Fannie Mae Eases Credit To Aid Mortgage Lending
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
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.
Here endeth the lesson.
Do not disrupt the mantra……..IT’S ALL BUSH’S FAULT, IT’S ALL BUSH’S FAULT. Repeat ad infinitum. Even in 1998, when he was just a southern state governor, the Evil Chimpy McBusHitler(tm) and his boy genius devised this devious plot to enrich themsevles at the expense of “ordinary Americans.” Lex, if you keep up this subversive writing, your site will be shut down under the auspices of fairness in the NEW ORDER.
Here’s pretty much the whole nice yards of the who, the how, and the why. (It ain’t pretty)
http://understandingtax.typepad.com/understanding_tax/2008/09/7-the-financial-crisis-what-went-wrong.html
Oh yeah, It’s all Bush’s fault!
Probably the best explaination I have seen of this whole mess, from the roots to today.
I DEMAND A FAIR TRIAL AND THEN HANG THE GUILTY SOB’s.
ALL OF THEM!
Chris Dodd, Barney Frank, Frank Rains, Jamie Gorelick, and every other slimball politician involved in creating this mess!
If their actions cannot be proven to be criminal, there is ample evidence that they are too damn stupid to serve in ANY public office. Ever!
Nine years ago, the Republicans were firmly in control of Congress.
Nothing got passed without their collective approval. Indeed they were in control from 1993 through 2006, directing most all legislation. Fannie and Freddie lobbyists lobbied them, because they, Republicans were in control.
But for those really wanting to lay and play the blame game, there is not much blame that really lies there. Some, but not as much as elsewhere.
For starters, try the repeal of the 1933 Glass-Steagall Act in 1999, I believe ramrodded by Lindsey Graham and signed by (yes, Democrat) Pres. Clinton. That deserves much more blame. But that is only one facet. There is plenty more blame to go around. I could name many culprits.
But blame doesn’t solve our current serious crisis, so why do we quibble about Fannie Mae actions 9 years ago, when Rome may burn down next week? …. Other than some people’s partisan, fruitless, and not always accurate ‘gotcha’ entertainment.
I’m not good at big picture economics, but the foreclosures in my neighborhood (and there are many, many, many–40% of the house sales in my area are foreclosures, and in the burbs, there are subdivisions that are now ghost towns) are houses that came to be foreclosed on for two primary reasons:
1. the houses were bought up by folks who put no money down with the intention of flipping them…in some cases, buying three or more houses to refurbish and sell. At the peak, folks were flipping houses for over twice the price they purchased them. After the peak, they got stuck with mortgages greater than the value of the house as the market declined. In other cases, they had planned on refinancing before having to make a balloon payment, but found that the banks there were willing to give them a mortgage before were not willing to refinance the deflated value home.
2. the other group are the folks who believed that the inflated market rate of their home reflected “real” equity and took out large second mortgages to either upgrade the homes (value then lost) or used the money to pay for fancy vacations or large gas-guzzling suvs.
These were middle and upper class families/couples. If my area is representative, its not just a matter of Fanny Mae and Freddy Mac lowering loan thresholds for first-time borrowers, its the same kind of greed/failure to recognize the reality of market conditions that contributed to the Depression when stocks were bought on margins; the junk bond fiasco of the 1980s, the dot-com speculation bust, among others.
Yes, there are macroscale processes at work, clearly, but at the ground level, I’m also seeing a lot of mistakes–banks that sold mortgages back and forth like swapping baseball cards (one friend’s mortgage was sold three times in the first year), and homebuyers who didn’t sit down and look at the realities of their household budgets and over estimated the value of their investment.
So, as Filterman notes, since Rome is burning (seems like next week is here now), we need to figure out how to douse the flames…but we also need to figure out how to train folks to fireproof in anticipation of next time…there always seems to be a next time. I’m not saying regulation–I doubt we can regulate commonsense.
Fliterman, as of last week the Democrats were firmly in control of Congress, yet they couldn’t pass the recent bail-out act. Apparently majorities are not all that is required, which leads me to believe that reparenentatives might actually vote the wishes of their constituents rather than their party. As we both know, there’s enough blame to go around, no use in blaming a party for a policy that wasn’t in the platform.
Fact remains that there is a credit crunch right now. The question remains if the same Congress and financial institutions that got us into this mess can come up with a solution. Without taking my money at the point of a gun to cover somebody else’s failure to pay. Because that’s pretty much what goverments can do.
– Max
The longer nothing is done, the more it fixes itself. (But not necessarially in ways our betters, (representatives), would like). To me that’s what’s wonderful about capitalism. It repairs itself. If you add in pinches of marxism and dollops of socialism so as to make it fair or more fair, it never really heals. It becomes a running sore. Look to Europe. Hell, look here!
KM: your right. I saw it here in Doity Joisey too. People thought trees grew to the sky. (I have a good friend who, if he sold “the condo” in Florida today would have to bring 175 grand to the closing)
Filterman: Since 1994 when the Republicans took over, the Democrats have worked diligently to polarize the country. (They lost so they took their ball and went home). In 2000 when Bush won it got worse, (selected, not elected, etc), and they have played their silly little political games ever since. (They’re still doing it. Look at the Senate bill! The original request from the Treasury was 3 pages. Now, it’s a novel).
I think there’s plenty of blame to go around, but the original cancers were from Carter and Clinton.
John: I think you’re correct. We hang them after the trial. Unfortunately it wont happen. Even after this their “subjects” will still vote for them. WTF, there are a lot of really stupid subjects scattered about. (Once found, nurtured and made dependant that is. I’m thinking of Tom Lear’s old song, The Old Dope Peddler.
Damn! Am I really that old?)
Good luck to us all.
“Here endeth the lesson”? I don’t really think so!
There will be a “bailout” that will not benefit the taxpayer one whit. The Bureau of Printing and Engraving will need to work a few overtime shifts to print up the $1 trillion (more or less) that this fiasco is priced at. Everyone’s wealth will become devalued in the process. Except that of the bankers.
I think that the lesson is that Congress screwed up in 1913 by abandoning its Constitutional duties to a private banking cartel, and has repeatedly screwed up in the meantime by bailing out members of said cartel when their greed blows up in their face. Taxpayers are impoverished as a result.
I doubt that the right lesson has been learned yet.
Mike
Pixiekiller,
I’m not so sure the problem is fixing itself. Home prices are still falling, stock market can be considered down an overall 14% from the begining of the year 2008. And wait till the unemployment report comes out.
The only way I can see it fixing itself would be if oil dropped by 50%. Which could happen over the long term-but its gonna be painful getting there.
Hey listen up… all you Milton Friedman wanna-bees I need some advice on a pressing issue that you all just might be quilified to comment upon…here it is…
I received a credit card solicitation yesterday for a so-called ” Business Card”… the terms were …
0% fixed APR until January 1, 2010, on balances transferred ( from other credit cards) NOW;
3% cash back on busines essentials;
1% on other purchases;
a credit line up to $ 33,000.00; and no annual fee… Oh and I almost forgot the solicitation came from Washington Mutual ( a/k/a Wa-Mu) …should I apply ? Best
Flit — I recognize Glass-Stegall repeal is an article of faith on the left, but on closer examination, that idea is more of a political ALE-47. By 1999, the Act was OBE — securities firms were offering depository accounts, international banks were buying in to U.S. securities dealers (Sumitomo bought a large stake in Goldman, Sachs in 1986 — something a U.S. bank could not do), etc. In fact, as a 2000 study from the Comptroller of the Currency said:
As Michael Flynn says, there are six linked causes of this mess :
Mortgage-backed securities
Post 2001 Fed weak money policy
Fannie Mae and Freddie Mac accounting irregularities
Failure to reform Fannie and Freddie, and a subsequent rush into subprime lending
Slowing of the housing market (once they ran out of greater fools), unravelling the required continual appreciation model of subprime lending
Bank investments in MBSs were suddenly worthless (due in part to FASB 107), reducing capital below regulatory limits, and curtailing lending
It wasn’t GLBA that made banks carry MBSs as investment grade securities. Indeed, it was the failure of the SEC to insist upon adequate capitalization of those MBS, which should be laid at Chris Cox’s feet — McCain was right to call for his resignation. In fact, the board of the SEC, split between Democrats and Republicans, should have raised the warning flag long ago concerning the high levels of leverage in the MBSs.
So, there is more than enough blame to go around on both sides. What is most troubling, is the determination to gain partisan political advantage from this, symbolized by Dear Leader Pelosi’s corrosive, borderline irrational speech just before the House vote. Furthermore, the Dear Leader, who let House committees spend the last two years looking into every *hit house rumor concerning the Bush adminstration, doesn’t appear too interested in finding out how to prevent this from happening again.
Skippie-san;
Yeah, housing has dropped 14%. It’s still overpriced by about 20/25%. Or, that’s my understanding from looking at the charts of inflation and housing costs. (Think tulip-mania). Housing and inflation lines began to diverge back in the early 90′s.
When your “new fangled mortgage” could be the same or less than rent, WTF, buy! Others, the smart ones, were working the angles with re-financed money so they could “flip that house”.
Curse both their houses! They are deserving of the hair-cut they are getting. May each have sand in their vasoline! When you gamble and lose, you have lost. If you borrow money and gamble with it and lose, well, in my part of the world, your legs get broken in four or five places.
Ultimately, the “real price” has to be found. More artificiality in the form of any government intervention will only distort and prolong that “real price”.
My Dad, an old fashioned doctor used to muse that when a patient’s problem was “treated”, that meant a long term income stream. (Lots of tongue clucking and expensive salves). If you cured that patient, well, you got paid, got a card every christmas with enclosed pictures and maybe a flat or two of home-made raviolis delivered to your front door on Thanksgiving. (He liked the second way)
And oil, by-the-way, is dropping. Will it get to 50/60 bucks a barrel? Depends on us.
The bullskat out of Washington and the MSM is getting deeper by the minute. This will only hurt those totally financially irresponsible. Or the greedy.
Would that I was 20 years younger and could trot through congress with a machete.
Keep your powder dry.