Follow along with the video below to see how to install our site as a web app on your home screen.
Note: This feature currently requires accessing the site using the built-in Safari browser.
Most of the subprime loans were to middle and upper income buyers. Most of them were incurred in expensive areas. For example 90% of all mortgages written in San Diego in 2006 were subprime loans.
The most toxic subprimes and the worst price runups (b/c the two are connected) occurred in traditionally "poor" "minority" neighborhoods such as Miami, Bradenton, Naples, and Las Vegas. hotbeds of poverty, I tell ya!
Most of the subprime loans were to middle and upper income buyers. Most of them were incurred in expensive areas. For example 90% of all mortgages written in San Diego in 2006 were subprime loans.
The most toxic subprimes and the worst price runups (b/c the two are connected) occurred in traditionally "poor" "minority" neighborhoods such as Miami, Bradenton, Naples, and Las Vegas. hotbeds of poverty, I tell ya!
If you believe in the efficacy of the market, if the CRA truly was the cause of the financial crisis, the home prices that would have gone up the most, then crashed the most and had the highest rates of default would have been in CRA areas, none of which happened.
Fannie and Freddie could not buy the most toxic loans - NINJA's, for example. They could only buy conforming loans. The most toxic loans were sold, converted to AAA MBS's and resold in the private market. FM and FM could certainly buy liar loans. That's why they are called Liar loans.They weren't backed up by Fannie. These were private sector originations that Fannie wouldn't and couldn't buy because they were noncomforming, no-doc, NINJA loans, securitized into MBS --> CDO's in the private market.
many "ninjas", etc. or "liar" loans were indeed bought up by both Fanny and Fred...talking about it right here in the Huff-n-Puff Post...
In the mortgage industry, they are called "liar loans" _ mortgages approved without requiring proof of the borrower's income or assets. The worst of them earn the nickname "ninja loans," short for "no income, no job, and (no) assets."
....
Countrywide Financial Corp., now part of Bank of America Corp., was one of the top providers of liar loans. The company is now is paying the price. More than 12 percent of Countrywide's $25.4 billion in pick-a-payment loans are in default, and 83 percent had little or no documentation, according to a Securities and Exchange Commission filing last week.
Critics say Fannie Mae and Freddie Mac, which bought or guaranteed liar loans from lenders including Countrywide and IndyMac, should have stuck with traditional 30-year, fixed-rate mortgages.
"I personally think that they ventured beyond their mission," said Richard Smith, a mortgage broker in Chattanooga, Tenn. Because of their decision to back shakier loans, he said, "the home-buying public is going to have to pay."
Fannie and Freddie entered the market for risky loans just as they emerged from accounting scandals. At the time, Wall Street giants such as Bear Stearns and Lehman Brothers Holdings Inc. were backing a growing share of ever-riskier loans, and both government-sponsored companies felt pressure to compete.
Freddie Mac wanted "to stay competitive in the market and take steps to preserve market share," spokesman Michael Cosgrove said.
Fannie Mae increased its purchases of liar mortgages "at the requests of many of our customers," according to spokesman Brian Faith.
Both companies also were able to use subprime and liar-loan investments to meet government-set affordable housing goals.
Now Fannie, Freddie and other mortgage investors are reviewing defaulted loans to see if lenders committed fraud. If they find enough evidence, they could force lenders to assume responsibility for losses.
But it's unclear how much money they might recover, especially from lenders that have gone under or been seized by the government.
8-08
"Liar Loans" Threaten To Prolong Mortgage Crisis
Fannie and Freddie also participated in buying these repackaged AAA securities, of course - just like all the other market participants.
During the boom years, mortgage lenders paid Fannie Mae and Freddie Mac a small fee for accepting stated-income loans. Today those lenders are paying a whole lot more.
Loan-buyback requests from the government-sponsored enterprises are mounting, and alternative-A loans are at the center of many disputes. At issue are the terms of the GSEs’ reduced-documentation programs and who should be responsible for a loan product that most industry experts now concede never should have been mass marketed in the first place.
...
Though Alt-A loans accounted for only 10% of the GSEs’ volume from 2005 to 2007, they are generating a larger share of repurchase requests. And while low-documentation loans were always considered riskier than their full-doc equivalents, Fannie was happy to guarantee them at the time.
Fannie’s handbook from 2006 states, regarding one type of loan: “Lender is not required to verify the borrower’s income or assets.”
“All that language like that did was create a ‘don’t ask, don’t tell’ environment while giving Fannie Mae plausible deniability,” Pfeifer said. “How would a broker know whether or not the borrower qualified for a fully documented loan unless they actually ran the borrower’s qualifications under the full-doc guidelines? And if the borrower qualified, why go stated-income?”
A copy of the Fannie handbook details the accepted variances from the company’s underwriting and documentation requirements. Among them are stated incomes, which allowed the lender to rely on an oral verification of the borrower’s employment (rather than on pay stubs and tax returns) and determine that the income is “reasonable,” as well as the even more bare-bones no income/no asset, or Nina, loans.
The existence of a no/low-doc channel — and the additional fees that lenders paid to participate in it — convinced many lenders that Fannie was taking on the risk of borrower misrepresentations, said Brian Chappelle of the Washington consulting firm Potomac Partners, especially since buyback requests had been exceedingly rare.
8-13-10
A No-Doc Paradox at Center of Many GSE-Lender Tussles | TAMP BLOG
Fannie and Freddie could not buy the most toxic loans - NINJA's, for example. They could only buy conforming loans. The most toxic loans were sold, converted to AAA MBS's and resold in the private market. FM and FM could certainly buy liar loans. That's why they are called Liar loans.many "ninjas", etc. or "liar" loans were indeed bought up by both Fanny and Fred...talking about it right here in the Huff-n-Puff Post...
Fannie and Freddie also participated in buying these repackaged AAA securities, of course - just like all the other market participants.
I believe they could...and did...altho perhaps most ninjas (ninas) were rejected....do you consider low/no doc stated-income loans as "conforming" loans? These were by far the most popular "liar" loans....and were part of Fannies "Alt-A" category...
Fannie and Freddie could not buy the most toxic loans - NINJA's, for example. They could only buy conforming loans. The most toxic loans were sold, converted to AAA MBS's and resold in the private market. FM and FM could certainly buy liar loans. That's why they are called Liar loans.They weren't backed up by Fannie. These were private sector originations that Fannie wouldn't and couldn't buy because they were noncomforming, no-doc, NINJA loans, securitized into MBS --> CDO's in the private market.
many "ninjas", etc. or "liar" loans were indeed bought up by both Fanny and Fred...talking about it right here in the Huff-n-Puff Post...
In the mortgage industry, they are called "liar loans" _ mortgages approved without requiring proof of the borrower's income or assets. The worst of them earn the nickname "ninja loans," short for "no income, no job, and (no) assets."
....
Countrywide Financial Corp., now part of Bank of America Corp., was one of the top providers of liar loans. The company is now is paying the price. More than 12 percent of Countrywide's $25.4 billion in pick-a-payment loans are in default, and 83 percent had little or no documentation, according to a Securities and Exchange Commission filing last week.
Critics say Fannie Mae and Freddie Mac, which bought or guaranteed liar loans from lenders including Countrywide and IndyMac, should have stuck with traditional 30-year, fixed-rate mortgages.
"I personally think that they ventured beyond their mission," said Richard Smith, a mortgage broker in Chattanooga, Tenn. Because of their decision to back shakier loans, he said, "the home-buying public is going to have to pay."
Fannie and Freddie entered the market for risky loans just as they emerged from accounting scandals. At the time, Wall Street giants such as Bear Stearns and Lehman Brothers Holdings Inc. were backing a growing share of ever-riskier loans, and both government-sponsored companies felt pressure to compete.
Freddie Mac wanted "to stay competitive in the market and take steps to preserve market share," spokesman Michael Cosgrove said.
Fannie Mae increased its purchases of liar mortgages "at the requests of many of our customers," according to spokesman Brian Faith.
Both companies also were able to use subprime and liar-loan investments to meet government-set affordable housing goals.
Now Fannie, Freddie and other mortgage investors are reviewing defaulted loans to see if lenders committed fraud. If they find enough evidence, they could force lenders to assume responsibility for losses.
But it's unclear how much money they might recover, especially from lenders that have gone under or been seized by the government.
8-08
"Liar Loans" Threaten To Prolong Mortgage Crisis
Fannie and Freddie also participated in buying these repackaged AAA securities, of course - just like all the other market participants.
"Those who helped cause the crisis are engaged in an ongoing effort to rewrite its history.
Their goal? Exonerate their own bad behavior, throw off any responsibility for the collapse, blame anything but their own ideology and horrific decision making. They want to keep pushing their tired political agendas, despite the damage they may have caused."
From this article, written by the author of "Bailout Nation."
Get Me ReWrite! | The Big Picture
Fannie and Freddie could not buy the most toxic loans - NINJA's, for example. They could only buy conforming loans. The most toxic loans were sold, converted to AAA MBS's and resold in the private market. FM and FM could certainly buy liar loans. That's why they are called Liar loans.
Fannie and Freddie also participated in buying these repackaged AAA securities, of course - just like all the other market participants.
I believe they could...and did...altho perhaps most ninjas (ninas) were rejected....do you consider low/no doc stated-income loans as "conforming" loans? These were by far the most popular "liar" loans....and were part of Fannies "Alt-A" category...
Conforming loans are those that conform to FM and FM standards, period. Ninja loans did not and do not conform. And as your paste demonstrates, the GSE's were only 10% Alt-A (a nice name for subprimes)
So we agree that the worst of these loans were sold to and repackaged in the private sector non-CRA institutions. How, then, is the CRA responsible? 80% of subprimes originated outside of CRA.
I believe they could...and did...altho perhaps most ninjas (ninas) were rejected....do you consider low/no doc stated-income loans as "conforming" loans? These were by far the most popular "liar" loans....and were part of Fannies "Alt-A" category...
Conforming loans are those that conform to FM and FM standards, period. Ninja loans did not and do not conform. And as your paste demonstrates, the GSE's were only 10% Alt-A (a nice name for subprimes)
So we agree that the worst of these loans were sold to and repackaged in the private sector non-CRA institutions. How, then, is the CRA responsible? 80% of subprimes originated outside of CRA.
Are you really still asking this? The government set the low standards....despite warnings....
No, the government set conforming standards. Mortgage originators and the upstream companies desperate for debt derivatives stepped well, well below those standards to feed the derivatives market. The GSE's didn't create subprimes, and they became a smaller and smaller portion of the subprime purchasing market as the bubble grew from the early 2000's to 2007.
.and money was there to be made
Again, how can money be "there to be made" if the AAA rated traunches of MBS's consist of B-rated Subprimes and Alt-A's that were magically expected to have a <5% default rate? Once you can answer that question, it all starts to make sense. Let me give you a hint: it had nothing at all to do with the underlying loans.
..how can you fault others for jumping on the bandwagon of such magnificent government financial leadership?
They didn't. They jumped off of that leadership into far more risky loans and MBS's.
Are you really still asking this? The government set the low standards....despite warnings....and money was there to be made...how can you fault others for jumping on the bandwagon of such magnificent government financial leadership?
Conforming loans are those that conform to FM and FM standards, period. Ninja loans did not and do not conform. And as your paste demonstrates, the GSE's were only 10% Alt-A (a nice name for subprimes)
So we agree that the worst of these loans were sold to and repackaged in the private sector non-CRA institutions. How, then, is the CRA responsible? 80% of subprimes originated outside of CRA.
No, the government set conforming standards. Mortgage originators and the upstream companies desperate for debt derivatives stepped well, well below those standards to feed the derivatives market. The GSE's didn't create subprimes, and they became a smaller and smaller portion of the subprime purchasing market as the bubble grew from the early 2000's to 2007.
.
Again, how can money be "there to be made" if the AAA rated traunches of MBS's consist of B-rated Subprimes and Alt-A's that were magically expected to have a <5% default rate? Once you can answer that question, it all starts to make sense. Let me give you a hint: it had nothing at all to do with the underlying loans.
..how can you fault others for jumping on the bandwagon of such magnificent government financial leadership?
They didn't. They jumped off of that leadership into far more risky loans and MBS's.
Riiiight...."conforming standards".....no doc and stated income loans are "conforming".... to what...?
By no means am I saying the private sector is innocent....they got creative as the private sector usually does and invented all sorts of loans and packagings and at some point even wound up taking away market share from the gubmint entities... which is not too surprising...
but I believe the government set the overall stage...how is it the mortgage industry suddenly got so loosey goosey when for decades it had been always so strict?
Way back in 2001 Bush warned that standards should be tightened....but the Dems would not agree...
but I believe the government set the overall stage...how is it the mortgage industry suddenly got so loosey goosey when for decades it had been always so strict?
Way back in 2001 Bush warned that standards should be tightened....but the Dems would not agree...
Hmm...Wall Street disagrees.You really have to ask why they are abandoning him? Because his polices fucking suck for wall street, He lied like hell and is not governing like they thought he would.
Hmm...Wall Street disagrees.You really have to ask why they are abandoning him? Because his polices fucking suck for wall street, He lied like hell and is not governing like they thought he would.
http://finance.yahoo.com/echarts?s=%5EDJI+Interactive#chart2:symbol=^dji;range=20090102,20100901;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off
lol what the hell is that chart suppose to prove about why people on wall street are moving away from Supporting Obama?
You really think how the market is doing means anything when it comes to how traders feel about Obama?
well you're right that the derivatives market got going and exacerbated the meltdown...however i can't remember when the mortgage industry ever before made 125%LTV loans with no down payment...but I believe the government set the overall stage...how is it the mortgage industry suddenly got so loosey goosey when for decades it had been always so strict?
First, let's not be confused. The mortgage market had not "always been so strict". Real estate prices have climbed and swooned based on tighter/looser standards for decades.
But to answer your question, the difference this time around was the derivatives market. The first derivatives of mortgages came about around a decade ago and completely changed the upstream mortgage market. It created Triple-A rated MBS's composed of B-rated sub-primes, repackaged as AAA rated CDS, bet on with a credit default swap, a swap that was later packaged with other swaps to create a synthetic CDO.
If you tried to offer a "synthetic CDO" bet in Las Vegas, you'd be chased out of town on a rail. Not so, Lehman, UBS, Goldman etc....they ate that shit up and pressured downstream lenders to feed the money.
Way back in 2001 Bush warned that standards should be tightened....but the Dems would not agree...
In 2001? You can't be serious. What power did the Dems have to prevent something from coming out of the house committee in 2001?
And was he recommending these tightened standards at the same time he was halving the net capital rule, offering 5K to low income individuals to use as a downpayment, and asking FM and FM to increase the US level of home ownership?
Mythmaking is in full swing as the Bush administration prepares to leave town. Among the more prominent is the assertion that the housing meltdown resulted from unbridled capitalism under a president opposed to all regulation.
Like most myths, this is entertaining but fictional. In reality, Fannie Mae and Freddie Mac were among the principal culprits of the housing crisis, and Mr. Bush wanted to rein them in before things got out of hand.
Rather than a failure of capitalism, the housing meltdown shows what's likely to happen when government grants special privileges to favored private entities that facilitate bad actors and lousy practices.
Fannie and Freddie are "government-sponsored enterprises" (GSEs), chartered by Congress. As such, they had an implicit promise of taxpayer backing and could borrow money at rates well below competitors.
Because of this, the Bush administration warned in the budget it issued in April 2001 that Fannie and Freddie were too large and overleveraged. Their failure "could cause strong repercussions in financial markets, affecting federally insured entities and economic activity" well beyond housing.
Mr. Bush wanted to limit systemic risk by raising the GSEs' capital requirements, compelling preapproval of new activities, and limiting the size of their portfolios. Why should government regulate banks, credit unions and savings and loans, but not GSEs? Mr. Bush wanted the GSEs to be treated just like their private-sector competitors.
But the GSEs fought back. They didn't want to see the Bush reforms enacted, because that would level the playing field for their competitors. Congress finally did pass the Bush reforms, but in 2008, after Fannie and Freddie collapsed.
The largely unreported story is that to fend off regulation, the GSEs engaged in a lobbying frenzy. They hired high-profile Democrats and Republicans and spent $170 million on lobbying over the past decade. They also constructed an elaborate network of state and local lobbyists to pressure members of Congress.
When Republican Richard Shelby of Alabama, then chairman of the Senate Banking Committee, pushed for comprehensive GSE reform in 2005, Democrat Sen. Chris Dodd of Connecticut successfully threatened a filibuster. Later, after Fannie and Freddie collapsed, Mr. Dodd asked, "Why weren't we doing more?" He then voted for the Bush reforms that he once called "ill-advised."
But Mr. Dodd wasn't the only Democrat to heap abuse on the Bush reforms. Rep. Barney Frank of Massachusetts defended Fannie and Freddie as "fundamentally sound" and labeled the president's proposals as "inane." He later voted for the reforms. Sen. Charles Schumer of New York dismissed Mr. Bush's "safety and soundness concerns" as "a straw man." "If it ain't broke, don't fix it," was the helpful advice of both Sen. Thomas Carper of Delaware and Rep. Maxine Waters of California. Rep. Gregory Meeks of New York berated a Bush official at a hearing, saying, "I am just pissed off" at the administration for raising the issue.
Democrats had ready allies among lenders accustomed to GSEs buying their risky mortgages. For example, Angelo Mozilo, CEO of Countrywide Financial, complained that "an overly cumbersome regulatory process" would "reduce, or even eliminate, the incentives for the GSEs and their primary market partners."
It took Fannie and Freddie over three decades to acquire $2 trillion in mortgages and mortgage-backed securities. Together, they held $2.1 trillion in 2000. By 2005, the two GSEs held $4 trillion, up 92% in just five years. By 2008, they'd grown another 24%, to nearly $5 trillion. They held almost half of all American mortgages.
continued:
Karl Rove: President Bush Tried to Rein In Fan and Fred - WSJ.com
Hmm...Wall Street disagrees.You really have to ask why they are abandoning him? Because his polices fucking suck for wall street, He lied like hell and is not governing like they thought he would.
http://finance.yahoo.com/echarts?s=%5EDJI+Interactive#chart2:symbol=^dji;range=20090102,20100901;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off
well you're right that the derivatives market got going and exacerbated the meltdown...however i can't remember when the mortgage industry ever before made 125%LTV loans with no down payment...
...in any case i don't believe that derivatives were the sole "ultimate cause" of the meltdown.....all those various forms of derivatives the market played with were essentially nothing more than forms of "insurance" to cover risk....all of which were all ultimately based upon the performance of the underlying of mortgage assets....mortgage assets which ultimately failed because bad loans were made to people who could not pay them back...
well you're right that the derivatives market got going and exacerbated the meltdown...however i can't remember when the mortgage industry ever before made 125%LTV loans with no down payment...but I believe the government set the overall stage...how is it the mortgage industry suddenly got so loosey goosey when for decades it had been always so strict?
First, let's not be confused. The mortgage market had not "always been so strict". Real estate prices have climbed and swooned based on tighter/looser standards for decades.
But to answer your question, the difference this time around was the derivatives market. The first derivatives of mortgages came about around a decade ago and completely changed the upstream mortgage market. It created Triple-A rated MBS's composed of B-rated sub-primes, repackaged as AAA rated CDS, bet on with a credit default swap, a swap that was later packaged with other swaps to create a synthetic CDO.
If you tried to offer a "synthetic CDO" bet in Las Vegas, you'd be chased out of town on a rail. Not so, Lehman, UBS, Goldman etc....they ate that shit up and pressured downstream lenders to feed the money.
...in any case i don't believe that derivatives were the sole "ultimate cause" of the meltdown.....all those various forms of derivatives the market played with were essentially nothing more than forms of "insurance" to cover risk....all of which were all ultimately based upon the performance of the underlying of mortgage assets....mortgage assets which ultimately failed because bad loans were made to people who could not pay them back...
Bush supported home ownership but as Karl Rove says "Mr. Bush's goal was for people to own homes they could afford, not ones made accessible by reckless lenders who off-loaded their risk to GSEs."
Hmm...Wall Street disagrees.You really have to ask why they are abandoning him? Because his polices fucking suck for wall street, He lied like hell and is not governing like they thought he would.
http://finance.yahoo.com/echarts?s=%5EDJI+Interactive#chart2:symbol=^dji;range=20090102,20100901;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off
How much of that is inflation...?
