Freddie & Fannie: Central Planning at its worst

[The Rabbi]

You are on the right course.
It is and was not the fault of any government employee,program, law, regulation, rule, Barney Frank, Phil Gramm or whoever that adults did not pay their mortgages.
How ironic it is that the very peoplethat claim they are conservative here blame the government for folks that are deadbeats and do not pay their bills.

I'm not saying there are not deadbeats.

But, if I lend $20.00 to a hamster, and it doesn't pay me back, the default on the loan isn't the hamster's fault.

And not the governments fault either.

Actually it is since they were the ultimate guarantor of the loan.

 

[Gadawg73]

I'm not saying there are not deadbeats.

But, if I lend $20.00 to a hamster, and it doesn't pay me back, the default on the loan isn't the hamster's fault.

And not the governments fault either.

Actually it is since they were the ultimate guarantor of the loan.

Under your theory my neighbor that ran off with his millions and his 1.2 million home was foreclosed on was not at fault.
It was the government's fault he left for Costa Rica because they were the guarantor of the loan.
If you invest with 5 others on a venture and your entity gets a loan and the loan goes into default because one of the investors committed fraud under your theory you would be at fault also because you were a guarantor of the loan.
And I could you give you a thousand other examples.
Government contributed in a small way, less than 10% of $ loaned but individuals are responsible for their own actions.
Give me the name of ONE PERSON the government held down and forced to sign loan documents.

 

[The Rabbi]

And not the governments fault either.

Actually it is since they were the ultimate guarantor of the loan.

Under your theory my neighbor that ran off with his millions and his 1.2 million home was foreclosed on was not at fault.
It was the government's fault he left for Costa Rica because they were the guarantor of the loan.
If you invest with 5 others on a venture and your entity gets a loan and the loan goes into default because one of the investors committed fraud under your theory you would be at fault also because you were a guarantor of the loan.
And I could you give you a thousand other examples.
Government contributed in a small way, less than 10% of $ loaned but individuals are responsible for their own actions.
Give me the name of ONE PERSON the government held down and forced to sign loan documents.

Franklin Raines.
The government had oversight over Fannie/Freddie. They allowed them to write loan guidelines that allowed for abuse like improper documentation coupled with very low downpayments that resulted in people defaulting and the lender unable to recoup his loss on the property.
Sure the mortgagors are at fault for taking loans they couldn't pay but the lenders are equally at fault for offering loans that didnt adequately protect them from loss.

 

[Samson]

You are on the right course.
It is and was not the fault of any government employee,program, law, regulation, rule, Barney Frank, Phil Gramm or whoever that adults did not pay their mortgages.
How ironic it is that the very peoplethat claim they are conservative here blame the government for folks that are deadbeats and do not pay their bills.

I'm not saying there are not deadbeats.

But, if I lend $20.00 to a hamster, and it doesn't pay me back, the default on the loan isn't the hamster's fault.

And not the governments fault either.

I forget sometimes that I'm addressing the hopelessly thick.

Its an analogy.

Me = Government Sponsored Contractor
Hamster = 18 yo Unemployed Mother of 5

****damn, no wonder I'm tired by 2200 hrs****

 

[KissMy]

I'm not saying there are not deadbeats.

But, if I lend $20.00 to a hamster, and it doesn't pay me back, the default on the loan isn't the hamster's fault.

And not the governments fault either.

I'm forget sometimes that I'm addressing the hopelessly thick.

Its an analogy.

Me = Government Sponsored Contractor
Hamster = 18 yo Unemployed Mother of 5

****damn, no wonder I'm tired by 2200 hrs****

Subprime borrower get loans thinking can you believe they were stupid enough to give me money that I never intend to pay back. Then they go out to get another loan from some other sucker. There is no no interest rate that will discourage these people. Credit standards are our only defense. Government backed subprime loans will end the value of the dollar in a hurry. Currency is only worth the credit rating of its borrower. This is exactly why oil prices soared during this period of retarded lending.

 

[Samson]

And not the governments fault either.

I'm forget sometimes that I'm addressing the hopelessly thick.

Its an analogy.

Me = Government Sponsored Contractor
Hamster = 18 yo Unemployed Mother of 5

****damn, no wonder I'm tired by 2200 hrs****

Subprime borrower get loans thinking can you believe they were stupid enough to give me money that I never intend to pay back. Then they go out to get another loan from some other sucker. There is no no interest rate that will discourage these people. Credit standards are our only defense. Government backed subprime loans will end the value of the dollar in a hurry. Currency is only worth the credit rating of its borrower. This is exactly why oil prices soared during this period of retarded lending.

I'm simply astonished that some cannot imagine that the government's intent could have such disasterous consequences: Its as if the Federal Government has NEVER screwed up before, and could NEVER, POSSIBLY have created such an extraordinary situation!

This sort of thing is why Centralised Governments should be given ONE SIMPLE TASK:

Protect the Border........


Wait, lemme think of something else.............

 

[Gadawg73]

Actually it is since they were the ultimate guarantor of the loan.

Under your theory my neighbor that ran off with his millions and his 1.2 million home was foreclosed on was not at fault.
It was the government's fault he left for Costa Rica because they were the guarantor of the loan.
If you invest with 5 others on a venture and your entity gets a loan and the loan goes into default because one of the investors committed fraud under your theory you would be at fault also because you were a guarantor of the loan.
And I could you give you a thousand other examples.
Government contributed in a small way, less than 10% of $ loaned but individuals are responsible for their own actions.
Give me the name of ONE PERSON the government held down and forced to sign loan documents.

Franklin Raines.
The government had oversight over Fannie/Freddie. They allowed them to write loan guidelines that allowed for abuse like improper documentation coupled with very low downpayments that resulted in people defaulting and the lender unable to recoup his loss on the property.
Sure the mortgagors are at fault for taking loans they couldn't pay but the lenders are equally at fault for offering loans that didnt adequately protect them from loss.

I have said allalong it is the fault of the banks.
NOT GOVERNMENT.
And Raines was not forced to sign loan documents.
The banks fucked themselves. Noone forced them to do a damn thing.
The banks lobbied and wanted those easier requirements.
Again, give me the name of ANYONE that was helddown and forced to sign loan documents.
BTW, it was Mudd that fuckedit all up, not Raines. Raines was a crook but it was under Bush that the problems worsened with Mudd.

 

[CrusaderFrank]

Under your theory my neighbor that ran off with his millions and his 1.2 million home was foreclosed on was not at fault.
It was the government's fault he left for Costa Rica because they were the guarantor of the loan.
If you invest with 5 others on a venture and your entity gets a loan and the loan goes into default because one of the investors committed fraud under your theory you would be at fault also because you were a guarantor of the loan.
And I could you give you a thousand other examples.
Government contributed in a small way, less than 10% of $ loaned but individuals are responsible for their own actions.
Give me the name of ONE PERSON the government held down and forced to sign loan documents.

Franklin Raines.
The government had oversight over Fannie/Freddie. They allowed them to write loan guidelines that allowed for abuse like improper documentation coupled with very low downpayments that resulted in people defaulting and the lender unable to recoup his loss on the property.
Sure the mortgagors are at fault for taking loans they couldn't pay but the lenders are equally at fault for offering loans that didnt adequately protect them from loss.

I have said allalong it is the fault of the banks.
NOT GOVERNMENT.
And Raines was not forced to sign loan documents.
The banks fucked themselves. Noone forced them to do a damn thing.
The banks lobbied and wanted those easier requirements.
Again, give me the name of ANYONE that was helddown and forced to sign loan documents.
BTW, it was Mudd that fuckedit all up, not Raines. Raines was a crook but it was under Bush that the problems worsened with Mudd.

CRA forces bank to make loans.

Again I ask, why do we need the US Government to by loans from banks?

Why do we need the Government to provide mortgage insurance?

Why do we need 2 separate entities providing the same unnecessary, unconstitutional function?

 

[Gadawg73]

Franklin Raines.
The government had oversight over Fannie/Freddie. They allowed them to write loan guidelines that allowed for abuse like improper documentation coupled with very low downpayments that resulted in people defaulting and the lender unable to recoup his loss on the property.
Sure the mortgagors are at fault for taking loans they couldn't pay but the lenders are equally at fault for offering loans that didnt adequately protect them from loss.

I have said allalong it is the fault of the banks.
NOT GOVERNMENT.
And Raines was not forced to sign loan documents.
The banks fucked themselves. Noone forced them to do a damn thing.
The banks lobbied and wanted those easier requirements.
Again, give me the name of ANYONE that was helddown and forced to sign loan documents.
BTW, it was Mudd that fuckedit all up, not Raines. Raines was a crook but it was under Bush that the problems worsened with Mudd.

CRA forces bank to make loans.

Again I ask, why do we need the US Government to by loans from banks?

Why do we need the Government to provide mortgage insurance?

Why do we need 2 separate entities providing the same unnecessary, unconstitutional function?

That is correct and I have stated that 1001 times here.
CRA loans account for less than 3 % of all dollars spent on loans. I hate those programs but that didn't affect the melt down.
Frank you know that CRA loans are not 650K loans.

 

[CrusaderFrank]

I have said allalong it is the fault of the banks.
NOT GOVERNMENT.
And Raines was not forced to sign loan documents.
The banks fucked themselves. Noone forced them to do a damn thing.
The banks lobbied and wanted those easier requirements.
Again, give me the name of ANYONE that was helddown and forced to sign loan documents.
BTW, it was Mudd that fuckedit all up, not Raines. Raines was a crook but it was under Bush that the problems worsened with Mudd.

CRA forces bank to make loans.

Again I ask, why do we need the US Government to by loans from banks?

Why do we need the Government to provide mortgage insurance?

Why do we need 2 separate entities providing the same unnecessary, unconstitutional function?

That is correct and I have stated that 1001 times here.
CRA loans account for less than 3 % of all dollars spent on loans. I hate those programs but that didn't affect the melt down.
Frank you know that CRA loans are not 650K loans.

CRA is central planning at its finest.

It's time we revisited all the New Deal and Great Society and Nixon programs (or department) and ask, "Does this program realize it's the year 2010?"

 

[Gadawg73]

I'm not saying there are not deadbeats.

But, if I lend $20.00 to a hamster, and it doesn't pay me back, the default on the loan isn't the hamster's fault.

And not the governments fault either.

I forget sometimes that I'm addressing the hopelessly thick.

Its an analogy.

Me = Government Sponsored Contractor
Hamster = 18 yo Unemployed Mother of 5

****damn, no wonder I'm tired by 2200 hrs****

And your analogy is false.
It never happened.
Sticks and stones friend. Doesn't matter. Been shot at, beat up, under fire, left for dead.
I have been making million dollar deals with banks for years. I majored in finance,have held a detective license for30 years and do consultant work for the banks now. They fucked themselves. I know how this works. The media spin by the talking heads sounds good but it is false. Government's fucked up involvement was miniscule. Hundred million dollar speculative real estate bundled mortgages did this in, not some bad loan that a poor person could not pay.
That sir, is an absurd argument.

 

[edthecynic]

Franklin Raines.
The government had oversight over Fannie/Freddie. They allowed them to write loan guidelines that allowed for abuse like improper documentation coupled with very low downpayments that resulted in people defaulting and the lender unable to recoup his loss on the property.
Sure the mortgagors are at fault for taking loans they couldn't pay but the lenders are equally at fault for offering loans that didnt adequately protect them from loss.

I have said allalong it is the fault of the banks.
NOT GOVERNMENT.
And Raines was not forced to sign loan documents.
The banks fucked themselves. Noone forced them to do a damn thing.
The banks lobbied and wanted those easier requirements.
Again, give me the name of ANYONE that was helddown and forced to sign loan documents.
BTW, it was Mudd that fuckedit all up, not Raines. Raines was a crook but it was under Bush that the problems worsened with Mudd.

CRA forces bank to make loans.

Again I ask, why do we need the US Government to by loans from banks?

Why do we need the Government to provide mortgage insurance?

Why do we need 2 separate entities providing the same unnecessary, unconstitutional function?

CRA is the favorite boogyman of racists because banks were forced to make loans to QUALIFIED minorities. If you remember, back in the 60s and 70s banks would not make loans to QUALIFIED minorities who tried to buy a home in a WHITE neighborhood. To the racist, no minority was ever QUALIFIED to buy a home in a white neighborhood so they have hated the CRA ever since and blame it for everything.

In reality, CRA loans were 1% over prime and if the buyer made their payments on time for 2 years the 1% was dropped. CRA loans were not the high risk, high interest ARMs that caused the meltdown. There was just not enough profit in a loan that was only 1% over prime and adjusted DOWN to be BUNDLED in the high risk, high profit, very speculative, high interest loan packages, a 1% over prime loan would drag down the potential profit of the derivatives package.

 

[KissMy]

GSEs Fannie & Freddie were the problem. How Did Paul Krugman Get It So Wrong?

 

[GWV5903]

GSEs Fannie & Freddie were the problem. How Did Paul Krugman Get It So Wrong?

DEAD ON! Toro & Peepers need to read this........

Thanks for finding this article, I have debated this very point way too many times........

 

[GWV5903]

They were under-regulated, like the rest of the mortgage business. We've been trying to tell you that.

Pay attention.

I recall reading article after article in WSJ, raising red flags over Freddie and Fanny between 2001-2002.

When Bush was President.

Yes........


BOOOOOOOOOOOOOOOOOOOOoooooooooOOOOOSH

Fannie and Freddie may have been on the edge in 2001 and 2002, but it was Bush's dec 2003 American Dream Downpayment Initiative (ADDI) that changed the rules and pushed the housing market over the cliff.

The American Dream Downpayment Initiative allowed no downpayment loans to people with bad credit for more than the house was worth and who were at least 20% below the standard for the neighborhood who would never be able to make their payments. Bush did it to try to strip minority votes away from the Dems. It was the centerpiece of his 2004 campaign.

American Dream Downpayment Initiative - Affordable Housing - CPD - HUD
American Dream Downpayment Initiative
Summary

The American Dream Downpayment Initiative (ADDI) was signed into law on December 16, 2003. The American Dream Downpayment Assistance Act authorizes up to $200 million annually for fiscal years 2004 - 2007. ADDI will provide funds to all fifty states and to local participating jurisdictions that have a population of at least 150,000 or will receive an allocation of at least $50,000 under the ADDI formula. ADDI will be administered as a part of the HOME Investment Partnerships Program, a formula grant program.

Purpose

ADDI aims to increase the homeownership rate, especially among lower income and minority households, and to revitalize and stabilize communities. ADDI will help first-time homebuyers with the biggest hurdle to homeownership: downpayment and closing costs. The program was created to assist low-income first-time homebuyers in purchasing single-family homes by providing funds for downpayment, closing costs, and rehabilitation carried out in conjunction with the assisted home purchase.

Type of Assistance

ADDI will provide downpayment, closing costs, and rehabilitation assistance to eligible individuals. The amount of ADDI assistance provided may not exceed $10,000 or six percent of the purchase price of the home, whichever is greater. The rehabilitation must be completed within one year of the home purchase. Rehabilitation may include, but is not limited to, the reduction of lead paint hazards and the remediation of other home health hazards.

Eligible Customers

To be eligible for ADDI assistance, individuals must be first-time homebuyers interested in purchasing single family housing. A first-time homebuyer is defined as an individual and his or her spouse who have not owned a home during the three-year period prior to the purchase of a home with ADDI assistance. ADDI funds may be used to purchase one- to four- family housing, condominium unit, cooperative unit, or manufactured housing. Additionally, individuals who qualify for ADDI assistance must have incomes not exceeding 80% of area median income.

Eligible Activities

ADDI funds may be used for downpayment, closing costs and, if necessary, rehabilitation in conjunction with home purchase. ADDI funds used for rehabilitation may not exceed twenty percent of the participating jurisdiction's total ADDI allocation. The rehabilitation assisted with ADDI funds must be completed within one year of the home purchase.

Funding Status

In FY 2007, Congress appropriated $24,750,000 for ADDI. Previously, Congress appropriated $74,513,000 in FY2003 and $86,984 in FY2004, $49,600,000 in FY2005 and $24,750,000 in FY2006. HUD has issued formula allocations for FY 2007 to assist participating jurisdictions in preparing their consolidated plans.

Obtaining Assistance

First, check the formula allocation page to determine whether your local HOME administering agency received ADDI funding. If they did not receive ADDI funding, ADDI funds may be available through your state. Every state received ADDI funds. The contacts for state are available in the HOME administering agency list.

USATODAY.com - Bush seeks to increase minority homeownership

Bush seeks to increase minority homeownership
By Thomas A. Fogarty, USA TODAY

In a bid to boost minority homeownership, President Bush will ask Congress for authority to eliminate the down-payment requirement for Federal Housing Administration loans.

In announcing the plan Monday at a home builders show in Las Vegas, Federal Housing Commissioner John Weicher called the proposal the "most significant FHA initiative in more than a decade." It would lead to 150,000 first-time owners annually, he said.

Nothing-down options are available on the private mortgage market, but, in general, they require the borrower to have pristine credit. Bush's proposed change would extend the nothing-down option to borrowers with blemished credit.

The FHA isn't a direct lender, but guarantees loan payments for mortgages on moderately priced owner-occupied property. The FHA guarantee now permits private lenders to finance as much as 97% of the purchase price of a home for millions of low- and middle-income borrowers.

In the proposal soon to be delivered to Congress, Bush would allow the FHA to guarantee loans for the full purchase price of the home, plus down-payment costs. As a practical matter, the FHA would guarantee mortgages as high as 103% of the value of the underlying property.

Absolutely wrong, Clinton created FHA DPA in '96, ADDI funds a very small demographic, almost minute, the income limitations where calculated with some common sense, in Harris County our Commissioner Court presides over the approval, as recently as '09 they raised the Purchase Price Limit because the Federal Funds had not been used, also the borrower has to fit into traditional FHA DITI Ratio's.........

I will refrain from the insults, but you bought the ocean front property in AZ and don't even know it......

 

[The Rabbi]

Under your theory my neighbor that ran off with his millions and his 1.2 million home was foreclosed on was not at fault.
It was the government's fault he left for Costa Rica because they were the guarantor of the loan.
If you invest with 5 others on a venture and your entity gets a loan and the loan goes into default because one of the investors committed fraud under your theory you would be at fault also because you were a guarantor of the loan.
And I could you give you a thousand other examples.
Government contributed in a small way, less than 10% of $ loaned but individuals are responsible for their own actions.
Give me the name of ONE PERSON the government held down and forced to sign loan documents.

Franklin Raines.
The government had oversight over Fannie/Freddie. They allowed them to write loan guidelines that allowed for abuse like improper documentation coupled with very low downpayments that resulted in people defaulting and the lender unable to recoup his loss on the property.
Sure the mortgagors are at fault for taking loans they couldn't pay but the lenders are equally at fault for offering loans that didnt adequately protect them from loss.

I have said allalong it is the fault of the banks.
NOT GOVERNMENT.
And Raines was not forced to sign loan documents.
The banks fucked themselves. Noone forced them to do a damn thing.
The banks lobbied and wanted those easier requirements.
Again, give me the name of ANYONE that was helddown and forced to sign loan documents.
BTW, it was Mudd that fuckedit all up, not Raines. Raines was a crook but it was under Bush that the problems worsened with Mudd.

Of course Raines was responsible. If not Raines, some executive at Fannie. Fannie was under gov't supervision and had to do what they were told.
Banks screwed themselves in part because they could sell the paper to Fannie. If that market had disappeared they could not have made the loans to begin with. They might have made other more stupid loans (e.g. loans to 3rd world countries like in the 1970s) but that is irrelevant here.
The banks lobbied to dissolve Fannie because they saw (correctly) unfair competition from the government for a market that they themselves wanted. The gov't continued the subsidy of Fannie because it lowered rates and thus benefitted borrowers, who not coincidentally are also voters.

 

[edthecynic]

GSEs Fannie & Freddie were the problem. How Did Paul Krugman Get It So Wrong?

DEAD ON! Toro & Peepers need to read this........

Thanks for finding this article, I have debated this very point way too many times........

http://www.federalreserve.gov/boarddocs/surveys/craloansurvey/summary2000.pdf

Results for Community Development Lending

Survey respondents report that community development lending offers a variety of
benefits to banking institutions. Virtually all survey respondents report that they benefit from
their community development lending because it promotes community growth and stability and
responds to the credit needs of the local community. Virtually none of the respondents report that
they undertake community development lending solely to obtain a satisfactory or outstanding
CRA rating.

On a per institution basis, nearly all banking institutions that provided responses,
regardless of asset-size category, report that their community development lending is either
profitable or marginally profitable (chart 7a).


Chart 7a: Profitability of Community
Development Lending
(percent of institutions)
Profitable
54%
Marginally
Profitable
39%
Break Even
4%
Marginally
Unprofitable
2%
Unprofitable
1%

 

[FA_Q2]

What is your point ed? Of course it is profitable. That is not the point. The problem is that banks were able to turn this profit from the initial charges of a loan and then turn around and sell the mortgage to the FM's and avoid the risk involved. Unfortunately they did not realize the fallout would be large enough to take down the rest of the system with it. That was the underlying problem, why would a bank damage their profitability with silly things like checking income and making proper loans when they could simply sell the risk to the government through the FM's. The new regulations that are coming out do not address this underlying problem and the government involvement in both of those institutions is what has driven this problem. When you are guaranteed profit with ZERO risk, there is no reason that you would not take the offer. If the FM's did not exist the deregulation would not have mattered one bit as banks would not have made the loans if they ended up retaining the risk for those same loans.

 

[CrusaderFrank]

GSEs Fannie & Freddie were the problem. How Did Paul Krugman Get It So Wrong?

Wow.

Krugman wrong in the trillion column -- again

Never saw that coming.

 

[GWV5903]

GSEs Fannie & Freddie were the problem. How Did Paul Krugman Get It So Wrong?

DEAD ON! Toro & Peepers need to read this........

Thanks for finding this article, I have debated this very point way too many times........

http://www.federalreserve.gov/boarddocs/surveys/craloansurvey/summary2000.pdf

Results for Community Development Lending

Survey respondents report that community development lending offers a variety of
benefits to banking institutions. Virtually all survey respondents report that they benefit from
their community development lending because it promotes community growth and stability and
responds to the credit needs of the local community. Virtually none of the respondents report that
they undertake community development lending solely to obtain a satisfactory or outstanding
CRA rating.

On a per institution basis, nearly all banking institutions that provided responses,
regardless of asset-size category, report that their community development lending is either
profitable or marginally profitable (chart 7a).


Chart 7a: Profitability of Community
Development Lending
(percent of institutions)
Profitable
54%
Marginally
Profitable
39%
Break Even
4%
Marginally
Unprofitable
2%
Unprofitable
1%

Really what's your point? Do you really think they where going to lose money? The Fed gives them their discount based on conforming to CRA, CRA gave birth to stupid lending practices, that's the whole issue, you do realize that the guy or gal that could not pay Sears $45 on time could buy a home for $500.....are you telling us that Fannie & Freddie did not know this?

We have Carter & Clinton to thank for this, keep blaming 43 or WS for this all you want, but if Fannie & Freddie didn't buy the vast majority of these loans, they would have never existed.......