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Liberal-leaning New York Times article from 1999:
Fannie Mae Eases Credit To Aid Mortgage Lending - New York Times (http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F9582 60&sec=&spon=&pagewanted=1 - broken link)
"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."
Maintain its phenomenal growth in profits, which were shown to be artificially high from accounting fraud by CEO Franklin Raines among others..
And people still want to pin this problem on the Bush administration. I don't like much of the Bush admin, but this financial meltdown goes further back than 8 years..
I wouldn't be so quick to blame most of the financial mess on Fannie and Freddie.
Quote:
Start with the most basic fact of all: virtually none of the $1.5 trillion of cratering subprime mortgages were backed by Fannie or Freddie. That’s right — most subprime mortgages did not meet Fannie or Freddie’s strict lending standards. All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrower’s income or employment history? All made in the private sector, without any support from Fannie and Freddie.
Look at the numbers. While the credit bubble was peaking from 2003 to 2006, the amount of loans originated by Fannie and Freddie dropped from $2.7 trillion to $1 trillion. Meanwhile, in the private sector, the amount of subprime loans originated jumped to $600 billion from $335 billion and Alt-A loans hit $400 billion from $85 billion in 2003. Fannie and Freddie, which wouldn’t accept crazy floating rate loans, which required income verification and minimum down payments, were left out of the insanity.
No, many people do not have any training or knowledge of financial matters.
They assume the experts, who are actually working with such matters
on a daily basis and who have the actuarians and education, know better
than they.
When these respected experts tell them they can afford it, they believe.
The people's only mistake, most of them, is that they are dumb.
There must be much more blame on those who should have known better.
80% of the loans in question did not even fall under these minority loan regulations. Those only applied to banks lending their own deposits to homeowners. Very few banks do this.
Furthermore, in all this crisis. No expert on the problem has ever blamed his even partly on the Government making lenders loan to minorities with credit issues.
This just sounds good to right wingers. To blame it on Government do-gooders and minorities.
That way they don't have to think about how they got suckered by the GOP pushing deregulation for anything and everything.
Here' another thing to think about. Not only were only 20% of the loans in question even under those minority guidlines.....Nobody forced Wall St to buy the loans!!
"Forget that sub-prime investment instruments were in very high demand by Wall Street, forget that everyone was making a killing on them and everyone thought they were the greatest thing since sliced bread. No, no, it's not the deregulated greed of Wall Street that made this crisis, it's the liberal do-gooder policies that somehow FORCED all those hoity-toity innocent banks to purchase tonnes and tonnes of bad debt."
A few years ago I refinanced a mortgage with my local bank. At that time my banker looked over the value of the property, my income history and the amount I was refinancing. She stated that, if I sold this property and put the money into a more expensive house I could realize a profit on my existing home and be eligible for a mortgage for nearly four times what I was asking to borrow. I considered my requirements, my income and my age and I politely declined. I am very glad I did not bite on this opportunity but the bait was tempting.
Later I was walking around stretching my legs and I wandered into an empty office. I noted a chart on the wall that was tracking the bank employees and stated the bonuses they would receive was dependant on the amount of money they leant. This was the incentive the bank used to encourage mortgage originators to sell mortgages. I think this need for selling ever more mortgages, regardless of the borrowers’ ability to pay, is the basis of our problems. I cannot blame an unsophisticated customer for being sold a defective product by an unscrupulous salesman. Let us blame a banking industry that failed to follow the basic rules and gambled with their owner’s investments and their customer’s deposits. They should have realized that if they could not cover the loss they should not have made the bet.
Fannie and Freddie are heavily implicated in the mortgage meltdown/credit crisis/bailout fleecing of American taxpayers.
The companies, which together own or guarantee about $5 trillion in home loans, about half the nation’s total, have lost $14 billion in the last year and are likely to pile up billions more in losses until the housing market begins to recover.
Fannie and Freddie both purchase home loans from banks and then repackage those loans as mortgage-backed securities which they either hold on their own books or sell to investors around the globe.
Government takes control of Fannie, Freddie - Mortgage Mess - MSNBC.com (broken link)
---That last sentence is why American taxpayers are going to have to pay foreign investors/governments for the bad debt/mortgage-backed securities Fannie/Freddie sold them.---
Treasury Secretary Henry Paulson has been in contact in recent weeks with foreign governments that hold billions of dollars of Fannie and Freddie debt to reassure them that the United States recognizes the importance of the two companies.
Armando Falcon, who clashed frequently with the companies during his six years as Fannie and Freddie's chief government regulator, said in an interview last month that the companies' woes are similar to the downfall of other major corporate titans like Enron and WorldCom earlier this decade. "It boils down to a whole lot of greed and arrogance," he said.
The companies, he said, took advantage of the perception on Wall Street that the government would stand behind them in a time of crisis, as is now the case.
With that implied government backing, the companies generated large profits for years, but ultimately took on too much risk, causing investors to lose faith in their ability to navigate the historic housing bust.
Even as the subprime mortgage market collapsed, Fannie and Freddie kept backing risky so-called Alt-A loans, which were made to borrowers with solid credit but little proof of their incomes, or small or no down payments. Mortgage giants were blind to bubble - Mortgage Mess - MSNBC.com
Hagel, Sununu, Dole, McCain (all R's) tried to rein in Fannie/Freddie. The Democrats repeatedly blocked those attempts.
should be perfectly apparent.. the banks!
Democrats pushed for including low income people in the home buying market true, but republicans took away all the direct regulation that was attached to the process. So, banks out of greed conjured up these wonderful schemes where they would lend to someone they don't typically lend to.. with a teaser rate banking on the fact that the house's value would double by the time the ridiculous interest rate kicked in. They figured the majority of these people would cash out and the few that didn't they could milk them into further poverty with the hike in interest rate. What happened is.. the market burst.. housing prices got so out of control.. that the market couldn't support them.. they were working overtime on conjurring up further teaser schemes to make loans to people to keep the ball rolling and it all caught up to them
You can sit and blame the homebuyers all you want.. but most first time homebuyers are not properly educated on it.. and yes that is their fault to some extent..
but here's a scenario...
Her in boise.. 2 years ago.. the average house for sale was like 260,000... and virtually NO houses on the market under 100,000.. they just didn't exist.. not even a shack..
in conventional lending.. most people in this area based on wages.. they cannot afford much more than 100,000.
If you put your information into conventional calculators online even.. most people making 50k per year should only be purchasing a house in this ballpark. Because the housing market ballooned there were NO HOUSES for that price... so they were telling 50k salaries that they can afford 250k house..
realtors and appraisers were telling people their houses were worth so much more and had conventional lending turned people down when they should have.... the prices wouldn't have gone up like they did..
it was nothing but a rat race of trying to cash in as much and as quick as they could without any check of the market and demographic...they gambled away your 401k's pensions, retirement, savings.. and lost it.. so now the tax payer has to bail THEM out.. to bail themselves out.
People should be angry about this!
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