Obama Reviving the Community Reinvestment Act

[GHook93]

Is he clueless or just retarded. The MAIN culprit of the mortgage meltdown was Clinton's (with Dodds and Franks help) revival of the community investment act. It required banks to lend a certain percent off their portfolio to lower income people. It forced the banks hand and forced them into the 100% finance and stated income programs.

You would think this fool would learn from recent history, but then again he is a fool.

Obama Has Learned Nothing From The Mortgage Meltdown Mess | Fox News
Obama Has Learned Nothing From the Mortgage Meltdown Mess

Read more: Obama Has Learned Nothing From The Mortgage Meltdown Mess | Fox News

Just days before Christmas, the Obama administration gave Bank of America a big lump of coal, levying a hefty $335 million dollar fine on the company for discriminating against minorities in its lending practices.

Supposedly Countrywide, a mortgage company bought by Bank of America in 2008, had not given out enough low interest rate loans to minorities from 2004 to 2008.

What the large fine reveals is that President Obama hasn’t learned anything from the recent financial crisis.

What the president sees as discrimination in awarding a mortgage, lenders saw as wise business decisions.

If a borrower can’t afford a down payment, Obama appears to view charging a higher interest rate as discrimination. Lenders also think that they shouldn’t treat borrowers whose sole source of income is welfare or unemployment insurance, the same as those applicants who have a job. But Obama, again, appears to view this as discrimination.

There is obviously a problem with no down payments: if the price of the house falls so that it is worth less than the loan, people will default and walk away. Similarly, when unemployment insurance or welfare runs out, borrowers might find they can’t keep paying their mortgage.

The Equal Credit Opportunity Act the Obama administration used to impose this fine was exactly what helped cause the mortgage crisis by forcing lenders to make risky loans that they didn’t want to make.

Yet, just last month, Obama put the blame for these risky loans going bad on banks for their “breathtaking greed” that “plunged our economy and the world into a crisis.”

It’s hard to believe that Countrywide, a leading lender of subprime mortgages, wasn’t already doing too much to make these risky loans. Indeed, it was the poster child for doing what the government wanted.

In 2002, Countrywide had adopted its “No Income/No Asset Documentation Program.” Borrowers could get a loan with just 5 percent down. The big government mortgage bundlers, Fannie Mae and Freddie Mac, bought these mortgages and encouraged Countrywide to expand the program. By the first half of 2006, almost two-thirds of Countrywide’s subprime loans had absolutely no down payment.

Certainly President Obama push to encourage banks to make risky loans isn’t unique -- in truth, he is just doing what Presidents Clinton and Bush also did.

Starting with the Clinton administration and continuing through the administration of George W. Bush, if lenders didn’t give out loans under these conditions to minorities, it was viewed as evidence of discrimination. The motive for encouraging risky loans was a noble one: to increase home ownership. It was meant to help people who couldn’t, under the previous standards, afford a home mortgage.

But with hindsight of the disaster these regulations created, Obama has no excuse. These regulations should be scraped and the last thing that should be happening is for banks to feel pressure to make more such risky loans.

Obama’s actions show that we have never left the world where the Federal Reserve and other government agencies told mortgage lenders: “discrimination may be observed when a lender’s underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower–income minority applicants.”

This is a world where the Federal Reserve told banks that the “outdated” criteria included:

Credit History: Lack of credit history should not be seen as a negative factor.... In reviewing past credit problems, lenders should be willing to consider extenuating circumstances. For lower–income applicants in particular, unforeseen expenses can have a disproportionate effect on an otherwise positive credit record. In these instances, paying off past bad debts or establishing a regular repayment schedule with creditors may demonstrate a willingness and ability to resolve debts.... Down Payment and Closing Costs: Accumulating enough savings to cover the various costs associated with a mortgage loan is often a significant barrier to homeownership by lower-income applicants. Lenders may wish to allow gifts, grants, or loans from relatives, nonprofit organizations, or municipal agencies to cover part of these costs. . . . Sources of Income: In addition to primary employment income, Fannie Mae and Freddie Mac will accept the following as valid income sources: overtime and part–time work, second jobs (including seasonal work), retirement and Social Security income, alimony, child support, Veterans Administration (VA) benefits, welfare payments, and unemployment benefits.
Is this really how we want mortgage lending to operate?

 

[CrusaderFrank]

Obama needs one more term to "Finish the job"

Frightening. Absolutely frightening

 

[Stephanie]

well he PROMISED to TRANSFORM America..too bad most people weren't listening when he said this.

 

[GHook93]

well he PROMISED to TRANSFORM America..too bad most people weren't listening when he said this.

Transforming the country? This is continuing a policy that caused the meltdown. That is doing some of the same!

 

[gallantwarrior]

Insanity: doing the same thing over and over again and expecting different results.
Albert Einstein

 

[CrusaderFrank]

well he PROMISED to TRANSFORM America..too bad most people weren't listening when he said this.

When he talked about "Change" he never meant for the better

 

[gallantwarrior]

When Obama talks about creating jobs, he never mentions that they will be created in Mexico and China, either. So does that mean he's not a stone-cold liar?

 

[DSGE]

well he PROMISED to TRANSFORM America..too bad most people weren't listening when he said this.

Transforming the country? This is continuing a policy that caused the meltdown. That is doing some of the same!

It's not the policy that caused the meltdown.

The meltdown was caused by new and exotic credit instruments.

 

[gallantwarrior]

well he PROMISED to TRANSFORM America..too bad most people weren't listening when he said this.

Transforming the country? This is continuing a policy that caused the meltdown. That is doing some of the same!

It's not the policy that caused the meltdown.

The meltdown was caused by new and exotic credit instruments.

Well, that and a bunch of crooks who played the system and bled it dry.

 

[Zoom-boing]

Is he clueless or just retarded.

Yes, yes he is. . . . they all are (Obobble, Shrub, Willy).

A downpayment to buy a home, a steady job to get a home loan, if you're a higher risk you pay a higher rate . . . how the hell is this discrimination? It's common sense!

Please, please can we take them out back and shoot them with a bb gun? Pretty please?

^ ^ ^ (quick, report me!)

 

[GHook93]

well he PROMISED to TRANSFORM America..too bad most people weren't listening when he said this.

Transforming the country? This is continuing a policy that caused the meltdown. That is doing some of the same!

It's not the policy that caused the meltdown.

The meltdown was caused by new and exotic credit instruments.

True the lenders made the deals so they deserve part of them blame. HOWEVER, the CRA forced banks to toss out the risk matrix and provide state loans, no money down loans to people who couldn't afford them, otherwise the banks would be levied fines and would lose tax benefits. Their hands were forced. On top of that the Clinton Administration gave Fannie Mae and Freddie Mac the POWER to create an artificial secondary market. This allowed banks to make these toxic loans and sell them off instantly with no risk and only reward!

Side Fact: The US company that lost the most money in any given year were Fannie Mae and Freddie Mac in 2008, that was beaten by them in 2009, and again in 2010 and most likely beaten again in 2011. No company in history has been able to run so far in the red for so long!

 

[Uncensored2008]

It's not the policy that caused the meltdown.

The meltdown was caused by new and exotic credit instruments.

ROFL

Yeah, people not paying off their loans had nothing to do with it...

You voted for Obama, dinja?

 

[DSGE]

It's not the policy that caused the meltdown.

The meltdown was caused by new and exotic credit instruments.

ROFL

Yeah, people not paying off their loans had nothing to do with it...

I see you have a thorough understanding of the financial crisis

You voted for Obama, dinja?

I'm not American.

 

[Uncensored2008]

I see you have a thorough understanding of the financial crisis

I see you are a mindless Obamabot.

Look Sparky, regardless of packaging, the fact of loans defaulting is the ultimate basis of the bubble bursting. That the fucking moron Obama is suing to pressure BofA to return to the frivolous lending standards that drove the initial bubble is insanity. Obama cares only about racial and class warfare, he doesn't give a fuck about the damage done.

I don't expect you to grasp this.

I'm not American.

You are a leftist though.

How can I tell? Simple, the lower the IQ, the further to the left.

 

[DSGE]

Transforming the country? This is continuing a policy that caused the meltdown. That is doing some of the same!

It's not the policy that caused the meltdown.

The meltdown was caused by new and exotic credit instruments.

True the lenders made the deals so they deserve part of them blame. HOWEVER, the CRA forced banks to toss out the risk matrix and provide state loans, no money down loans to people who couldn't afford them, otherwise the banks would be levied fines and would lose tax benefits. Their hands were forced. On top of that the Clinton Administration gave Fannie Mae and Freddie Mac the POWER to create an artificial secondary market. This allowed banks to make these toxic loans and sell them off instantly with no risk and only reward!

Side Fact: The US company that lost the most money in any given year were Fannie Mae and Freddie Mac in 2008, that was beaten by them in 2009, and again in 2010 and most likely beaten again in 2011. No company in history has been able to run so far in the red for so long!

It didn't force banks to provide NINJA loans. This isn't something banks were forced into. Banks wanted to give every man and his dog a loan because they could instantly securitize it, sell it to an investment bank, subordinate the debt into tranches, package it into a CDO, have the ratings agencies slap a AAA rating on it, and sell it for fuckloads of money. Being able to package it into hard to value securities and get the ratings agencies to classify it as risk free meant that the banks willingly originated the world's shittiest mortgages. Private investment banks were the largest originators of sub-prime mortgages. Not Fannie and Freddie. They held comparatively safe assets until near the end when they decided to get in on the action and buy, not originate, assets which turned out to be toxic.

 

[DSGE]

I see you have a thorough understanding of the financial crisis

I see you are a mindless Obamabot.

I don't care for Obama. I think he's better than the alternatives though.

Look Sparky, regardless of packaging, the fact of loans defaulting is the ultimate basis of the bubble bursting. That the fucking moron Obama is suing to pressure BofA to return to the frivolous lending standards that drove the initial bubble is insanity. Obama cares only about racial and class warfare, he doesn't give a fuck about the damage done.

Look sport, it didn't drive the bubble. You're talking out your arse.

I'm not American.

You are a leftist though.

I'm centrist.

How can I tell? Simple, the lower the IQ, the further to the left.

Oh, you got me! Your quick wit has convinced me to accept everything you say as gospel. I know when I've been bested.

 

[Uncensored2008]

It didn't force banks to provide NINJA loans. This isn't something banks were forced into. Banks wanted to give every man and his dog a loan because they could instantly securitize it, sell it to an investment bank, subordinate the debt into tranches, package it into a CDO, have the ratings agencies slap a AAA rating on it, and sell it for fuckloads of money. Being able to package it into hard to value securities and get the ratings agencies to classify it as risk free meant that the banks willingly originated the world's shittiest mortgages. Private investment banks were the largest originators of sub-prime mortgages. Not Fannie and Freddie. They held comparatively safe assets until near the end when they decided to get in on the action and buy, not originate, assets which turned out to be toxic.

Not discounting what you wrote, which is mostly factual, what was it that made the loans toxic? Couldn't the investment banks have securitized loans without the use of questionable lending practices?

See, the fact of Angelo Mozilo being a crook doesn't alter the fact that Janet Reno engaged in the unprecedented act of filing civil suit against lenders who FAILED to offer unsound loans. Loans based on race rather than the ability to repay. The fucking moron Obama is now repeating this insane act. Regardless of criminal acts by the big banks, of which there are myriad, this action is absolutely insane, irresponsible and beyond the pale.

Even for the fucking moron Obama, this is unbelievable.

 

[GHook93]

It didn't force banks to provide NINJA loans. This isn't something banks were forced into.

True, but in order to avoid fines, which Clinton, Frank and Dodds were hitting the banks with regularly and to keep the tax benefits, Banks were forced to get creatively stupid. There was no way around it.

Banks wanted to give every man and his dog a loan because they could instantly securitize it, sell it to an investment bank, subordinate the debt into tranches, package it into a CDO, have the ratings agencies slap a AAA rating on it, and sell it for fuckloads of money. Being able to package it into hard to value securities and get the ratings agencies to classify it as risk free meant that the banks willingly originated the world's shittiest mortgages. Private investment banks were the largest originators of sub-prime mortgages. Not Fannie and Freddie. They held comparatively safe assets until near the end when they decided to get in on the action and buy, not originate, assets which turned out to be toxic.

Not quite how you stated it. First, another bonehead law the GLB was enacted that allowed commercial banks, investment banks (brokerages) and insurance co's to be one entity. This is were the CDO became a problem. Banks could either house the loan (and of course they housed many loans), sell the loan instantly onto the secondary market (which was Fannie Mae and Freddie Mac) or sell the loans to private investors. The third way was the CDOs. Basically they would package toxic loans stamp a AAA rating on them and sell them (this wouldn't have happened if GLB wasn't enacted). Nevertheless, CRA forced the bad loans to be created and the meltdown would have occurred with or without the CDOs.

 

[DSGE]

It didn't force banks to provide NINJA loans. This isn't something banks were forced into. Banks wanted to give every man and his dog a loan because they could instantly securitize it, sell it to an investment bank, subordinate the debt into tranches, package it into a CDO, have the ratings agencies slap a AAA rating on it, and sell it for fuckloads of money. Being able to package it into hard to value securities and get the ratings agencies to classify it as risk free meant that the banks willingly originated the world's shittiest mortgages. Private investment banks were the largest originators of sub-prime mortgages. Not Fannie and Freddie. They held comparatively safe assets until near the end when they decided to get in on the action and buy, not originate, assets which turned out to be toxic.

Not discounting what you wrote, which is mostly factual, what was it that made the loans toxic? Couldn't the investment banks have securitized loans without the use of questionable lending practices?

It was that the loans were made to people that couldn't pay them back. There's no argument about that. But it's not nearly as simple as "banks were making loans nobody could repay", since the natural follow up question would be "who on earth would buy them?". The extent of sub-prime origination can't be explained by the CRA.

They'd run out of creditworth mortgages to originate.

See, the fact of Angelo Mozilo being a crook doesn't alter the fact that Janet Reno engaged in the unprecedented act of filing civil suit against lenders who FAILED to offer unsound loans. Loans based on race rather than the ability to repay. The fucking moron Obama is now repeating this insane act. Regardless of criminal acts by the big banks, of which there are myriad, this action is absolutely insane, irresponsible and beyond the pale.

Even for the fucking moron Obama, this is unbelievable.

Hey, I don't want the CRA either. But if people make the mistake of attributing the GFC to it, I'll call them on it.

 

[DSGE]

It didn't force banks to provide NINJA loans. This isn't something banks were forced into.

True, but in order to avoid fines, which Clinton, Frank and Dodds were hitting the banks with regularly and to keep the tax benefits, Banks were forced to get creatively stupid. There was no way around it.

Banks wanted to give every man and his dog a loan because they could instantly securitize it, sell it to an investment bank, subordinate the debt into tranches, package it into a CDO, have the ratings agencies slap a AAA rating on it, and sell it for fuckloads of money. Being able to package it into hard to value securities and get the ratings agencies to classify it as risk free meant that the banks willingly originated the world's shittiest mortgages. Private investment banks were the largest originators of sub-prime mortgages. Not Fannie and Freddie. They held comparatively safe assets until near the end when they decided to get in on the action and buy, not originate, assets which turned out to be toxic.

Not quite how you stated it. First, another bonehead law the GLB was enacted that allowed commercial banks, investment banks (brokerages) and insurance co's to be one entity.

Why is that a problem?

This is were the CDO became a problem. Banks could either house the loan (and of course they housed many loans)

They certainly didn't retain sub-prime loans on their balance sheet. They securitized them.

, sell the loan instantly onto the secondary market (which was Fannie Mae and Freddie Mac)

Why on earth are Fannie and Freddie gonna buy a loan they know will default?

or sell the loans to private investors. The third way was the CDOs. Basically they would package toxic loans stamp a AAA rating on them and sell them (this wouldn't have happened if GLB wasn't enacted).

Absolutely it would have happened. Why are you attributing CDOs to GLB?

Nevertheless, CRA forced the bad loans to be created and the meltdown would have occurred with or without the CDOs.

It didn't force bad loans to nearly the extent we saw. Point me to where in the CRA it says banks were obliged to provide loans to people with no income, no job and no assets. Because nobody in the world would make such a ridiculous loan unless either they were being forced to, or they could dupe some sucker into buying it from them.