Anybody watching the Goldman hearing?

[Misty]

Can anyone guess how the Kennedy Family made their fortune?

The same way I make my living, bootlegging. Lol

 

[GWV5903]

I already did.

You posted stories demonstrating no empirical causal link.

Freddie and Fannie were too leveraged and posed a systemic risk, just like the big banks, but Freddie and Fannie loans performed better than private loans. Also, the CRA played virtually no role.

Feel free to refute it.

http://www.usmessageboard.com/economy/70006-cra-not-to-blame-for-housing-debacle.html

You Are Absolutely Wrong, the Community Reinvestment Act is the primary basis for the housing bubble.....

Prior to 1993 there where no options to buy real estate with bad credit unless you put down 20% or more.....

The Sub Prime market was created to give poor borrowers a chance to own.....

In 1996 The Clinton Administration introduced the Down Payment Assistance Loan for FHA mortgages, this loan would allow the buyer to obtain a home for $500, thats right $500....

Toro, your full of bull crap.....

 

[boedicca]

The criticism of Freddie and Fannie and their role in the financial crisis from the right is mainly ideological. What the right points to were not the primary driver of the housing bubble. Perversely, the things the right criticizes are more relevant today as the Democrats told the GSEs in early 2009 to extend an additional $200 billion in loans in the midst of the housing collapse to people with bad credit, whose loans were essentially being monetized by the US government. The loans that are on the balance sheets of Freddie and Fannie are junkier now than they ever were at the height of the bubble.

Absolutely Incorrect.

The fact that Fannie Mae and Freddie Mac were backed up with TAXPAYER MONEY to buy up subprime loans provided the pay-off to banks to make No Doc loans. They also participated in packaging them off to sell to others, realizing how risky they were (but wanting to profit from them).


In January 2007, as years of loose mortgage lending were about to send the nation's housing market into devastating decline, Fannie Mae chief executive Daniel H. Mudd wrote a confidential memo to his board.

Discussing the company's successes, Mudd said one of Fannie Mae's achievements in 2006 was expanding its involvement in the market for subprime and other nontraditional mortgages. He called it a step "toward optimizing our business."

A month later, Fannie Mae outlined plans to further expand its activities in the subprime market. The company recognized the already weak performance of subprime loans but predicted that they would get better in 2007, according to another Fannie Mae document.

Internal documents show that even late in the housing bubble, Fannie Mae was drawn to risky loans by a variety of temptations, including the desire to increase its market share and fulfill government quotas for the support of low-income borrowers.

Since then, Fannie Mae's exposure to loosely underwritten mortgages has produced billions of dollars of losses and sent its stock price plummeting, prompting the federal government to prepare for a potential taxpayer bailout of the company. This month, Fannie Mae reported that loans from 2006 and 2007 accounted for almost 60 percent of its second-quarter credit losses.

(snip)

"By entering new markets -- especially Alt-A and subprime -- and guaranteeing more of our customers' products at market prices, we met our goal of increasing market share from 22 to 25 percent," Mudd wrote in a 2006 year-end report to the Fannie Mae board dated Jan. 3, 2007.

(snip)

During the peak years of the housing bubble, the company was distracted by an accounting scandal and its fallout. For much of 2006, the company was focused on a continuing effort to correct years of false financial reports, a massive project that cost more than $1 billion and ultimately revealed that Fannie Mae had overstated past profits by $6.3 billion.

(snip)

Buying Alt-A and subprime mortgages was part of Fannie Mae's effort to meet the challenge. Fannie Mae sought to reap the rewards and protect itself from the downside of the investments through a feat of financial engineering it called its "Risk Transformation Facility," which was meant to transfer the riskiest elements to other investors.

(snip)

"We engaged in the subprime market, for the first time closing deals to guarantee and securitize subprime loans, with help from the new facility that allows us to sell off the riskiest layers," Mudd wrote. By October, the company had signed $3 billion of such deals.


Fannie's Perilous Pursuit of Subprime Loans - washingtonpost.com

 

[Toro]

I already did.

You posted stories demonstrating no empirical causal link.

Freddie and Fannie were too leveraged and posed a systemic risk, just like the big banks, but Freddie and Fannie loans performed better than private loans. Also, the CRA played virtually no role.

Feel free to refute it.

http://www.usmessageboard.com/economy/70006-cra-not-to-blame-for-housing-debacle.html

You Are Absolutely Wrong, the Community Reinvestment Act is the primary basis for the housing bubble.....

Prior to 1993 there where no options to buy real estate with bad credit unless you put down 20% or more.....

The Sub Prime market was created to give poor borrowers a chance to own.....

In 1996 The Clinton Administration introduced the Down Payment Assistance Loan for FHA mortgages, this loan would allow the buyer to obtain a home for $500, thats right $500....

Toro, your full of bull crap.....

Feel free to post empirical evidence rather than talking points. I haven't seen any thus far. I'd be happy to change my mind, but nobody of your ilk has yet to demonstrate any statistical evidence that the CRA was the cause of the housing bubble.

If this were true, then the homes that would have gone up the most were those in CRA areas, the homes that would have fallen the most after the Bubble burst would have been CRA loans, and the loans that would have gone bad the most would have been CRA loans. If you believe in markets, this must have happened if the CRA was the primary culprit of the housing bubble. But none of that happened. None of that was true. In fact, CRA loans accounted for only a small percentage of bad loans.

we asked how CRA-related subprime loans performed relative to other loans. Once again, the potential role of the CRA could be large or small, depending on the answer to this question. We found that delinquency rates were high in all neighborhood income groups, and that CRA-related subprime loans performed in a comparable manner to other subprime loans; as such, differences in performance between CRA-related subprime lending and other subprime lending cannot lie at the root of recent market turmoil. ...

Our analysis of the loan data found that about 60 percent of higher-priced loan originations went to middle- or higher-income borrowers or neighborhoods. Such borrowers are not the populations targeted by the CRA. In addition, more than 20 percent of the higher-priced loans were extended to lower-income borrowers or borrowers in lower-income areas by independent nonbank institutions--that is, institutions not covered by the CRA.6

Putting together these facts provides a striking result: Only 6 percent of all the higher-priced loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas, the local geographies that are the primary focus for CRA evaluation purposes. This result undermines the assertion by critics of the potential for a substantial role for the CRA in the subprime crisis. In other words, the very small share of all higher-priced loan originations that can reasonably be attributed to the CRA makes it hard to imagine how this law could have contributed in any meaningful way to the current subprime crisis.

Of course, loan originations are only one path that banking institutions can follow to meet their CRA obligations. They can also purchase loans from lenders not covered by the CRA, and in this way encourage more of this type of lending. The data also suggest that these types of transactions have not been a significant factor in the current crisis. Specifically, less than 2 percent of the higher-priced and CRA-credit-eligible mortgage originations sold by independent mortgage companies were purchased by CRA-covered institutions.

FRB: Speech--Kroszner, The Community Reinvestment Act and the Recent Mortgage Crisis--December 3, 2008

So, according to you, even though CRA loans did not default at a higher rate than other subprime loans, and even though 94% of all subprime loans were not CRA loans, and even though 24 of the top 25 subprime lending institutions were not directly subject to CRA lending standards, the CRA was the cause of the housing bubble.

That's not a serious argument. It is an argument made by ideologues who are backing into a thesis to fit their worldview. It should be ignored.

 

[Toro]

The criticism of Freddie and Fannie and their role in the financial crisis from the right is mainly ideological. What the right points to were not the primary driver of the housing bubble. Perversely, the things the right criticizes are more relevant today as the Democrats told the GSEs in early 2009 to extend an additional $200 billion in loans in the midst of the housing collapse to people with bad credit, whose loans were essentially being monetized by the US government. The loans that are on the balance sheets of Freddie and Fannie are junkier now than they ever were at the height of the bubble.

Absolutely Incorrect.

The fact that Fannie Mae and Freddie Mac were backed up with TAXPAYER MONEY to buy up subprime loans provided the pay-off to banks to make No Doc loans. They also participated in packaging them off to sell to others, realizing how risky they were (but wanting to profit from them).


In January 2007, as years of loose mortgage lending were about to send the nation's housing market into devastating decline, Fannie Mae chief executive Daniel H. Mudd wrote a confidential memo to his board.

Discussing the company's successes, Mudd said one of Fannie Mae's achievements in 2006 was expanding its involvement in the market for subprime and other nontraditional mortgages. He called it a step "toward optimizing our business."

A month later, Fannie Mae outlined plans to further expand its activities in the subprime market. The company recognized the already weak performance of subprime loans but predicted that they would get better in 2007, according to another Fannie Mae document.

Internal documents show that even late in the housing bubble, Fannie Mae was drawn to risky loans by a variety of temptations, including the desire to increase its market share and fulfill government quotas for the support of low-income borrowers.

Since then, Fannie Mae's exposure to loosely underwritten mortgages has produced billions of dollars of losses and sent its stock price plummeting, prompting the federal government to prepare for a potential taxpayer bailout of the company. This month, Fannie Mae reported that loans from 2006 and 2007 accounted for almost 60 percent of its second-quarter credit losses.

(snip)

"By entering new markets -- especially Alt-A and subprime -- and guaranteeing more of our customers' products at market prices, we met our goal of increasing market share from 22 to 25 percent," Mudd wrote in a 2006 year-end report to the Fannie Mae board dated Jan. 3, 2007.

(snip)

During the peak years of the housing bubble, the company was distracted by an accounting scandal and its fallout. For much of 2006, the company was focused on a continuing effort to correct years of false financial reports, a massive project that cost more than $1 billion and ultimately revealed that Fannie Mae had overstated past profits by $6.3 billion.

(snip)

Buying Alt-A and subprime mortgages was part of Fannie Mae's effort to meet the challenge. Fannie Mae sought to reap the rewards and protect itself from the downside of the investments through a feat of financial engineering it called its "Risk Transformation Facility," which was meant to transfer the riskiest elements to other investors.

(snip)

"We engaged in the subprime market, for the first time closing deals to guarantee and securitize subprime loans, with help from the new facility that allows us to sell off the riskiest layers," Mudd wrote. By October, the company had signed $3 billion of such deals.


Fannie's Perilous Pursuit of Subprime Loans - washingtonpost.com

Right. Subprime share of the GSEs had fallen from half the market to a quarter. Most of those loans were being written outside of the GSEs. The GSEs participated, and like I said, it is wrong to say they had no influence. But the GSEs were losing market share. This is from a Moody's report.

Freddie Mac has long played a central role (shared with Fannie Mae) in the secondary mortgage finance market. In recent years, both housing GSEs have been losing share within the overall market due to the shifting nature of consumer preferences towards adjustable-rate loans and other hybrid products. For the first half of 2006, Fannie Mae and Freddie Mac captured about 44% of total origination volume – up from a 41% share in 2005, but down from 59% in 2003.

http://www.freddiemac.com/investors/pdffiles/fm2006_moodys.pdf

So, in other words, Freddie and Fannie were losing market share during the housing bubble. As I posted earlier, that was because their underwriting standards were higher than the private market. They were losing share throughout because their volume of non-conforming loans were declining. It was Wall Street that was churning this shit from the private market lenders through their CDO machine.

 

[GWV5903]

You posted stories demonstrating no empirical causal link.

Freddie and Fannie were too leveraged and posed a systemic risk, just like the big banks, but Freddie and Fannie loans performed better than private loans. Also, the CRA played virtually no role.

Feel free to refute it.

http://www.usmessageboard.com/economy/70006-cra-not-to-blame-for-housing-debacle.html

You Are Absolutely Wrong, the Community Reinvestment Act is the primary basis for the housing bubble.....

Prior to 1993 there where no options to buy real estate with bad credit unless you put down 20% or more.....

The Sub Prime market was created to give poor borrowers a chance to own.....

In 1996 The Clinton Administration introduced the Down Payment Assistance Loan for FHA mortgages, this loan would allow the buyer to obtain a home for $500, thats right $500....

Toro, your full of bull crap.....

Feel free to post empirical evidence rather than talking points. I haven't seen any thus far. I'd be happy to change my mind, but nobody of your ilk has yet to demonstrate any statistical evidence that the CRA was the cause of the housing bubble.

If this were true, then the homes that would have gone up the most were those in CRA areas, the homes that would have fallen the most after the Bubble burst would have been CRA loans, and the loans that would have gone bad the most would have been CRA loans. If you believe in markets, this must have happened if the CRA was the primary culprit of the housing bubble. But none of that happened. None of that was true. In fact, CRA loans accounted for only a small percentage of bad loans.

we asked how CRA-related subprime loans performed relative to other loans. Once again, the potential role of the CRA could be large or small, depending on the answer to this question. We found that delinquency rates were high in all neighborhood income groups, and that CRA-related subprime loans performed in a comparable manner to other subprime loans; as such, differences in performance between CRA-related subprime lending and other subprime lending cannot lie at the root of recent market turmoil. ...

Our analysis of the loan data found that about 60 percent of higher-priced loan originations went to middle- or higher-income borrowers or neighborhoods. Such borrowers are not the populations targeted by the CRA. In addition, more than 20 percent of the higher-priced loans were extended to lower-income borrowers or borrowers in lower-income areas by independent nonbank institutions--that is, institutions not covered by the CRA.6

Putting together these facts provides a striking result: Only 6 percent of all the higher-priced loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas, the local geographies that are the primary focus for CRA evaluation purposes. This result undermines the assertion by critics of the potential for a substantial role for the CRA in the subprime crisis. In other words, the very small share of all higher-priced loan originations that can reasonably be attributed to the CRA makes it hard to imagine how this law could have contributed in any meaningful way to the current subprime crisis.

Of course, loan originations are only one path that banking institutions can follow to meet their CRA obligations. They can also purchase loans from lenders not covered by the CRA, and in this way encourage more of this type of lending. The data also suggest that these types of transactions have not been a significant factor in the current crisis. Specifically, less than 2 percent of the higher-priced and CRA-credit-eligible mortgage originations sold by independent mortgage companies were purchased by CRA-covered institutions.

FRB: Speech--Kroszner, The Community Reinvestment Act and the Recent Mortgage Crisis--December 3, 2008

So, according to you, even though CRA loans did not default at a higher rate than other subprime loans, and even though 94% of all subprime loans were not CRA loans, and even though 24 of the top 25 subprime lending institutions were not directly subject to CRA lending standards, the CRA was the cause of the housing bubble.

That's not a serious argument. It is an argument made by ideologues who are backing into a thesis to fit their worldview. It should be ignored.

Not a serious argument? You're one and only source is weak and a little biased to say the least.....

I have spent the last 18 years in the housing industry, CRA gave birth to the Sub Prime Loan (1993), the FHA DPA Loan (1995) and Clinton revised CRA in 1995, exerting more pressure on banks to offer the underprivileged more access to lending.....

CRA is the argument, Carter created it and Clinton expanded it, both with good intentions, but with no reasonable understanding what a monster they had hatched.....

When you open up the doors to the vault for free money, by way of the Federal Government, the results do not lie.....

Housing was at a low point in the first half of the '90s, we had just come out of the Savings and Loan Crisis of the '80s, FHA DPA and Sub Prime Lending made way for the housing boom from 1996 to 2006, this is not the argument of ideologues, these are facts.....

We had an entire community funded by B of A Acorn Loans, BTW they did not have to make a down payment, received .50 to .75 lower rates, tell me how this does not fly in the face of the Equal Housing Act.....that community, which is in the 4th largest city in America, now has one of the highest foreclosure rates in the country......

Do a little research, it is real easy to find, but don't be stupid enough to believe the CRA had nothing to do with the current housing crisis.....

 

[oreo]

I'm not defending GS, but watching the people who created the environment for this crisis lecture the slimeballs is really beyond the pale.

Example

Senator: Do you know what a No Doc Loan is?

And then he proceeds to describe how those No Doc loans were packaged to sell off.

What he leaves out is the role the government played via CRA to force banks to make No Doc Loans to begin with, and how they financed Fannie Mae and Freddie Mac to buy them up (who then proceeded to lie on their financial statements about them).

This hearing is incomplete. Without testimony from the Boston Federal Reserve that wrote the paper recommending "subjective standards", the bank regulators who threatened to pull bank charters if they didn't increase minority lending, Barney Frank and Chris Dodd, the rating agencies that scored subprime portfolios as high investment grade instruments, and the various execs at FM/FM - this is Just A Witch Hunt.

Yep--it was Alan Greenspan and Clinton's treasury secretary--Robert Rubin-- that fully supported--and defended hedge funds--against all warnings. They have since apologized for their roles--but let's not forget that ground zero for all of this great recession--is none other than Federal Government policy--or should I say the "lack of it." Fannie/Freddie a complete disaster--in their policy of loaning out money to people with sub-prime mortgages that had no hope of paying the monthly mortgage payment if interest rates rose. Let alone--no collateral--no down payment--and less than a desirable credit rating. (All government policy.)

So--now it's just the "dog and pony" show put on by politicians to point fingers at everyone else other than themselves.

And not that I am giving GS a pass on this--but it did start with our government. I doubt they'll be putting themselves in front of the camera's to be blasted by themselves---

 

[Toro]

Not a serious argument? You're one and only source is weak and a little biased to say the least.....

I have spent the last 18 years in the housing industry, CRA gave birth to the Sub Prime Loan (1993), the FHA DPA Loan (1995) and Clinton revised CRA in 1995, exerting more pressure on banks to offer the underprivileged more access to lending.....

CRA is the argument, Carter created it and Clinton expanded it, both with good intentions, but with no reasonable understanding what a monster they had hatched.....

When you open up the doors to the vault for free money, by way of the Federal Government, the results do not lie.....

Housing was at a low point in the first half of the '90s, we had just come out of the Savings and Loan Crisis of the '80s, FHA DPA and Sub Prime Lending made way for the housing boom from 1996 to 2006, this is not the argument of ideologues, these are facts.....

We had an entire community funded by B of A Acorn Loans, BTW they did not have to make a down payment, received .50 to .75 lower rates, tell me how this does not fly in the face of the Equal Housing Act.....that community, which is in the 4th largest city in America, now has one of the highest foreclosure rates in the country......

Do a little research, it is real easy to find, but don't be stupid enough to believe the CRA had nothing to do with the current housing crisis.....

I've spent nearly 20 years in the investment business, most of that at as an institutional money manager whose institution buys derivatives and structured finance products. I've sat across the table from the likes of Goldman and Merrill and UBS and those clowns who were trying to sell us this crap, like synthetic CDOs and mezzanine subprime CDOs, garbage that is now trading at pennies on the dollar. I largely kept our guys out of it.

I was actively shorting the housing market and made a fair amount of money went it collapsed. I had studied it for years. I had heard arguments both for and against a housing bubble. I heard arguments from literally hundreds of some of the smartest people in finance on this. Do you know how many times the CRA came up? Exactly zero. None. Zero, zip, nada. It was only after the housing bubble collapsed that I started hearing this CRA narrative, and they all came from people with a political axe to grind.

If the CRA caused the housing bubble, answer these questions;

- How could 8% of all subprime loans, which accounted for less than 1% of total loan volume, cause a bubble?
- Why have those loans not deteriorated faster than other subprime loans?
- If they caused the financial crisis, why did homes financed by CRA loans not rise as much as homes in the middle and upper-middle class sunbelt? If you believe in the efficacy of markets, then the demand for those loans should have pushed home prices in CRA areas higher than the rest of the country, but they did not. Why?
- Why did they not crash more?
- How come 24 of the biggest 25 largest subprime underwriters were not directly covered by the CRA directive?
- The US was actually middle of the pack in terms of home price appreciation. Other countries had bigger relative housing bubbles, including the UK, Ireland, Spain, Australia, China, Canada, etc. Please explain how the CRA caused housing bubbles in those countries.

Thanks.

I agree with you on the free money part, but it wasn't the "free money" that came from the CRA that was the problem. It was the free money that came from the Fed and from Wall Street, which packaged any garbage they could find into structured finance products.

 

[midcan5]

These guys are literally bullshitting the panel and smiling about it.

They have better answers than politicians.

A lesson in life in America, I was listening to a Black professor on NPR yesterday from my alma mater and she mentioned she was no longer surprised that today's youth of any background color or creed are only interested in money. It is odd but I remember all the kids from rich families these past summers, telling us how much they would make when done with their fancy college. It struck me as so distorted but so true.

These guys made it, they have those fancy jobs, they make millions, we used to aspire to goodness we now aspire to greed. The lawyers prepped them well, I listened a bit and thought are these politicians so naive as to think they will get an honest, deep and profound answer! Too crazy.


"Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone." John Maynard Keynes

 

[editec]

Regardless of who was responsible for the real estate loans, Goldman betrayed its own clients.

Now, Goldman is taking the position that they are not responsible to their clients to warn them that the dereivatives they created from those dubious RE mortgages were overrated.

But they were responsible for that since THEY HIRED THE BONDS rating agencies, and pressured them to rate teh bonds higher than they ought to have been

If they had reason to believe that the bonds rating agencies were wrong, they had fudiciary responsibility to tell their clients that.

So this whole issue really hinges on what Goldman knew and when.

And given that they set themselves up to make money if the bonds went down, I think it fairly obvious that they knew their bonds were overrated.

They were betting against their own clients, folks...clients that they mislead

They had INSIDER information and they defrauded their own clients.

So it does NOT matter if Fanny is at fault in creating those conditions or if private finance companies are.

Because what this hearing this is about is what GOLDMAN did, and that has nothing to do with creating those real estate loans, but with the rating those derivatives created from them.

They lied to their clients, folks.

They defruaded investors.

Franny or Freddy or the government didn't make them do that.

 

[GWV5903]

Not a serious argument? You're one and only source is weak and a little biased to say the least.....

I have spent the last 18 years in the housing industry, CRA gave birth to the Sub Prime Loan (1993), the FHA DPA Loan (1995) and Clinton revised CRA in 1995, exerting more pressure on banks to offer the underprivileged more access to lending.....

CRA is the argument, Carter created it and Clinton expanded it, both with good intentions, but with no reasonable understanding what a monster they had hatched.....

When you open up the doors to the vault for free money, by way of the Federal Government, the results do not lie.....

Housing was at a low point in the first half of the '90s, we had just come out of the Savings and Loan Crisis of the '80s, FHA DPA and Sub Prime Lending made way for the housing boom from 1996 to 2006, this is not the argument of ideologues, these are facts.....

We had an entire community funded by B of A Acorn Loans, BTW they did not have to make a down payment, received .50 to .75 lower rates, tell me how this does not fly in the face of the Equal Housing Act.....that community, which is in the 4th largest city in America, now has one of the highest foreclosure rates in the country......

Do a little research, it is real easy to find, but don't be stupid enough to believe the CRA had nothing to do with the current housing crisis.....

I've spent nearly 20 years in the investment business, most of that at as an institutional money manager whose institution buys derivatives and structured finance products. I've sat across the table from the likes of Goldman and Merrill and UBS and those clowns who were trying to sell us this crap, like synthetic CDOs and mezzanine subprime CDOs, garbage that is now trading at pennies on the dollar. I largely kept our guys out of it.

I was actively shorting the housing market and made a fair amount of money went it collapsed. I had studied it for years. I had heard arguments both for and against a housing bubble. I heard arguments from literally hundreds of some of the smartest people in finance on this. Do you know how many times the CRA came up? Exactly zero. None. Zero, zip, nada. It was only after the housing bubble collapsed that I started hearing this CRA narrative, and they all came from people with a political axe to grind.

If the CRA caused the housing bubble, answer these questions;

- How could 8% of all subprime loans, which accounted for less than 1% of total loan volume, cause a bubble?
- Why have those loans not deteriorated faster than other subprime loans?
- If they caused the financial crisis, why did homes financed by CRA loans not rise as much as homes in the middle and upper-middle class sunbelt? If you believe in the efficacy of markets, then the demand for those loans should have pushed home prices in CRA areas higher than the rest of the country, but they did not. Why?
- Why did they not crash more?
- How come 24 of the biggest 25 largest subprime underwriters were not directly covered by the CRA directive?
- The US was actually middle of the pack in terms of home price appreciation. Other countries had bigger relative housing bubbles, including the UK, Ireland, Spain, Australia, China, Canada, etc. Please explain how the CRA caused housing bubbles in those countries.

Thanks.

I agree with you on the free money part, but it wasn't the "free money" that came from the CRA that was the problem. It was the free money that came from the Fed and from Wall Street, which packaged any garbage they could find into structured finance products.

I appreciate your point of view and have had this debate with a mortgage analysis as well, you miss the point, prior to CRA, Sub Prime and FHA DPA loans these borrowers had only one way to purchase, exceptionally higher rates and 20% down or greater, hence the cause and effect we have today.....

Take NACA for example, they have a collective pool of funds to help their borrowers if they fall behind, Acorn no down payment, rates lower than par, FHA DPA no down payment, finance your closing cost (inflated appraisals), these loans where all born from the ideology of CRA.....

Fact, banks had to have a portfolio of CRA loans to continue to be competitive, ask yourself this, why did Clinton revise CRA in '95, clearly to put more pressure on these institutions to lend to less qualified borrowers......

Why did Clinton, Rubin, Greenspan, Summers and Levitt all ignore Brooksley Born CFTC Chairwomen......she warned all of them and they characterized her as "irascible, difficult, stubborn, unreasonable", they knew exactly what they where doing.....

Did you know that a Sub Prime Loan waived escrows 98% of the time? Now how in the hell do you cover this with a derivative?

As for your point on why didn't CRA homes rise in value, they were usually in lower price point communities, not the preferred location for a boom in value....you have heard the golden rule for real estate, location, location, location.....

One other thing you can tag to the CRA is the boom in investor purchases, again the Sub Prime vehicle opened this door as well and was the driving force in the outlandish increases in value in California, Florida and Nevada.......

On the international markets, they to used similar loan vehicles, bad idea......

The basic fault with CRA, Sub Prime and FHA DPA loans is simple, when your hard earned money is not on the line, it is much easier to walk away.....if Carter & Clinton didn't understand this basic fact, how in the hell did they become POTUS......

 

[Toro]

I appreciate your point of view and have had this debate with a mortgage analysis as well, you miss the point, prior to CRA, Sub Prime and FHA DPA loans these borrowers had only one way to purchase, exceptionally higher rates and 20% down or greater, hence the cause and effect we have today.....

Take NACA for example, they have a collective pool of funds to help their borrowers if they fall behind, Acorn no down payment, rates lower than par, FHA DPA no down payment, finance your closing cost (inflated appraisals), these loans where all born from the ideology of CRA.....

Fact, banks had to have a portfolio of CRA loans to continue to be competitive, ask yourself this, why did Clinton revise CRA in '95, clearly to put more pressure on these institutions to lend to less qualified borrowers......

Why did Clinton, Rubin, Greenspan, Summers and Levitt all ignore Brooksley Born CFTC Chairwomen......she warned all of them and they characterized her as "irascible, difficult, stubborn, unreasonable", they knew exactly what they where doing.....

Did you know that a Sub Prime Loan waived escrows 98% of the time? Now how in the hell do you cover this with a derivative?

As for your point on why didn't CRA homes rise in value, they were usually in lower price point communities, not the preferred location for a boom in value....you have heard the golden rule for real estate, location, location, location.....

One other thing you can tag to the CRA is the boom in investor purchases, again the Sub Prime vehicle opened this door as well and was the driving force in the outlandish increases in value in California, Florida and Nevada.......

On the international markets, they to used similar loan vehicles, bad idea......

The basic fault with CRA, Sub Prime and FHA DPA loans is simple, when your hard earned money is not on the line, it is much easier to walk away.....if Carter & Clinton didn't understand this basic fact, how in the hell did they become POTUS......

You can convince me. If you or anyone can point to empirical data substantiating that the CRA was the cause of the housing bubble, I will change my mind. The problem is that no one yet has presented this data. In fact, all the data I have seen argues against the CRA being the cause.

I agree that subprime, Alt-A, NINJAs, etc. were a serious problem. But I don't understand how a relatively small percentage of loans that went into minority communities had anything to do with lax lending to middle and upper middle class borrowers who used that money to buy multiple properties or properties they clearly could not afford. The volume of loans to middle and upper middle class borrowers was many times greater than anything that went into CRA loans.

I have worked in capital markets for a long time, and if there is one thing that I have learned is that price follows supply/demand dynamics. Stocks that go up the most are the ones that have the heaviest demand. Bonds go up the most if there are relative demand/supply imbalances. Likewise, in housing, prices go up the most where there is heaviest demand relative to supply. That is basic economics 101. If the CRA caused the housing bubble, then CRA loan demand would have pushed up homes the most. But that didn't happen. There weren't enough loans to make that happen.

It doesn't make any sense either that the CRA caused the bubble when within subprime mortgages, the rate of default for CRA loans was the same as all other subprime loans. The incidence of foreclosures looks something like this: subprime loans had a higher rate of default than Alt-A loans, which had a higher rate of default than jumbo loans, which had a higher rate of default than conforming loans. This makes sense because the borrowing standards across the spectrum was progressively worse the further away you got from conforming loans. Logically, one would have expected CRA loans to have had a higher rate of default if their writing standards were lower than the loans that were not CRA loans, yet this did not happen.

Also, if you study the history of housing markets in the United States, you learn that they are all very similar. Generally, they occur where either land is scarce or in the sunbelt. There haven't been many housing booms and busts in South Dakota, for example. But in places like California, Arizona, Florida, New York, Boston, and this time Nevada, housing bubbles are more common because they fit a narrative that people buy into - either 1.) people want to buy where it is warm, and/or 2.) land is running out. This was no different. Relatively few CRA subprime loans went into places that went the most nuts - Las Vegas, Phoenix, etc. In 2006, 90% of all mortgages written in San Diego were subprime mortgages. Almost all of those went to people not classified as poor. Where I live in the Florida Panhandle, in Panama City Beach, 98% of all condos were purchased by people who did not apply for Homestead exemption, i.e. they didn't live there. This is what a mania looks like and had nothing to do with the CRA. Lending to poor black people in Jacksonville did not force bankers to lend to fuel speculation in Panama City Beach.

Finally, it should be noted that under Bush, CRA standards were relaxed during the time of the housing bubble.

Whether or not something is born of the CRA does not apply. It does not force bankers to lend any more than owing a gun forces people to murder others.

Re: waived escrow - The lenders didn't care. They sold subprime mortgages to Wall Street, who packaged them into CDOs, had the ratings agencies stamp a AAA rating on them, then sold the CDOs into the market. Wall Street was making enormous amounts of money creating and selling these things. They bought subprime mortgage companies so they could feed their own machine. Wall Street wanted the loans so they could turn it into product. The demand from Wall Street for subprime mortgages is a big reason why they existed in the volume they did.

 

[GWV5903]

i appreciate your point of view and have had this debate with a mortgage analysis as well, you miss the point, prior to cra, sub prime and fha dpa loans these borrowers had only one way to purchase, exceptionally higher rates and 20% down or greater, hence the cause and effect we have today.....

Take naca for example, they have a collective pool of funds to help their borrowers if they fall behind, acorn no down payment, rates lower than par, fha dpa no down payment, finance your closing cost (inflated appraisals), these loans where all born from the ideology of cra.....

Fact, banks had to have a portfolio of cra loans to continue to be competitive, ask yourself this, why did clinton revise cra in '95, clearly to put more pressure on these institutions to lend to less qualified borrowers......

Why did clinton, rubin, greenspan, summers and levitt all ignore brooksley born cftc chairwomen......she warned all of them and they characterized her as "irascible, difficult, stubborn, unreasonable", they knew exactly what they where doing.....

Did you know that a sub prime loan waived escrows 98% of the time? Now how in the hell do you cover this with a derivative?

As for your point on why didn't cra homes rise in value, they were usually in lower price point communities, not the preferred location for a boom in value....you have heard the golden rule for real estate, location, location, location.....

One other thing you can tag to the cra is the boom in investor purchases, again the sub prime vehicle opened this door as well and was the driving force in the outlandish increases in value in california, florida and nevada.......

On the international markets, they to used similar loan vehicles, bad idea......

The basic fault with cra, sub prime and fha dpa loans is simple, when your hard earned money is not on the line, it is much easier to walk away.....if carter & clinton didn't understand this basic fact, how in the hell did they become potus......

you can convince me. if you or anyone can point to empirical data substantiating that the cra was the cause of the housing bubble, i will change my mind. The problem is that no one yet has presented this data. In fact, all the data i have seen argues against the cra being the cause.

i agree that subprime, alt-a, ninjas, etc. Were a serious problem. but i don't understand how a relatively small percentage of loans that went into minority communities had anything to do with lax lending to middle and upper middle class borrowers who used that money to buy multiple properties or properties they clearly could not afford. The volume of loans to middle and upper middle class borrowers was many times greater than anything that went into cra loans.

I have worked in capital markets for a long time, and if there is one thing that i have learned is that price follows supply/demand dynamics. Stocks that go up the most are the ones that have the heaviest demand. Bonds go up the most if there are relative demand/supply imbalances. Likewise, in housing, prices go up the most where there is heaviest demand relative to supply. That is basic economics 101. If the cra caused the housing bubble, then cra loan demand would have pushed up homes the most. But that didn't happen. There weren't enough loans to make that happen.

It doesn't make any sense either that the cra caused the bubble when within subprime mortgages, the rate of default for cra loans was the same as all other subprime loans. The incidence of foreclosures looks something like this: Subprime loans had a higher rate of default than alt-a loans, which had a higher rate of default than jumbo loans, which had a higher rate of default than conforming loans. This makes sense because the borrowing standards across the spectrum was progressively worse the further away you got from conforming loans. Logically, one would have expected cra loans to have had a higher rate of default if their writing standards were lower than the loans that were not cra loans, yet this did not happen.

also, if you study the history of housing markets in the united states, you learn that they are all very similar. generally, they occur where either land is scarce or in the sunbelt. There haven't been many housing booms and busts in south dakota, for example. But in places like california, arizona, florida, new york, boston, and this time nevada, housing bubbles are more common because they fit a narrative that people buy into - either 1.) people want to buy where it is warm, and/or 2.) land is running out. This was no different. Relatively few cra subprime loans went into places that went the most nuts - las vegas, phoenix, etc. In 2006, 90% of all mortgages written in san diego were subprime mortgages. Almost all of those went to people not classified as poor. Where i live in the florida panhandle, in panama city beach, 98% of all condos were purchased by people who did not apply for homestead exemption, i.e. They didn't live there. This is what a mania looks like and had nothing to do with the cra. Lending to poor black people in jacksonville did not force bankers to lend to fuel speculation in panama city beach.

Finally, it should be noted that under bush, cra standards were relaxed during the time of the housing bubble.

whether or not something is born of the cra does not apply. it does not force bankers to lend any more than owing a gun forces people to murder others.

Re: Waived escrow - the lenders didn't care. They sold subprime mortgages to wall street, who packaged them into cdos, had the ratings agencies stamp a aaa rating on them, then sold the cdos into the market. Wall street was making enormous amounts of money creating and selling these things. They bought subprime mortgage companies so they could feed their own machine. Wall street wanted the loans so they could turn it into product. The demand from wall street for subprime mortgages is a big reason why they existed in the volume they did.

No I can't, you're in denial, we all have a habit of sticking to our gun's, you are bent on the individual loans, my point is it created a mind set, it became more and more acceptable, again prior to '77 these individuals had one choice, 20%+ down, with excessively high interest rates....

B of A was the primary lender for CRA/Acorn Home Loans, they were closing these loans in '96, the turn around for housing was really early '94, CRA made a huge impact throughout the mid to late '90s well into 2006, they, being B of A, quit doing Acorn loans I want to say in '07......

You're forgetting that the median/average prices rose $100,000/$150,000 from '96 to '06....

Oh it makes perfect sense, let's see, we have gone from horse back to a land speed record of 763mph in a little over a 100 years, so you don't want to believe we can go from the CRA to buying a $150,000 asset for as little as $200 dollars in less than 20 years.....

Yes the housing market is cyclical, like a lot of markets, history is very clear about this......

The only narrative is job growth, without job growth, no bubble of any kind....

Oh it applies when you can directly link the two.....try this article, one of the better ones on this subject RealClearMarkets - Acorn's a Creature of the CRA

Neither did the buyers or agents or Fannie Mae or Freddie Mac, I'd expect nothing less from Wall Street, but I do expect more from our government officials.....

I'll leave it at we agree on some things and disagree on others.....ole.....

 

[boedicca]

So, in other words, Freddie and Fannie were losing market share during the housing bubble. As I posted earlier, that was because their underwriting standards were higher than the private market. They were losing share throughout because their volume of non-conforming loans were declining. It was Wall Street that was churning this shit from the private market lenders through their CDO machine.

Without FM/FM to buy up subprime at the beginning, such loans would never have been credible. FM/FM legitimized no doc loans. Once the floodgates opened, others piled on. The fact that a bubble formed doesn't absolve them of their role in fostering the bubble in the first place.