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You made this all up. You laughingly refuse to address what I said. Your posts are nothing more than deflection.
What’s laughable is claiming anything that refutes your argument is either “made up”, deflection, or against your “rules”. Let me know when you’re ready to have a grown up style debate. You’re essentially sticking your fingers in your ears every tine someone threatens your confirmation bias. You’re way out of your depth here and the sad part is you don’t even know it.
Under the new rules, banks would have more flexibility in lending to people who already owe a considerable amount of money or who cannot afford a down payment equal to 20 percent of the price of a home, the people said. Tuesday Announcement
In addition to changing its guidelines, Fannie Mae plans a national educational campaign that will seek to teach recent immigrants and minorities how to obtain mortgages. The campaign will be aimed particularly at immigrants in a dozen "gateway" cities where the percentage of home ownership has been declining.
Mortgage experts have estimated that up to two million American households are excluded from buying homes now because of conservative mortgage lending standards. These include Americans with minor blemishes on their credit records, for such things as changing jobs repeatedly or failing to pay utility bills on time. Most mortgage experts assume that even people who fall behind on other bills will struggle to make mortgage payments lest they lose their homes.
Freddie Mac loosened its guidelines for low-income mortgages a few weeks ago. But Deepak Bhargava, the legislative director of the Association of Community Organizations for Reform Now, a New Orleans-based group of affordable housing advocates, said that Freddie Mac's guidelines remained more restrictive than Fannie Mae's.
Next week's changes in Fannie Mae's guidelines will probably widen the gap between the two institutions' policies, Mr. Bhargava said. Freddie Mac officials did not return phone calls made to their homes and office this evening.
In its proposal, the Fed staff said raising the threshold would increase the availability of credit and ease the regulatory burden on banks without endangering the safety and soundness of the banking industry.
-snip-
THAT has changed in the last few years, however, as secondary-market investors such as the Federal National Mortgage Association, better known as Fannie Mae -- which package blocks of loans and sell them to private investors -- have made it easier for mortgage lenders to market low-down-payment loans.
In 1994, Fannie Mae introduced Fannie 97 -- a 3-percent-down-payment program for home buyers with good income and credit history who have been unable to save for a down payment. Under both programs, qualified buyers in the New York region who have total household incomes of $70,950 or less are eligible.
----------------------
Homeowners Record Is Set in Third Quarter - NYTimes.com Homeowners Record Is Set in Third Quarter - The New York Times
Homeowners Record Is Set in Third Quarter
By STEVEN A. HOLMES
Published: November 1, 1997
In 1995, seeking to save his department from elimination by the newly elected Republican-led Congress, Housing Secretary Henry G. Cisneros adopted a ''national homeownership strategy'' that eased requirements to qualify for Federal Housing Administration-insured loans and reduced closing costs by as much as $1,200 on those loans for first-time buyers.
------------------------------------------
.
125% Loan: Blessing Or Bane?
By JAY ROMANO
Published: July 13, 1997
RESPONDING to the seemingly insatiable demand by borrowers for ever more exotic forms of credit, some aggressive lenders have brought to market a rather unconventional mortgage product: the 125 percent loan.
With such a loan, homeowners -- even those with less-than-pristine credit -- can borrow up to 125 percent of the market value of their homes by pledging collateral that doesn't exist.
Lenders who make such loans say they are effective credit tools that can be used by homeowners to raise cash for unexpected expenditures, get out from under high-interest credit-card debt or pay for home improvements that will in turn increase the owner's equity.
''The underwriting criteria (from the government) are actually more flexible,'' Mr. Levy said. ''They allow more dinks on your credit and a more narrow spread between what you make and what you pay out.''
And that is just what concerns Mr. Bader of Skyscraper Mortgage.
''The person who couldn't qualify for an ordinary home equity loan at 8 percent is now borrowing even more money at 14 percent,'' Mr. Bader said, adding that anyone thinking about taking out such a loan should contemplate the following:
Shareholder owned but federally chartered, it is an odd hybrid that dominates the business of channeling money between lenders and Wall Street by buying mortgages and packaging them into securities. Its chief executive, Franklin D. Raines, is a former White House budget director whose name has been floated by Vice President Al Gore's presidential campaign as a possibility for the No. 2 spot on the Democratic ticket, and its executives have close ties to both parties.
Government-sponsored enterprise debt also is counted as safer than traditional corporate debt by regulators when they assess the financial strength of banks. As a result, many banks have made such debt a big part of their capital base, a situation that has left some regulators and members of Congress speculating about the implications for the financial system if Fannie Mae or Freddie Mac were to get into serious financial trouble.
=========================================
U.S. Proposes Rules to Help House Buyers
Published: March 05, 2000
The federal government (HUD) has proposed new rules that would make it easier for low-income house buyers to qualify for mortgage loans, a move intended to help blacks and other minorities buy houses.
The proposed rules from the Department of Housing and Urban Development would require two of the largest housing finance companies in the country, Fannie Mae and Freddie Mac, to increase the percentages of overall loans that they offer to lower-income families from the current standard of 42 percent to 48 percent in 2000 and to 50 percent in 2001.
The companies would be required over the next 10 years to buy $2.4 trillion in mortgages from banks and other lenders to assist the 28 million American families with low and moderate incomes. Many of those families are minorities, housing officials said.
''This rule will greatly expand the supply of affordable housing across the country,'' said Housing Secretary Andrew M. Cuomo.
The companies(fannie/freddie) buy mortgages for homes and apartment buildings from banks, savings and loans and other mortgage lenders, and package and sell the loans to investors. When Freddie Mac and Fannie Mae buy mortgages from lenders, they provide the lenders with cash to issue new mortgages.
Under the higher goals, the companies would buy an additional $488.3 billion in mortgages over the next 10 years for seven million more low- and moderate-income families. The new mortgages would be added to the $1.9 trillion in mortgages for about 21 million families that would have been helped by the current standards.
Mr. Cuomo said that Fannie Mae and Freddie Mac were cooperating with federal regulators on this issue. The Housing Department said it was reviewing fair-lending practices at Fannie Mae. The two companies can do more, Mr. Cuomo said, and that led to the elevated goals.
The requirements for mortgage purchases were last set in 1995. The goals were up for renewal this year, as required by Congress. The housing administration could have lowered the goals or have left them unchanged. U.S. Proposes Rules to Help House Buyers - NYTimes.com
.......... the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
''With the Federal Government directing it, we've created new products for people who have glitches, hairy credit,'' said Abe Eisner, executive vice president of GFI. ''No-doc means all we need is your name, address and Social Security number, depending on your credit history.''
GFI is a barometer for the industry; its subprime lending currently represents about 25 percent of the company's business. Two years ago, it was 10 percent.
--snip-....
One measure of the expanding subprime market is the number of loans that have been packaged and sold as asset-backed securities -- meaning that investors buy shares in those resold loans and then reap the returns as the mortgages are paid off.
--snip--
According to Jay Siegel, a vice president at Moody's Investor Service: ''Subprime loans have exploded from $7 billion in 1992 to $37 billion in 1996 as a sector of the entire securitized conventional loan market.'' That $37 billion, Mr. Siegel said, represents 11 percent of all the conventional loans that were securitized in 1996, up from 1.4 percent in 1992.
--snip--
--snip--
Even quasi-governmental agencies have primed the subprime pump. The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) have recently developed computerized underwriting systems that allow lenders to speedily and reliably evaluate an applicant's credit-worthiness. The loans rejected by the automated system are, by definition, subprime.
''In the past, if a loan was rejected by Fannie Mae or Freddie Mac, that was it,'' Mr. Hornblass said. ''They weren't touching that business.
''But now both agencies have set up arrangements with lending companies that buy those subprime loans coming through the automated systems. Freddie Mac and Fannie Mae take a fee, the loans get funneled to a lending company that's willing to buy them, package them and then sell the securities to investors.''
The agencies have also, for the first time, become guarantors of subprime loans. In fact, on May 21, Freddie Mac agreed to guarantee the securitization of $227.3 million in subprime loans originated by the First Union Home Equity Bank.
Several industry analysts point out that the trend toward subprime lending has been a boon to the nation's affordable housing movement. ''There are more subprime opportunities that dovetail well with C.R.A.-required lending,'' said Mr. Gumbinger
--snip--
C.R.A. is the Community Reinvestment Act, a law passed by Congress in 1977 to combat red-lining -- the systematic policy of banks to avoid making loans in poor communities. The law requires Federally regulated banks and savings and loans, but not mortgage banks, to ''help meet the credit needs of communities in which they are chartered.'' If one of those lenders applies to Federal regulatory agencies for a merger or a new charter, it must demonstrate that it has originated a sufficient number of loans in low- and moderate-income neighborhoods.
According to data provided by Douglas Duncan, a senior economist at the Mortgage Bankers Association of America, 19.2 percent of the nation's home loans in 1993 went to minority-group members. By 1995 the first year of the changes, that share had risen to 22.2 percent.
Lenders are not required to cancel the insurance for loans approved before July 29, 1999, when the Homeowners Protection Act took effect, but most do, if only to remain in the good graces of Fannie Mae and the similar federal agency, Federal Home Loan Mortgage Corporation or Freddie Mac. Because these two agencies set the standards for the mortgages they will buy, Fannie Mae and Freddie Mac have enormous influence over the mortgage market. The Mortgage Market - Up, Down and Sideways - NYTimes.com
=======================
Published: October 3, 1999
But it got greater impetus in late 1994 when Fannie Mae, the nation's largest purchaser of mortgages from banks and other home-mortgage originators, introduced pilot programs to stimulate the home sales market in New York and Boston. Fannie Mae packages these loans with other mortgages as securities for sale to investors. Creating a market to which mortgage originators can sell their loans encourages them to lend more
There have been 14,000 Partnership home buyers since 1986, and more and more of the newer houses are three-families. Nowadays the loans are normally sold to Fannie Mae, and the underwriting for them follows Fannie Mae's standards.
1999 new york times Easing the Rules for Mortgage Approval - NYTimes.com
...In 1995, the Clinton Administration changed the law governing GSEs' mission -- the Community Reinvestment Act (CRA) -- to encourage more lending in poor neighborhoods.
Previously, the CRA directed government to monitor banks' lending practices to make sure they did not violate fair lending rules in poor neighborhoods.
--snip--
....With the 1995 change, the government published each bank's lending activity and started giving bank ratings based primarily upon the amount of lending it performed in poor neighborhoods.
--snip-- These changes empowered community organizations, such as ACORN, to pressure banks to increase lending activities in poorer neighborhoods -- which involved reducing mortgage loan standards -- or face backlash from those organizations' private and political associates.
--snip--
For example, if Chase or BOA made 100 mortgages in a poor Chicago district, and Countrywide 150, the government would likely give Chase a lower CRA rating, and community organizers could pressure politicians to make it more difficult for Chase to get licensed to do full ranges of business in new areas of the country. Low CRA ratings could also disadvantage Chase with regard to government lending programs and make it more difficult for Chase to participate in mergers and acquisitions through Fannie Mae, the government controlled banks' mortgage lending activity rates.
Throughout the Congressional debate on GSE regulations in 2003-2005, senior Congressional Democrats repeatedly inferred -- even directly stated on at least one public occasion -- the US federal government would bail Fannie Mae out if required.
--snip-
In written law, the US government only 100% guarantees Ginnie Mae. The other major two GSEs, Fannie Mae and Freddie Mac, exist in more of a grey area. Nothing explicitly states the federal government is 100% behind them, but it has always been implied. That is why statements of top government officials in the run up to the bubble are so very important, as are actions like the US President personally appointing Fannie's CEO and directors.
From 1993-1999, the Clinton Administration replaced many of Fannie Mae's key executives, including the CEO, the CEO's number two, and nearly half the board of directors. As a government sponsored enterprise (GSE), the President had the authority to make those appointments. The board, which increasingly consisted of Presidential appointments, incentivize them to reach higher mortgage targets. More specifically, the board promised senior executive millions in bonuses each year as long as Fannie reported certain earnings figures.
Just a quick reminder... Fannie's ability to reach earnings targets is directly related to the number of mortgages it buys, as long as those mortgages do not default or as long as Fannie executives do not recognize negative changes in the payment flow.
In fact, according to the federal Department of Housing and Urban Development, 14.9 percent -- or 2.1 million -- of all mortgages originated in the United States in 1999 went to subprime borrowers. ''Over 90 percent of subprime loans have been made in the last six years,'' Ms. Bayer said, ''and the subprime market has grown roughly 30 percent each year over the previous year during that time.''
=========================
the CRA/ fannie/ freddie/ HUD/ and the FED(interest rates) had a FULL effect on ALL mortgages
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market(subprime).
directly from the new york times in 1999.
all links directly from liberal new York times...all before the GS repeal ......all before bush, all show the culpability of fannie/Freddie/hud...and nothing to do with congress(no matter which party controlled it)
But what does it have to do with the financial crisis in the mid 2000s?
packaging and buying mortgage packages (mortgage backed securities) is not illegal.... its just another asset backed security...
the problem is where the mortgage backed securities, were packages of bad paper.... why was it bad paper..because the government lowered the standards of the mortgages themselves
would any loaning company, give/grant a loan to a person with less than stellar credit??? no, not unless they are forced
would any loaning company, give/grant a loan to a person for 700k, meanwhile their income is only 50k?? no, not unless they are forced
the loan companies HAD a set standard:
remember The 28/36 Rule is the rule-of-thumb for calculating the amount of debt that can be taken on by an individual or household. The 28/36 Rule states that a household should spend a maximum of 28% of its gross monthly income on total housing expenses and no more than 36% on total debt service, including housing and other debt such as car loans.
*******the GOVERMENT threw out those standards in 1995*******
housing prices skyrocketed...why.. because Johnny got this, I should get at least this
interest rates kept falling....government set
loan requirement loosened..to include NO DOC
0% down, 5 year arm, interest only 5 year given in ,1999,2000,2001... based on 1995 rules...and when did those mortgages that never should have been given, BREAK....04/05/06/07
lowering the HUD/FHA credit requirements
*******the GOVERMENT threw out those standards in 1995*******
do YOU REALLY THINK any loaning company, would give/grant a loan to a person with less than stellar credit??? no, it would be bad business.... I find it strange that people want to bash the market, who WOULD NOT GIVE THESE LOANS TO THOSE LESS STALLAR, but these same people will no admit that the government who sets these standards had a very big hand in this
the whole point is that yes packaging of mortgages , mortgage backed securities, is not illegal, and was a good way for banks etc to make money...but the mortgages were bad paper, and that is what happened....
it goes back to the 90's...it didn't start in the 00's....
packaging and buying mortgage packages (mortgage backed securities) is not illegal.... its just another asset backed security...
the problem is where the mortgage backed securities, were packages of bad paper.... why was it bad paper..because the government lowered the standards of the mortgages themselves
would any loaning company, give/grant a loan to a person with less than stellar credit???* no, not unless they are forced
would any loaning company, give/grant a loan to a person for 700k, meanwhile their income is only 50k?? no, not unless they are forced
the loan companies HAD a set standard:
remember The 28/36 Rule is the rule-of-thumb for calculating the amount of debt that can be taken on by an individual or household. The 28/36 Rule states that a household should spend a maximum of 28% of its gross monthly income on total housing expenses and no more than 36% on total debt service, including housing and other debt such as car loans.
*******the GOVERMENT threw out those standards in 1995*******
housing prices skyrocketed...why.. because Johnny got this, I should get at least this
interest rates kept falling....government set
loan requirement loosened..to include NO DOC
0% down, 5 year arm, interest only 5 year given in ,1999,2000,2001... based on 1995 rules...and when did those mortgages that never should have been given, BREAK....04/05/06/07
lowering the HUD/FHA credit requirements
*******the GOVERMENT threw out those standards in 1995*******
do YOU REALLY THINK any loaning company, would give/grant a loan to a person with less than stellar credit??? no, it would be bad business.... I find it strange that people want to bash the market, who WOULD NOT GIVE THESE LOANS TO THOSE LESS STALLAR, but these same people will no admit that the government who sets these standards had a very big hand in this
the whole point is that yes packaging of mortgages , mortgage backed securities, is not illegal, and was a good way for banks etc to make money**...but the mortgages were bad paper, and that is what happened....
it goes back to the 90's...it didn't start in the 00's....
Re: bold & underlined*: the answer is 2 words: Moral Hazard.
The very same 'moral hazardous' conditions that existed in an earlier financial debacle when the S&Ls continued to funnel money into risky endeavors because they were insured by FSLIC.
American people were on the hook to bail out the banks in both debacles.
Re: bold & underlined**: The banks were not forced, mandated, &/or required to sell, & then re-sell, & re-sell again, & then bundle & re-sell & so on ... any mortgages (prime or sub-prime or ... ) as securities full stop.
It was, as you stated, "a good way for banks, etc. to make money" full stop. As is usual, privatizing profits while socializing losses. They, as is usual, had little to lose & much to gain ~ they could (& still can) hold the real economy hostage.
Quote:
In economics, moral hazard occurs when someone increases their exposure to risk when insured. This can happen, for example, when a person takes more risks because someone else bears the cost of those risks.
packaging and buying mortgage packages (mortgage backed securities) is not illegal.... its just another asset backed security...
the problem is where the mortgage backed securities, were packages of bad paper.... why was it bad paper..because the government lowered the standards of the mortgages themselves
would any loaning company, give/grant a loan to a person with less than stellar credit??? no, not unless they are forced
would any loaning company, give/grant a loan to a person for 700k, meanwhile their income is only 50k?? no, not unless they are forced
They would make the loan if they knew there was a willing buyer for the loan. By the mid-2000s the investment banks had created a huge demand for subprime loans; the investment banks couldn't get enough of them. Which is why the investment banks started buying subprime mortgage originators; they had to guarantee a supply of subprime loans for their extremely profitable structured credit securitization business.
By 2004, creators of CDOs were the dominant buyers of the BBB-rated tranches
of mortgage-backed securities, and their bids significantly influenced prices in the
market for these securities. By 2005, they were buying “virtually all” of the BBB
tranches. Just as mortgage-backed securities provided the cash to originate mort-
gages, now CDOs would provide the cash to fund mortgage-backed securities. Also
by 2004, mortgage-backed securities accounted for more than half of the collateral in
CDOs, up from 35% in 2002. Sales of these CDOs more than doubled every year,
jumping from $30 billion in 2003 to $225 billion in 2006. Filling this pipeline would require hundreds of billions of dollars of subprime and Alt-A mortgages.
Quote:
Originally Posted by workingclasshero
the loan companies HAD a set standard:
remember The 28/36 Rule is the rule-of-thumb for calculating the amount of debt that can be taken on by an individual or household. The 28/36 Rule states that a household should spend a maximum of 28% of its gross monthly income on total housing expenses and no more than 36% on total debt service, including housing and other debt such as car loans.
*******the GOVERMENT threw out those standards in 1995*******
housing prices skyrocketed...why.. because Johnny got this, I should get at least this
interest rates kept falling....government set
loan requirement loosened..to include NO DOC
0% down, 5 year arm, interest only 5 year given in ,1999,2000,2001... based on 1995 rules...and when did those mortgages that never should have been given, BREAK....04/05/06/07
lowering the HUD/FHA credit requirements
*******the GOVERMENT threw out those standards in 1995*******
do YOU REALLY THINK any loaning company, would give/grant a loan to a person with less than stellar credit??? no, it would be bad business.... I find it strange that people want to bash the market, who WOULD NOT GIVE THESE LOANS TO THOSE LESS STALLAR, but these same people will no admit that the government who sets these standards had a very big hand in this
Again the demand for the subprime loans was coming from the investment banks. They were making tons of money off of the subprime loans.
BTW: In case you are not aware the GSE's never created a single CDO.
Quote:
Originally Posted by workingclasshero
the whole point is that yes packaging of mortgages , mortgage backed securities, is not illegal, and was a good way for banks etc to make money...but the mortgages were bad paper, and that is what happened....
it goes back to the 90's...it didn't start in the 00's....
The whole dynamics of subprime lending changed when the investment banks found a use for them, which occurred in the early 2000s.
From the FCIC.
So the CDO industry turned to nonprime mortgage–backed securities, which
CDO managers believed they understood, which seemed to have a record of good
performance, and which paid relatively high returns for what was considered a safe
investment. “Everyone looked at the sector and said, the CDO construct works, but
we just need to find more stable collateral,” said Wing Chau, who ran two firms,
Maxim Group and Harding Advisory, that managed CDOs mostly underwritten by
Merrill Lynch. “And the industry looked at residential mortgage–backed securities,
Alt-A, subprime, and non-agency mortgages, and saw the relative stability.” CDOs quickly became ubiquitous in the mortgage business. Investors liked the combination of apparent safety and strong returns, and investment bankers liked having a new source of demand for the lower tranches of mortgage-backed securities and other asset-backed securities that they created.
Last edited by WilliamSmyth; 05-26-2018 at 04:44 PM..
They would make the loan if they knew there was a willing buyer for the loan. By the mid-2000s the investment banks had created a huge demand for subprime loans; the investment banks couldn't get enough of them. Which is why the investment banks started buying subprime mortgage originators; they had to guarantee a supply of subprime loans for their extremely profitable structured credit securitization business.
By 2004, creators of CDOs were the dominant buyers of the BBB-rated tranches
of mortgage-backed securities, and their bids significantly influenced prices in the
market for these securities. By 2005, they were buying “virtually all” of the BBB
tranches. Just as mortgage-backed securities provided the cash to originate mort-
gages, now CDOs would provide the cash to fund mortgage-backed securities. Also
by 2004, mortgage-backed securities accounted for more than half of the collateral in
CDOs, up from 35% in 2002. Sales of these CDOs more than doubled every year,
jumping from $30 billion in 2003 to $225 billion in 2006. Filling this pipeline would require hundreds of billions of dollars of subprime and Alt-A mortgages.
Again the demand for the subprime loans was coming from the investment banks. They were making tons of money off of the subprime loans.
BTW: In case you are not aware the GSE's never created a single CDO.
The whole dynamics of subprime lending changed when the investment banks found a use for them, which occurred in the early 2000s.
From the FCIC.
So the CDO industry turned to nonprime mortgage–backed securities, which
CDO managers believed they understood, which seemed to have a record of good
performance, and which paid relatively high returns for what was considered a safe
investment. “Everyone looked at the sector and said, the CDO construct works, but
we just need to find more stable collateral,” said Wing Chau, who ran two firms,
Maxim Group and Harding Advisory, that managed CDOs mostly underwritten by
Merrill Lynch. “And the industry looked at residential mortgage–backed securities,
Alt-A, subprime, and non-agency mortgages, and saw the relative stability.” CDOs quickly became ubiquitous in the mortgage business. Investors liked the combination of apparent safety and strong returns, and investment bankers liked having a new source of demand for the lower tranches of mortgage-backed securities
and other asset-backed securities that they created.
you keep talking about the 00's without looking at the 90's...….
----------------------------
Down Payment Hurdle Is Getting Lower - NYTimes.com Down Payment Hurdle Is Getting Lower - The New York Times
Down Payment Hurdle Is Getting Lower
By JAY ROMANO
Published: July 7, 1996
-snip-
THAT has changed in the last few years, however, as secondary-market investors such as the Federal National Mortgage Association, better known as Fannie Mae -- which package blocks of loans and sell them to private investors -- have made it easier for mortgage lenders to market low-down-payment loans.
125% Loan: Blessing Or Bane?
By JAY ROMANO
Published: July 13, 1997
''This rule will greatly expand the supply of affordable housing across the country,'' said [b]Housing Secretary Andrew M. Cuomo.
The companies(fannie/freddie) buy mortgages for homes and apartment buildings from banks, savings and loans and other mortgage lenders, and package and sell the loans to investors.When Freddie Mac and Fannie Mae buy mortgages from lenders, they provide the lenders with cash to issue new mortgages.
Under the higher goals, the companies would buy an additional $488.3 billion in mortgages over the next 10 years for seven million more low- and moderate-income families. The new mortgages would be added to the $1.9 trillion in mortgages for about 21 million families that would have been helped by the current standards.
Mr. Cuomo said that Fannie Mae and Freddie Mac were directing federal regulators on this issue.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
125% Loan - Blessing Or Bane? - NYTimes.com
============================
Giving Credit Where Credit Was Denied
Published: June 08, 1997
Giving Credit Where Credit Was Denied - NYTimes.com
--snip--
According to Jay Siegel, a vice president at Moody's Investor Service: ''Subprime loans have exploded from $7 billion in 1992 to $37 billion in 1996
--snip--
--snip--
Even quasi-governmental agencies have primed the subprime pump. The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) have recently developed computerized underwriting systems that allow lenders to speedily and reliably evaluate an applicant's credit-worthiness. The loans rejected by the automated system are, by definition, subprime.
''In the past, if a loan was rejected by Fannie Mae or Freddie Mac, that was it,'' Mr. Hornblass said. ''They weren't touching that business.
''But now both agencies have set up arrangements with lending companies that buy those subprime loans coming through the automated systems. Freddie Mac and Fannie Mae take a fee, the loans get funneled to a lending company that's willing to buy them, package them and then sell the securities to investors.''
Several industry analysts point out that the trend toward subprime lending has been a boon to the nation's affordable housing movement. ''There are more subprime opportunities that dovetail well with C.R.A.-required lending,'' said Mr. Gumbinger
--snip--
see full article.. Giving Credit Where Credit Was Denied - NYTimes.com
=============
Published: October 3, 1999
…. Fannie Mae packages these loans with other mortgages as securities for sale to investors. Creating a market to which mortgage originators can sell their loans encourages them to lend more
1999 new york times
Easing the Rules for Mortgage Approval - NYTimes.com
===================
I cut this down, since mets thinks the NYT is a crazy manifesto
all of these BEFORE 2000, all talk about subprime...in the high 100's of billions to nearly 2 trillion....by The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac)
I understand the bottom fell out in the mid 00's... but the erosion of the foundation...happened in the 90's...by the government no less
The most recent global financial clusterfu*k, was, very obviously, not the result of a single event.
Republican Members of FCIC to Promote Crisis Urban Legends, Shift Blame From Banks Posted on December 15, 2010 by Yves Smith
Quote:
Lordie, the Big Lie is with us in force.
The New York Times reports that the Republican members of the Financial Crisis Inquiry Commission are going to pre-empt the report (due in mid-January) and issue their own 13 page screed later today focusing blame for the crisis on…Fannie and Freddie, and no doubt the CRA too.
Let’s look at a few inconvenient facts. We had housing bubbles in the UK, Australia, Ireland, Spain, Iceland, Latvia, Canada, and a lot of Eastern Europe. Can we blame the CRA and Fannie and Freddie for that? How about the M&A boom, which resulted in a ton of leveraged loans being issued at super low spreads? If the Fed and other central banks had not driven rates to the floor, we’d see a good bit more distress and dislocation in this sector of the market. Oh, and how about the fact that banks in Continental Europe, which had no housing bubble in their home markets, and no evil Fannie or Freddie analogues, also nearly keeled over in the crisis?
This whole line of thinking is garbage, the financial policy equivalent of arguing that the sun revolves around the earth. Yes, the US and other countries provide overly generous subsidies to housing, and curtailing them over time would not be a bad idea. But that’s been our policy for decades. Calling that a major, let alone primary, cause of the crisis, is simply a highly coded “blame the poor” strategy, In reality, both the runup to the crisis and its aftermath were one of the greatest wealth transfers from the citizenry at large to a comparatively small group of rentiers in the history of man. ...
& who could forget one of the most bizarre outcomes of the Financial Crisis Inquiry Commission ~ certainly a very Orwellian twist ~ where the Republican members decided, at the last, to go all MGTOW, including placing a totalitarian ban on the use of certain words & phrases such as ...
Quote:
During a private commission meeting last week, all four Republicans voted in favor of banning the phrases "Wall Street” and “shadow banking” and the words “interconnection” and “deregulation” from the panel’s final report, according to a person familiar with the matter and confirmed by Brooksley E. Born, one of the six commissioners who voted against the proposal.
Financial Crisis Panel In Turmoil As Republicans Defect; Plan To Blame Government For Crisis
Enough of these obama regulations. Trump is rolling back Dodd Frank to a much better version. Enjoy the stock market gains!
Yeah, right.
Because the important thing is to maximize the profits of the wealthy and their corporations - regardless of the disaster it may wreak for the general population, like the last financial meltdown.
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