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Old 05-28-2018, 08:33 PM
 
Location: Texas
37,939 posts, read 17,775,263 times
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Quote:
Originally Posted by WilliamSmyth View Post
All that shows is that there were more subprime loans in the 2000s than in the 90s. The reason why there were more subprime is that investment banks wanted subprime loans for CDOs.
Government pushed it on them using force by giving out a lower "bank score" and holding up those banks if they wanted to make changes or diversify, like in a merger. Coercion by offering incentives for those bad loans.


Quote:
Originally Posted by WilliamSmyth View Post
I have done so plenty of times in this thread. The Free Market found a use for subprime loans. The growth in subprime loans corresponds directly with the growth in CDOs which needed a supply of subprime loans. Its that simple. The free market shot itself in the foot.
lol No the free market didn't. Those institutions made a choice which was often enough based on government pushing them to that direction.

The free market rarely makes those loans. Going from 1 in 240 to 80 in 240 loans that are little to no money down doesn't happen in the free market. THAT is what happens in a managed market. You artificially create demand, and prices rise until there is a market correction and we have a crash.

Artificially created demand by lowering standards so everyone and their dog got a loan. Lowering standards is putting it mildly.
Don't make lower standards to make those horrible loans and we have no boom and bust.

Last edited by Loveshiscountry; 05-28-2018 at 08:47 PM..
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Old 05-28-2018, 08:56 PM
 
Location: Texas
37,939 posts, read 17,775,263 times
Reputation: 10366
Quote:
Originally Posted by Metsfan53 View Post
96% of top subprime lenders were not bound by regulations you reference no natter how many times you claim the law was the cause. Please explain that? Pointing out Angelo Mozilla as an exception does not negate this fact.

Lenders not subject to the CRA, such as subprime giant Countrywide Financial, still fell under its spell. Regulated by HUD, Countrywide and other lenders agreed to sign contracts with the government supporting such lending under threat of being brought under CRA rules.


"Countrywide can potentially help you meet your CRA goals by offering both whole loan and mortgage-backed securities that are eligible for CRA credit," the lender advertised to banks.


Any other research I can do for you that proves your claims are garbage?

So it wasn't your employees who did the dirty deed, it was the contract labor you hired. Well then. No blame there right?
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Old 05-28-2018, 10:11 PM
 
3,992 posts, read 2,445,434 times
Reputation: 2350
Quote:
Originally Posted by Loveshiscountry View Post
Lenders not subject to the CRA, such as subprime giant Countrywide Financial, still fell under its spell. Regulated by HUD, Countrywide and other lenders agreed to sign contracts with the government supporting such lending under threat of being brought under CRA rules.


"Countrywide can potentially help you meet your CRA goals by offering both whole loan and mortgage-backed securities that are eligible for CRA credit," the lender advertised to banks.


Any other research I can do for you that proves your claims are garbage?

So it wasn't your employees who did the dirty deed, it was the contract labor you hired. Well then. No blame there right?
1 cra loans =/= subprime necessarily
2 originations of cra subprime loans by cra regulated lenders and thier affiliates or contract labor as you call it accounted for 6% of market share in total
3 secondary purchase of subprime cra loans that you reference above by cra regulated institutions from non regulated lenders accounted for 2 percent of the secondary market.


So not quite the epidemic then huh? As you still fail to understand the appetite and volume that existed at Non despitory institutions not bound by cra, though origination, the secondary market, and securitization. But keep thinking you’ve got some special insight here
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Old 05-29-2018, 07:19 AM
 
Location: Alameda, CA
7,605 posts, read 4,828,836 times
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Quote:
Originally Posted by workingclasshero View Post
I bought my first house in 1986, sold it with a PCS (perm change of station) on the high in 89 (there was a small housing crash in90) as I was military

bought my second house in 90 in Panama (still have it, paid off)

bought my 3rd house here in Long Island in 1994...paid 125k....paid off...still own it..will sell it in less than 3 years for proably 3/4 mil

bought the next door neighbors house in 97, as a handyman special, for just under 120k...sold it in 05 for 450k

bought another house near Fort Bragg in the early 00's....150k... a 4000sf w/igp on a full acre....still own it.....worth about 350k (would be 1.5mil+ here in LI)

I was trading/investing/flipping real estate (sub prime) in the 90's


why do you guys ACT like it only just started in 04????
Asked and an answered multiple times.


Subprime didn't start in the 2000s. Its the scale that changed. In 2000 subprime was around 100 billion representing 10% of the market, by the mid 2000s subprime was over 600 billion and over 25% of the market. That growth was driven by the investment banks. Prior to the 2000s the investment banks were not demanding that volume of subprime. The investment banks were demanding the growth because they needed a supply for CDOs; CDOs which also had never been sold in anywhere near the volumes they were in the 2000s.
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Old 05-29-2018, 07:25 AM
 
Location: Alameda, CA
7,605 posts, read 4,828,836 times
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Quote:
Originally Posted by Loveshiscountry View Post
Government pushed it on them using force by giving out a lower "bank score" and holding up those banks if they wanted to make changes or diversify, like in a merger. Coercion by offering incentives for those bad loans.


lol No the free market didn't. Those institutions made a choice which was often enough based on government pushing them to that direction.

The free market rarely makes those loans. Going from 1 in 240 to 80 in 240 loans that are little to no money down doesn't happen in the free market. THAT is what happens in a managed market. You artificially create demand, and prices rise until there is a market correction and we have a crash.

Artificially created demand by lowering standards so everyone and their dog got a loan. Lowering standards is putting it mildly.
Don't make lower standards to make those horrible loans and we have no boom and bust.
You are just stating your belief and can provide zero documentation to back up your belief.


I have posted data and quotes from people in the industry who have stated what they were doing and why.
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Old 05-29-2018, 09:00 AM
 
Location: Long Island
32,816 posts, read 19,406,864 times
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Quote:
Originally Posted by WilliamSmyth View Post
Asked and an answered multiple times.


Subprime didn't start in the 2000s. Its the scale that changed. In 2000 subprime was around 100 billion representing 10% of the market, by the mid 2000s subprime was over 600 billion and over 25% of the market. That growth was driven by the investment banks. Prior to the 2000s the investment banks were not demanding that volume of subprime. The investment banks were demanding the growth because they needed a supply for CDOs; CDOs which also had never been sold in anywhere near the volumes they were in the 2000s.
ok...its scale changed

the fact is that the bubble started in 1995, just because it ballooned in the 00's doesn't mean that it didn't start somewhere


and linking the FDIC doesn't really make it justifiable ...do you REALLY THINK the GOVERNMENT will admit it was the cause???
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Old 05-29-2018, 09:00 AM
 
Location: Alameda, CA
7,605 posts, read 4,828,836 times
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https://www.forbes.com/sites/stevede.../#4166aa24f92f


Fannie Mae and Freddie Mac market share declined. The relative market share of Fannie Mae and Freddie Mac dropped from a high of 57 percent of all new mortgage originations in 2003, down to 37 percent as the bubble was developing in 2005-06. More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions. The government-sponsored enterprises were concerned with the loss of market share to these private lenders — Fannie and Freddie were chasing profits, not trying to meet low-income lending goals.

It was primarily private lenders who relaxed standards: Private lenders not subject to congressional regulations collapsed lending standards. the GSEs. Conforming mortgages had rules that were less profitable than the newfangled loans. Private securitizers — competitors of Fannie and Freddie — grew from 10 percent of the market in 2002 to nearly 40 percent in 2006. As a percentage of all mortgage-backed securities, private securitization grew from 23 percent in 2003 to 56 percent in 2006.

Derivatives exploded uncontrollably: CDOs provided the first “infinite market”; at height of crash, derivatives accounted for 3 times global economy.

Derivatives were unregulated: Derivatives had become a uniquely unregulated financial instrument. They are exempt from all oversight, counter-party disclosure, exchange listing requirements, state insurance supervision and, most important, reserve requirements. This allowed AIG to write $3 trillion in derivatives while reserving precisely zero dollars against future claims.
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Old 05-29-2018, 09:16 AM
 
Location: Long Island
32,816 posts, read 19,406,864 times
Reputation: 9618
Quote:
Originally Posted by WilliamSmyth View Post
https://www.forbes.com/sites/stevede.../#4166aa24f92f


Fannie Mae and Freddie Mac market share declined. The relative market share of Fannie Mae and Freddie Mac dropped from a high of 57 percent of all new mortgage originations in 2003, down to 37 percent as the bubble was developing in 2005-06. More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions. The government-sponsored enterprises were concerned with the loss of market share to these private lenders — Fannie and Freddie were chasing profits, not trying to meet low-income lending goals.

It was primarily private lenders who relaxed standards: Private lenders not subject to congressional regulations collapsed lending standards. the GSEs. Conforming mortgages had rules that were less profitable than the newfangled loans. Private securitizers — competitors of Fannie and Freddie — grew from 10 percent of the market in 2002 to nearly 40 percent in 2006. As a percentage of all mortgage-backed securities, private securitization grew from 23 percent in 2003 to 56 percent in 2006.

Derivatives exploded uncontrollably: CDOs provided the first “infinite market”; at height of crash, derivatives accounted for 3 times global economy.

Derivatives were unregulated: Derivatives had become a uniquely unregulated financial instrument. They are exempt from all oversight, counter-party disclosure, exchange listing requirements, state insurance supervision and, most important, reserve requirements. This allowed AIG to write $3 trillion in derivatives while reserving precisely zero dollars against future claims.
SO???

the fact is it started in the 90's, was government directed

the housing bubble which busted in 2007ish started in 1994/95... by liberal policies

bill Clinton and his chiefs of HUD, Henry Cisneros and Andrew Cuomo are the idiots to blame on that


and this is where it starts

Fannie Mae Seeks to Ease Home Buying - NYTimes.com Fannie Mae Seeks to Ease Home Buying - NYTimes.com
Fannie Mae Seeks to Ease Home Buying
By KEITH BRADSHER,
Published: March 10, 1994


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.



----------------------------


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.
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.
----------------------


=========================================


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

===========================

this from 1999

Fannie Mae Eases Credit To Aid Mortgage Lending - NYTimes.com
Fannie Mae Eases Credit To Aid Mortgage Lending - NYTimes.com
Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES
Published: September 30, 1999


.......... 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.


============================

Giving Credit Where Credit Was Denied

Published: June 08, 1997
Giving Credit Where Credit Was Denied - NYTimes.com

--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--


=================
Published: June 25, 2000

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


===============
hmmmmmmmm

Keeping Homeowners in Their Homes - 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

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.''
















it was exploding in the 90's also....


why are you defending the government and the 90's????
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Old 05-29-2018, 09:17 AM
 
Location: Alameda, CA
7,605 posts, read 4,828,836 times
Reputation: 1438
Quote:
Originally Posted by workingclasshero View Post
ok...its scale changed

the fact is that the bubble started in 1995, just because it ballooned in the 00's doesn't mean that it didn't start somewhere


and linking the FDIC doesn't really make it justifiable ...do you REALLY THINK the GOVERNMENT will admit it was the cause???
I don't care whether the government admits it or not. There is plenty of documentation on what occurred.



FTR, I'm not claiming that the government never makes mistakes or that they didn't make mistakes during the financial crisis. Clearly leaving the derivative marketplace almost totally unregulated was a huge mistake. Still is and still has the potential to crater the economy.



I don't even agree with all of the government housing initiatives. But I have this problem, I looked at the data. The investment banks efforts was the driving force behind the expansion of subprime mortgages during the 2000s.


As for it has to start somewhere, why don't we claim the start was with whoever lent the money for the first mortgage? Clearly that just eventually led to the financial collapse. Don't provide mortgages and there is no mortgage crisis.
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Old 05-29-2018, 09:20 AM
 
Location: Alameda, CA
7,605 posts, read 4,828,836 times
Reputation: 1438
Quote:
Originally Posted by workingclasshero View Post

--snip--


why are you defending the government and the 90's????
Why are you defending investment bankers? Why do you ignore their actions?
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