U.S. Is Set to Sue a Dozen Big Banks Over Mortgages

Ame®icano;4112054 said:
Yeah, Clinton. I'm not talking about original CRA of 1977, but about regulatory changes of 1995. Not that hard to find!. And yes, most of bad loans started by non depository institutions. What escapes you is basic market rule that adding more liquidity to a market without equally increasing production (real value), creates bubble.

Why would a nondepository institution make a loan to someone they did not believe was capable of repaying said loan, or create terms in a loan that make it likely it won't be repaid?

<That's only partly rhetorical>
 
So you don't think the real estate banking crisis of the late 1980's was serious? Whatever else those institutions were in the late 1980's, they weren't "fine". That's why hundreds collapsed and the government had to step in, bail them out and create the Resolution Trust Corporation to spend down the debt.

It's hard to have a serious conversation about real estate and mortgage financial instability with someone who thinks that mortgage institutions and banks were "fine" during the previous crisis.

Really? I haven't said it wasn't serious, that crisis wasn't even close to this one.

Now, you need to decide what crisis you want to discuss. Whenever I talk about Clinton's regulation, you switch to Carters CRA and vice versa.

You wanna talk about both? OK, tell me what precedes both crisis? What they have in common?
 
Ame®icano;4112054 said:
Yeah, Clinton. I'm not talking about original CRA of 1977, but about regulatory changes of 1995. Not that hard to find!. And yes, most of bad loans started by non depository institutions. What escapes you is basic market rule that adding more liquidity to a market without equally increasing production (real value), creates bubble.

Why would a nondepository institution make a loan to someone they did not believe was capable of repaying said loan, or create terms in a loan that make it likely it won't be repaid?

<That's only partly rhetorical>

Because they can sell it to someone else. Who was buying all those loans?

What idiot would take a loan under terms that will make it impossible to pay?
 
Ame®icano;4085321 said:
The federal agency that oversees the mortgage giants Fannie Mae and Freddie Mac is set to file suits against more than a dozen big banks, accusing them of misrepresenting the quality of mortgage securities they assembled and sold at the height of the housing bubble, and seeking billions of dollars in compensation.

At first, government force banks to give loans to those who couldn't afford it while giving to banks warranties thru Fannie & Freddy. Now they suing them for quality of given mortgages.
Market hasn't opened yet, but premarket doesn't look good at all.

no one ever forced banks to give money to people without sufficient credit worthiness. requiring that they not engage in discrimination is an entirely different matter.
 
Ame®icano;4112054 said:
If those people were the problem, why then change the law and lower the requirements? Maybe because banks were looking for qualified people to grant CRA loans, but ran out of credit worthy borrowers?
Actually what they did was give the largest most ridiculous loans possible to people regardless of income and then sell those loans to sucker investors, pocketing the origination fees. Sorry but the CRA doesn't require banks to NOT verify someone's income, it doesn't require banks to give no money down loans. You're so fucking full of shit.
Yeah, Clinton. I'm not talking about original CRA of 1977, but about regulatory changes of 1995. Not that hard to find!. And yes, most of bad loans started by non depository institutions. What escapes you is basic market rule that adding more liquidity to a market without equally increasing production (real value), creates bubble.

The liquidity was mostly added by banks not subject to CRA


Beside CRA changes, under Clinton's (Affordable Housing Goals) directive, Fannie & Freddie manipulated the market to greatly increase their low to moderate mortgage holdings, not talking about CRA loans, just low to moderate mortgages adding much more liquidity to the bottom of the market resulted in inflation on higher levels of the market. Got it?

Sorry, but the WSJ doesn't necessarily agree with you

Fed Paper: Were Fannie, Freddie Affordable Housing Goals Effective? - Developments - WSJ


There's nothing in any law requiring anyone to give anyone no-money down loans.
 
Ame®icano;4112943 said:
So you don't think the real estate banking crisis of the late 1980's was serious? Whatever else those institutions were in the late 1980's, they weren't "fine". That's why hundreds collapsed and the government had to step in, bail them out and create the Resolution Trust Corporation to spend down the debt.

It's hard to have a serious conversation about real estate and mortgage financial instability with someone who thinks that mortgage institutions and banks were "fine" during the previous crisis.

Really? I haven't said it wasn't serious, that crisis wasn't even close to this one.

Now, you need to decide what crisis you want to discuss. Whenever I talk about Clinton's regulation, you switch to Carters CRA and vice versa.

You wanna talk about both? OK, tell me what precedes both crisis? What they have in common?

No, you claimed that banks were "fine" and "The original Democrats CRA law of 1977 was pretty much ignored by the banks, that's why you can't see so many foreclosures from that time, and real estate price was pretty much stable."

Which is simply and completely false. There was a significant real estate bubble and 100's of depository institutions failed and/or were bailed out - before Clinton's reforms.
 
Ame®icano;4112957 said:
Ame®icano;4112054 said:
Yeah, Clinton. I'm not talking about original CRA of 1977, but about regulatory changes of 1995. Not that hard to find!. And yes, most of bad loans started by non depository institutions. What escapes you is basic market rule that adding more liquidity to a market without equally increasing production (real value), creates bubble.

Why would a nondepository institution make a loan to someone they did not believe was capable of repaying said loan, or create terms in a loan that make it likely it won't be repaid?

<That's only partly rhetorical>

Because they can sell it to someone else. Who was buying all those loans?

Two different groups: The GSE's were buying conforming loans, which had a far lower default rate. The private sector was buying nonconforming loans, which had a higher default rate. Because they were willing to buy less secure loans, the private sector ended up taking significant market share from the GSE's.
 
Government Sues Banks for Helping GSEs Meet Government Quotas
In order to meet these government quotas, Fannie and Freddie resorted to buying mortgage-backed securities based on subprime loans. This involved taking additional risks, since subprime loans were low quality because the borrowers generally had blemished credit records, but these loans were the most likely to meet the affordable housing goals. Wall Street and other firms made up pools of loans specifically to meet the GSEs’ requirements, and eventually Fannie and Freddie became the largest purchasers of the mortgage-backed securities issued against these pools of low-quality loans.

Moreover, in order to certify to HUD that they had met the quotas in any year, Fannie and Freddie had to know the percentage of loans in each pool that contributed to meeting the affordable housing goals and subgoals. It is likely, then, that in defending themselves in this suit, the banks will point out how much information the GSEs had about the loans they were buying, and hence that they assumed the risk.

Indeed, the GSEs were well aware of the additional risks they were assuming in buying subprime loans in order to comply with government requirements. For example, here is a statement in Fannie Mae’s 2006 10-K:

Fannie Mae 10K - "We have made, and continue to make, significant adjustments to our mortgage loan sourcing and purchase strategies in an effort to meet HUD’s increased housing goals and new subgoals. These strategies include entering into some purchase and securitization transactions with lower expected economic returns than our typical transactions. We have also relaxed some of our underwriting criteria to obtain goals-qualifying mortgage loans and increased our investments in higher-risk mortgage loan products that are more likely to serve the borrowers targeted by HUD’s goals and subgoals, which could increase our credit losses."

In effect, then, the government is suing 17 banks for helping Fannie and Freddie meet the government’s own affordable housing quotas.
 
Ame®icano;4112943 said:
So you don't think the real estate banking crisis of the late 1980's was serious? Whatever else those institutions were in the late 1980's, they weren't "fine". That's why hundreds collapsed and the government had to step in, bail them out and create the Resolution Trust Corporation to spend down the debt.

It's hard to have a serious conversation about real estate and mortgage financial instability with someone who thinks that mortgage institutions and banks were "fine" during the previous crisis.

Really? I haven't said it wasn't serious, that crisis wasn't even close to this one.

Now, you need to decide what crisis you want to discuss. Whenever I talk about Clinton's regulation, you switch to Carters CRA and vice versa.

You wanna talk about both? OK, tell me what precedes both crisis? What they have in common?

No, you claimed that banks were "fine" and "The original Democrats CRA law of 1977 was pretty much ignored by the banks, that's why you can't see so many foreclosures from that time, and real estate price was pretty much stable."

Which is simply and completely false. There was a significant real estate bubble and 100's of depository institutions failed and/or were bailed out - before Clinton's reforms.

You can flip it any way you want.

OK, first tell me what caused as you said significant real estate bubble that suddenly pushed 100's of depository institutions to fail?

Second, it's important for you to understand when banks started ignoring original CRA of 1977 and why it was revised in 1995. Do I need to draw it for you?
 
Ame®icano;4129100 said:
Ame®icano;4112943 said:
Really? I haven't said it wasn't serious, that crisis wasn't even close to this one.

Now, you need to decide what crisis you want to discuss. Whenever I talk about Clinton's regulation, you switch to Carters CRA and vice versa.

You wanna talk about both? OK, tell me what precedes both crisis? What they have in common?

No, you claimed that banks were "fine" and "The original Democrats CRA law of 1977 was pretty much ignored by the banks, that's why you can't see so many foreclosures from that time, and real estate price was pretty much stable."

Which is simply and completely false. There was a significant real estate bubble and 100's of depository institutions failed and/or were bailed out - before Clinton's reforms.

You can flip it any way you want.

OK, first tell me what caused as you said significant real estate bubble that suddenly pushed 100's of depository institutions to fail?

a decline in regulation (Garn- St Germain, for one), a change in how much loss from a real estate investment could be written off (the tax act of 1986) and the government backing that came along with deposit insurance at these institutions.

Second, it's important for you to understand when banks started ignoring original CRA of 1977 and why it was revised in 1995. Do I need to draw it for you?

You can try but I know what the drawing looks like already.
 
No federal government office ever forced any bank to give a loan to anyone who couldn't afford it. Ever.

That's why most of the toxic subprimes were offered by nondepository institutions outside the reach of the FDIC and the CRA.


Oh-oh... new documents shows otherwise.

At President Clinton's direction, no fewer than 10 federal agencies issued a chilling ultimatum to banks and mortgage lenders to ease credit for lower-income minorities or face investigations for lending discrimination and suffer the related adverse publicity. They also were threatened with denial of access to the all-important secondary mortgage market and stiff fines, along with other penalties.

Smoking-Gun Document Ties Policy To Housing Crisis
 

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