since 1933
We have just been presented with an equity line of credit worth nearly all the equity we have in our home. As we have no direct heirs to leave it to I am tempted to take the loan and literally party 'till we die and let the executor with the problem of figuring out how pay off the loan.
That is already figured out. You don't pay the loan back, they are the new owner, the day you sign on the dotted line. Your loan will be what you pay property taxes on. Not what the property would sell for.
The worst loans were not being sent to Fannie and Freddie
According to Fannie's former chief credit officer (prior to HUD's disastrous mandates nearly brought down our financial system), they were.
Quote:
"By mid-2008 Fannie and Freddie (the "GSEs") had a combined $5.4 trillion in securities outstanding, all of which were backed by the GSEs' full faith and credit. These securities financed 45% of all the residential mortgage debt in the U.S. GSE securities were viewed as having the implicit guaranty of the U.S government and were aggressively marketed to investors worldwide."
...which is why it was a GLOBAL problem.
More...
Quote:
"Investors in GSE securities were led to believe that the vast majority of the loans backing these securities were low risk. Thanks to the SEC's investigation, the GSEs have, for the first time, acknowledged the magnitude of their efforts to mislead investors with regard the true nature of their exposure to subprime and Alt-A loans. Instead of $600 billion in subprime and Alt-A loans, the GSEs' credit guaranty portfolios contained $1.6 trillion. Thus approximately $1 trillion in subprime and Alt-A loans were misclassified. Given the GSEs' high leverage--each dollar of capital supported about $80 in debt--their insolvency was inevitable."
Those loans would have been considered subprime and Alt-A before HUD forced Fannie and Freddie to compromise their lending standards. After HUD's extremely ill-advised mandates, those loans suddenly became "conforming" and investors worldwide who bought GSE-issued MBS had no idea how truly high-risk those trillions of dollars worth of GSE-issued MBS were.
More by Fannie Mae's former chief credit officer, here:
Quote:
"Over the period 1997-2007 they [Fannie and Freddie] acquired a total of $2.2 trillion in subprime loans and private securities backed by subprime loans. Conventional subprime loans came in two "flavors". The first group consisted of loans with a FICO score of less than 660 (a regulatory definition of subprime), loans which Fannie now says are similar to subprime loans in risk but have not been classified by it as subprime. The GSEs acquired $1.5 trillion of this type of subprime loan. These loans are now defaulting at 8-9 times the level of their traditionally underwritten loans with a FICO >=660.
Even former Treasury Secretary Timothy Geithner chimed in when interviewed by the Financial Crisis Inquiry Commission in 2009:
Quote:
"Moral hazard was everywhere and endemic. The biggest source was in the GSEs [Fannie and Freddie]. The GSEs were entirely moral hazard."
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