CRA Not to Blame for Housing Debacle

[bigrebnc1775]

Here's the relationship

"Without the CRA bad loans would have never been made. Without the threat of fines no bad loans would have been made, without the guarantee by Freddie and Fannie to cover any bad loans no bad loans would have been made."

But that's wrong.

- 94% of the subprime loans made were outside the CRA areas
- 24 of the 25 top subprime lenders did not have CRA mandates.
- the rate of default for CRA loans was no greater than other subprime mortgages
- the GSEs lost share to private lenders with no CRA mandate in subprime from 2002 through 2006, the duration of the bubble.

Therefore, you claim isn't true because most of the bad loans made had no relationship with the CRA.

You are wrong

Ten Important Things to Know About the CRA
1. The purpose of the CRA is to fight redlining and to increase bank lending in LMI neighborhoods.
Congress had two goals in mind when it passed the CRA in 1977.5 First, it saw the CRA as a way to fight bank “redlining,”or the outright refusal to lend in LMI, inner city, older, and predominantly minority neighborhoods. Second, it hoped that the CRA would result in more bank lending in such neighborhoods. As such, in order to comply with the CRA, it is not enough for a bank simply not to redline LMI neighborhoods. Instead, a bank must actually do something to meet the credit needs of LMI neighborhoods.
2. The CRA covers all banks whose deposits are insured by the Federal Deposit Insurance Corporation.
This includes foreign-owned banks, wholesale banks that do not have branches, internet banks, and other banks with a narrow purpose or limited business, as long as their deposits are insured by the FDIC. It
http://www.frbsf.org/community/craresources/advocacy.pdf

 

[finebead]

Most of the subprime lending was done by the unscrupulous mortgage companies like New Century Financial, Countrywide, First Franklin, and Long Beach Mortgage (those are in fact the top 4). None of those was covered by the CRA, because CRA only regulated "depositories", or banks in other words, and the biggest offenders were "mortgage only" lenders who sold the mortgages to the big Wall St. banks who then securitized them.

Since the biggest lenders were not regulated by CRA, CRA was not the primary driver in the mortgage crisis, unless you have some proof you wish to submit.

Also, subprime lending did not grow at any regular pace, rather, it exploded in 2004, 2005, and 2006.

The value of USA subprime mortgages was estimated at $1.3 trillion as of March 2007, with over 7.5 million first-lien subprime mortgages outstanding. Between 2004-2006 the share of subprime mortgages relative to total originations ranged from 18%-21%, versus less than 10% in 2001-2003 and during 2007.

http://www.stat.unc.edu/faculty/cji/fys/2010/subprime-mortgage.pdf

A radical change in subprime lending occurred in 2003 that caused the percentage of subprime lending to explode in 2004-2006, and that was NOT CRA. But the SEC did relax the Net Capital rule in 2003, allowing the biggest investment banks to expand their leverage ratio, which allowed them to consume the subprime debt, and without that, there would not have been anyone to buy all those bad loans.

Also Greenspan brought short term interest rates to 1% in 2003, which facilitated the LOW 2 year teaser rates that let many poor people try to buy a house, that never should have been given a loan.

SEC relaxation of the net capital rule and Greenspan dropping short term rates too low in 2003-2004 (in the effort to get Bush re-elected, the repubs sacrificed the health of the economy) was a much bigger problem than CRA.

 

[bigrebnc1775]

Most of the subprime lending was done by the unscrupulous mortgage companies like New Century Financial, Countrywide, First Franklin, and Long Beach Mortgage (those are in fact the top 4). None of those was covered by the CRA, because CRA only regulated "depositories", or banks in other words, and the biggest offenders were "mortgage only" lenders who sold the mortgages to the big Wall St. banks who then securitized them.

Since the biggest lenders were not regulated by CRA, CRA was not the primary driver in the mortgage crisis, unless you have some proof you wish to submit.

Also, subprime lending did not grow at any regular pace, rather, it exploded in 2004, 2005, and 2006.

The value of USA subprime mortgages was estimated at $1.3 trillion as of March 2007, with over 7.5 million first-lien subprime mortgages outstanding. Between 2004-2006 the share of subprime mortgages relative to total originations ranged from 18%-21%, versus less than 10% in 2001-2003 and during 2007.

http://www.stat.unc.edu/faculty/cji/fys/2010/subprime-mortgage.pdf

A radical change in subprime lending occurred in 2003 that caused the percentage of subprime lending to explode in 2004-2006, and that was NOT CRA. But the SEC did relax the Net Capital rule in 2003, allowing the biggest investment banks to expand their leverage ratio, which allowed them to consume the subprime debt, and without that, there would not have been anyone to buy all those bad loans.

Also Greenspan brought short term interest rates to 1% in 2003, which facilitated the LOW 2 year teaser rates that let many poor people try to buy a house, that never should have been given a loan.

SEC relaxation of the net capital rule and Greenspan dropping short term rates too low in 2003-2004 (in the effort to get Bush re-elected, the repubs sacrificed the health of the economy) was a much bigger problem than CRA.

your argumen has been debunked.

 

[finebead]

Most of the subprime lending was done by the unscrupulous mortgage companies like New Century Financial, Countrywide, First Franklin, and Long Beach Mortgage (those are in fact the top 4). None of those was covered by the CRA, because CRA only regulated "depositories", or banks in other words, and the biggest offenders were "mortgage only" lenders who sold the mortgages to the big Wall St. banks who then securitized them.

Since the biggest lenders were not regulated by CRA, CRA was not the primary driver in the mortgage crisis, unless you have some proof you wish to submit.

Also, subprime lending did not grow at any regular pace, rather, it exploded in 2004, 2005, and 2006.

The value of USA subprime mortgages was estimated at $1.3 trillion as of March 2007, with over 7.5 million first-lien subprime mortgages outstanding. Between 2004-2006 the share of subprime mortgages relative to total originations ranged from 18%-21%, versus less than 10% in 2001-2003 and during 2007.

http://www.stat.unc.edu/faculty/cji/fys/2010/subprime-mortgage.pdf

A radical change in subprime lending occurred in 2003 that caused the percentage of subprime lending to explode in 2004-2006, and that was NOT CRA. But the SEC did relax the Net Capital rule in 2003, allowing the biggest investment banks to expand their leverage ratio, which allowed them to consume the subprime debt, and without that, there would not have been anyone to buy all those bad loans.

Also Greenspan brought short term interest rates to 1% in 2003, which facilitated the LOW 2 year teaser rates that let many poor people try to buy a house, that never should have been given a loan.

SEC relaxation of the net capital rule and Greenspan dropping short term rates too low in 2003-2004 (in the effort to get Bush re-elected, the repubs sacrificed the health of the economy) was a much bigger problem than CRA.

your argumen has been debunked.

prove it. your argument fails to hold water.

 

[bigrebnc1775]

Most of the subprime lending was done by the unscrupulous mortgage companies like New Century Financial, Countrywide, First Franklin, and Long Beach Mortgage (those are in fact the top 4). None of those was covered by the CRA, because CRA only regulated "depositories", or banks in other words, and the biggest offenders were "mortgage only" lenders who sold the mortgages to the big Wall St. banks who then securitized them.

Since the biggest lenders were not regulated by CRA, CRA was not the primary driver in the mortgage crisis, unless you have some proof you wish to submit.

Also, subprime lending did not grow at any regular pace, rather, it exploded in 2004, 2005, and 2006.


http://www.stat.unc.edu/faculty/cji/fys/2010/subprime-mortgage.pdf

A radical change in subprime lending occurred in 2003 that caused the percentage of subprime lending to explode in 2004-2006, and that was NOT CRA. But the SEC did relax the Net Capital rule in 2003, allowing the biggest investment banks to expand their leverage ratio, which allowed them to consume the subprime debt, and without that, there would not have been anyone to buy all those bad loans.

Also Greenspan brought short term interest rates to 1% in 2003, which facilitated the LOW 2 year teaser rates that let many poor people try to buy a house, that never should have been given a loan.

SEC relaxation of the net capital rule and Greenspan dropping short term rates too low in 2003-2004 (in the effort to get Bush re-elected, the repubs sacrificed the health of the economy) was a much bigger problem than CRA.

your argumen has been debunked.

prove it. your argument fails to hold water.

Read the thread It's been debunked.

 

[Toro]

Here's the relationship

"Without the CRA bad loans would have never been made. Without the threat of fines no bad loans would have been made, without the guarantee by Freddie and Fannie to cover any bad loans no bad loans would have been made."

But that's wrong.

- 94% of the subprime loans made were outside the CRA areas
- 24 of the 25 top subprime lenders did not have CRA mandates.
- the rate of default for CRA loans was no greater than other subprime mortgages
- the GSEs lost share to private lenders with no CRA mandate in subprime from 2002 through 2006, the duration of the bubble.

Therefore, you claim isn't true because most of the bad loans made had no relationship with the CRA.

You are wrong

Ten Important Things to Know About the CRA
1. The purpose of the CRA is to fight redlining and to increase bank lending in LMI neighborhoods.
Congress had two goals in mind when it passed the CRA in 1977.5 First, it saw the CRA as a way to fight bank “redlining,”or the outright refusal to lend in LMI, inner city, older, and predominantly minority neighborhoods. Second, it hoped that the CRA would result in more bank lending in such neighborhoods. As such, in order to comply with the CRA, it is not enough for a bank simply not to redline LMI neighborhoods. Instead, a bank must actually do something to meet the credit needs of LMI neighborhoods.
2. The CRA covers all banks whose deposits are insured by the Federal Deposit Insurance Corporation.
This includes foreign-owned banks, wholesale banks that do not have branches, internet banks, and other banks with a narrow purpose or limited business, as long as their deposits are insured by the FDIC. It
http://www.frbsf.org/community/craresources/advocacy.pdf

This is an advocacy document written in 2001. It establishes no causal relationship between the CRA and the Housing Bubble.

 

[finebead]

your argumen has been debunked.

prove it. your argument fails to hold water.

Read the thread It's been debunked.

I read the thread, and your post on page 7, your timeline is wrong. You assert that the banks were coerced by CRA to make loans they should not have made, but the banks were not the problem in this, the big problem was the fraudulent mortgage companies, and they were not under the CRA, because the CRA only pertained to "depositories", which is why your post is wrong.

You can't prove that CRA forced Countrywide to make loans that could not be repaid, because it DID NOT!

That is why your argument is wrong.

 

[Sallow]

The CRA is a convenient boogeyman for those looking to blame the poor for our financial woes. It was however a catalyst that led to the re-vitalization of many formerly run down neighborhoods. I've seen this take place in New York City.

Really worked some magic here.

 

[bigrebnc1775]

But that's wrong.

- 94% of the subprime loans made were outside the CRA areas
- 24 of the 25 top subprime lenders did not have CRA mandates.
- the rate of default for CRA loans was no greater than other subprime mortgages
- the GSEs lost share to private lenders with no CRA mandate in subprime from 2002 through 2006, the duration of the bubble.

Therefore, you claim isn't true because most of the bad loans made had no relationship with the CRA.

You are wrong

Ten Important Things to Know About the CRA
1. The purpose of the CRA is to fight redlining and to increase bank lending in LMI neighborhoods.
Congress had two goals in mind when it passed the CRA in 1977.5 First, it saw the CRA as a way to fight bank “redlining,”or the outright refusal to lend in LMI, inner city, older, and predominantly minority neighborhoods. Second, it hoped that the CRA would result in more bank lending in such neighborhoods. As such, in order to comply with the CRA, it is not enough for a bank simply not to redline LMI neighborhoods. Instead, a bank must actually do something to meet the credit needs of LMI neighborhoods.
2. The CRA covers all banks whose deposits are insured by the Federal Deposit Insurance Corporation.
This includes foreign-owned banks, wholesale banks that do not have branches, internet banks, and other banks with a narrow purpose or limited business, as long as their deposits are insured by the FDIC. It
http://www.frbsf.org/community/craresources/advocacy.pdf

This is an advocacy document written in 2001. It establishes no causal relationship between the CRA and the Housing Bubble.

The federal banking agencies enforce the CRA by examining the CRA record of a bank, issuing a written report with a rating, and taking the bank’s CRA record into account when considering the bank’s application to expand its business.
As part of their regulatory function, the federal banking agencies periodically send examiners to a bank to determine whether it is in compliance with the banking laws, including the CRA. At the end of the CRA examination, the agency issues a written report describing its findings and containing one of four ratings: outstanding record of meeting community credit needs; satisfactory record; needs to improve; and substantial non-compliance. In addition to these periodic examinations, the federal banking agencies also evaluate certain bank expansion applications to ensure that the bank is capable of expanding and qualified to do so. One of the issues the agencies consider when a bank applies to expand its business is the bank’s CRA record. An agency may deny an application if a bank has a poor CRA record or condition approval on improved performance.


9. The CRA enforcement process is accessible to community advocates.
Members of the public are able to participate in the CRA enforcement process. Each of the federal banking agencies publishes a quarterly list of banks it is examining for CRA compliance and invites public input. When a bank files an expansion application covered by the CRA, the bank must file a newspaper notice of the application giving members of the public a chance to file written comments. Although the CRA enforcement process is legal in nature, formal legal training is not necessary to participate in the process.

3. Performance Tests and Evaluative Standards
The CRA regulations recognize three types of banks and establish different criteria for evaluating their CRA performance.31 First, retail banks with more than $250 million in assets ("large banks") are evaluated according to the lending, investment, and service tests. Second, retail banks with $250 million or less in assets ("small banks") are subject to the small bank performance test. Third, wholesale and limited purpose banks are evaluated according to the community development test. Finally, the CRA regulations permit any bank to elect to be evaluated for CRA compliance pursuant to a strategic plan.32 The new regulations exclude certain “special purpose banks” entirely from CRA responsibilities.33

Theres a lot of information there I suggest you read it.
http://www.frbsf.org/community/craresources/advocacy.pdf

 

[Toro]

You are wrong

Ten Important Things to Know About the CRA
1. The purpose of the CRA is to fight redlining and to increase bank lending in LMI neighborhoods.
Congress had two goals in mind when it passed the CRA in 1977.5 First, it saw the CRA as a way to fight bank “redlining,”or the outright refusal to lend in LMI, inner city, older, and predominantly minority neighborhoods. Second, it hoped that the CRA would result in more bank lending in such neighborhoods. As such, in order to comply with the CRA, it is not enough for a bank simply not to redline LMI neighborhoods. Instead, a bank must actually do something to meet the credit needs of LMI neighborhoods.
2. The CRA covers all banks whose deposits are insured by the Federal Deposit Insurance Corporation.
This includes foreign-owned banks, wholesale banks that do not have branches, internet banks, and other banks with a narrow purpose or limited business, as long as their deposits are insured by the FDIC. It
http://www.frbsf.org/community/craresources/advocacy.pdf

This is an advocacy document written in 2001. It establishes no causal relationship between the CRA and the Housing Bubble.

The federal banking agencies enforce the CRA by examining the CRA record of a bank, issuing a written report with a rating, and taking the bank’s CRA record into account when considering the bank’s application to expand its business.
As part of their regulatory function, the federal banking agencies periodically send examiners to a bank to determine whether it is in compliance with the banking laws, including the CRA. At the end of the CRA examination, the agency issues a written report describing its findings and containing one of four ratings: outstanding record of meeting community credit needs; satisfactory record; needs to improve; and substantial non-compliance. In addition to these periodic examinations, the federal banking agencies also evaluate certain bank expansion applications to ensure that the bank is capable of expanding and qualified to do so. One of the issues the agencies consider when a bank applies to expand its business is the bank’s CRA record. An agency may deny an application if a bank has a poor CRA record or condition approval on improved performance.


9. The CRA enforcement process is accessible to community advocates.
Members of the public are able to participate in the CRA enforcement process. Each of the federal banking agencies publishes a quarterly list of banks it is examining for CRA compliance and invites public input. When a bank files an expansion application covered by the CRA, the bank must file a newspaper notice of the application giving members of the public a chance to file written comments. Although the CRA enforcement process is legal in nature, formal legal training is not necessary to participate in the process.

3. Performance Tests and Evaluative Standards
The CRA regulations recognize three types of banks and establish different criteria for evaluating their CRA performance.31 First, retail banks with more than $250 million in assets ("large banks") are evaluated according to the lending, investment, and service tests. Second, retail banks with $250 million or less in assets ("small banks") are subject to the small bank performance test. Third, wholesale and limited purpose banks are evaluated according to the community development test. Finally, the CRA regulations permit any bank to elect to be evaluated for CRA compliance pursuant to a strategic plan.32 The new regulations exclude certain “special purpose banks” entirely from CRA responsibilities.33

Theres a lot of information there I suggest you read it.
http://www.frbsf.org/community/craresources/advocacy.pdf

What you are posting is a document on how the CRA is supposed to work, and how to make it work if it is not doing so. It is not evidence that the CRA caused the housing bubble.

 

[bigrebnc1775]

The CRA is a convenient boogeyman for those looking to blame the poor for our financial woes. It was however a catalyst that led to the re-vitalization of many formerly run down neighborhoods. I've seen this take place in New York City.

Really worked some magic here.

Really? This doesn't quite agree with you.
So what happened? Liberal politicians decided that everyone is entitled to be a homeowner. They saw people with bad credit being denied mortgages. They saw a disproportionate number of minorities being denied mortgages because a disproportionate number of minorities happen to have bad credit. They decided that bad credit is something people have little to no control over, even though poor people can have great credit if they keep their financial commitments and pay their bills on time. They concluded that the rich elite are discriminating against minorities and the poor to deny them their rights, and that something must be done.


That's why lenders have a big incentive to work with borrowers to help them stay in their homes and keep paying interest. In fact, last year there were 380,000 homeowners that lenders were fully justified in foreclosing on, but that they instead worked with so they could keep their homes. This was completely voluntary and without the government needing to intervene at all. That's the dirty little secret the democrats don't want you to know. They want you to be angry at the evil oppressive mortgage corporations cheating you out of your money and stealing your homes, so that you will vote them into office to protect and save you.

The Bielefeldt Papers: What's up with the economy, and what caused it?

 

[bigrebnc1775]

This is an advocacy document written in 2001. It establishes no causal relationship between the CRA and the Housing Bubble.

The federal banking agencies enforce the CRA by examining the CRA record of a bank, issuing a written report with a rating, and taking the bank’s CRA record into account when considering the bank’s application to expand its business.
As part of their regulatory function, the federal banking agencies periodically send examiners to a bank to determine whether it is in compliance with the banking laws, including the CRA. At the end of the CRA examination, the agency issues a written report describing its findings and containing one of four ratings: outstanding record of meeting community credit needs; satisfactory record; needs to improve; and substantial non-compliance. In addition to these periodic examinations, the federal banking agencies also evaluate certain bank expansion applications to ensure that the bank is capable of expanding and qualified to do so. One of the issues the agencies consider when a bank applies to expand its business is the bank’s CRA record. An agency may deny an application if a bank has a poor CRA record or condition approval on improved performance.


9. The CRA enforcement process is accessible to community advocates.
Members of the public are able to participate in the CRA enforcement process. Each of the federal banking agencies publishes a quarterly list of banks it is examining for CRA compliance and invites public input. When a bank files an expansion application covered by the CRA, the bank must file a newspaper notice of the application giving members of the public a chance to file written comments. Although the CRA enforcement process is legal in nature, formal legal training is not necessary to participate in the process.

3. Performance Tests and Evaluative Standards
The CRA regulations recognize three types of banks and establish different criteria for evaluating their CRA performance.31 First, retail banks with more than $250 million in assets ("large banks") are evaluated according to the lending, investment, and service tests. Second, retail banks with $250 million or less in assets ("small banks") are subject to the small bank performance test. Third, wholesale and limited purpose banks are evaluated according to the community development test. Finally, the CRA regulations permit any bank to elect to be evaluated for CRA compliance pursuant to a strategic plan.32 The new regulations exclude certain “special purpose banks” entirely from CRA responsibilities.33

Theres a lot of information there I suggest you read it.
http://www.frbsf.org/community/craresources/advocacy.pdf

What you are posting is a document on how the CRA is supposed to work, and how to make it work if it is not doing so. It is not evidence that the CRA caused the housing bubble.

What is the CRA, and what was it supposed to do?

 

[finebead]

You are wrong

Ten Important Things to Know About the CRA
1. The purpose of the CRA is to fight redlining and to increase bank lending in LMI neighborhoods.
Congress had two goals in mind when it passed the CRA in 1977.5 First, it saw the CRA as a way to fight bank “redlining,”or the outright refusal to lend in LMI, inner city, older, and predominantly minority neighborhoods. Second, it hoped that the CRA would result in more bank lending in such neighborhoods. As such, in order to comply with the CRA, it is not enough for a bank simply not to redline LMI neighborhoods. Instead, a bank must actually do something to meet the credit needs of LMI neighborhoods.
2. The CRA covers all banks whose deposits are insured by the Federal Deposit Insurance Corporation.
This includes foreign-owned banks, wholesale banks that do not have branches, internet banks, and other banks with a narrow purpose or limited business, as long as their deposits are insured by the FDIC. It
http://www.frbsf.org/community/craresources/advocacy.pdf

This is an advocacy document written in 2001. It establishes no causal relationship between the CRA and the Housing Bubble.

The federal banking agencies enforce the CRA by examining the CRA record of a bank, issuing a written report with a rating, and taking the bank’s CRA record into account when considering the bank’s application to expand its business.
As part of their regulatory function, the federal banking agencies periodically send examiners to a bank to determine whether it is in compliance with the banking laws, including the CRA. At the end of the CRA examination, the agency issues a written report describing its findings and containing one of four ratings: outstanding record of meeting community credit needs; satisfactory record; needs to improve; and substantial non-compliance. In addition to these periodic examinations, the federal banking agencies also evaluate certain bank expansion applications to ensure that the bank is capable of expanding and qualified to do so. One of the issues the agencies consider when a bank applies to expand its business is the bank’s CRA record. An agency may deny an application if a bank has a poor CRA record or condition approval on improved performance.


9. The CRA enforcement process is accessible to community advocates.
Members of the public are able to participate in the CRA enforcement process. Each of the federal banking agencies publishes a quarterly list of banks it is examining for CRA compliance and invites public input. When a bank files an expansion application covered by the CRA, the bank must file a newspaper notice of the application giving members of the public a chance to file written comments. Although the CRA enforcement process is legal in nature, formal legal training is not necessary to participate in the process.

3. Performance Tests and Evaluative Standards
The CRA regulations recognize three types of banks and establish different criteria for evaluating their CRA performance.31 First, retail banks with more than $250 million in assets ("large banks") are evaluated according to the lending, investment, and service tests. Second, retail banks with $250 million or less in assets ("small banks") are subject to the small bank performance test. Third, wholesale and limited purpose banks are evaluated according to the community development test. Finally, the CRA regulations permit any bank to elect to be evaluated for CRA compliance pursuant to a strategic plan.32 The new regulations exclude certain “special purpose banks” entirely from CRA responsibilities.33

Theres a lot of information there I suggest you read it.
http://www.frbsf.org/community/craresources/advocacy.pdf

You make my point for me very well. The CRA regulated BANKS, not mortgage companies.

The biggest issuers of subprime mortgages were "mortgage companies", and Countrywide Financial and New Century Financial were the two largest subprime issuers. They were NOT regulated by CRA in any way, nor were any of the other mortgage companies.

CRA was not the primary cause of the mortgage crisis.

 

[william the wie]

Back to reality.

The D HUD secretaries under Clinton signed and broadcast documents that sure read like a determination to vastly increase affordability of housing i. e. an announced intent to create a housing bubble that would eventually bust.

The means of doing this would be the CRA. IOW we the Dems say we created the means to force bubble creation and it is called CRA.

The Clinton administration climbed into the belly of the beast most noticeably Sec. of the Treasury Rubin and enticed the mortgage originators to party along with subprime, which addresses method.

Attacking a confession of intent, means, method and opportunity is hard to dismiss as blather when it all happens more or less as planned. Like the kid who sticks a knife in a wall socket the Ds were looking for stupid things and the truthful defense that they were too incompetent to pull it off just does not fly.

 

[boedicca]

The historical illiteracy / revisionism on the part of the Big Government types is quite thick in this thread.

Here's a reality check:

Of course, the new federal standards couldn’t just apply to minorities. If they could pay back loans under these terms, then so could the majority of loan applicants. Quickly, in other words, these became the new standards in the industry. In 1999, the New York Times reported that Fannie Mae and Freddie Mac were easing credit requirements for mortgages it purchased from lenders, and as the housing market boomed, banks embraced these new standards with a vengeance. Between 2004 and 2007, Fannie Mae and Freddie Mac became the biggest purchasers of subprime mortgages from all kinds of applicants, white and minority, and most of these loans were based on the lending standards promoted by the government.

RealClearMarkets - Articles - The Long Road to Slack Lending Standards


The one Root Cause of the Mortgage fueled financial bubble is Big Government Interference in private transactions. In order to compensate (bribe) the financial industry to comply with loosened lending standards, the Feds derisked them with taxpayer money via Fannie Mae and Freddie Mac.

 

[finebead]

The historical illiteracy / revisionism on the part of the Big Government types is quite thick in this thread.

Here's a reality check:

Of course, the new federal standards couldn’t just apply to minorities. If they could pay back loans under these terms, then so could the majority of loan applicants. Quickly, in other words, these became the new standards in the industry. In 1999, the New York Times reported that Fannie Mae and Freddie Mac were easing credit requirements for mortgages it purchased from lenders, and as the housing market boomed, banks embraced these new standards with a vengeance. Between 2004 and 2007, Fannie Mae and Freddie Mac became the biggest purchasers of subprime mortgages from all kinds of applicants, white and minority, and most of these loans were based on the lending standards promoted by the government.

RealClearMarkets - Articles - The Long Road to Slack Lending Standards


The one Root Cause of the Mortgage fueled financial bubble is Big Government Interference in private transactions. In order to compensate (bribe) the financial industry to comply with loosened lending standards, the Feds derisked them with taxpayer money via Fannie Mae and Freddie Mac.

I agree, and it was the republican HUD that controlled Fannie and Freddie from 2001-2008. The HUD secretary is a cabinet level post reporting to GWB at that time.

 

[edthecynic]

The following timeline of events is the TRUTH that caused the economic collapse.

7.Unqualified borrowers (low-income, bad credit, no down-payment) are suddenly made “qualified” by banks being blackmailed by our own government.

8.As these “unqualified” borrowers flood the market overnight buying houses, a rapid decrease in housing inventory begins inflating prices beyond normal ranges. Basic supply and demand principle.

Whenever a CON$ervative claims something is the "TRUTH" you can be sure it isn't!!!!!

Of course, conspicuous in its absence in your dishonest "time-line" is Bush's Dec 1993 ADDI, the actual law that made unqualified borrowers (low-income, bad credit, no down-payment) suddenly “qualified" and timed exactly with the beginning of the end of the real estate problem!!!

Bush's Dec 2003 American Dream Downpayment Initiative (ADDI) is what changed the rules to allow no downpayment loans for more than the house was worth to people with bad credit who could not keep up with the payments and who were at least 20% below the standard for the neighborhood.

Bush owns the housing crisis with his ADDI and every CON$ervative knows it!!!!!

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.


[ame]http://www.youtube.com/watch?v=kNqQx7sjoS8&feature=player_embedded[/ame]


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.

 

[bigrebnc1775]

prove it. your argument fails to hold water.

Read the thread It's been debunked.

I read the thread, and your post on page 7, your timeline is wrong. You assert that the banks were coerced by CRA to make loans they should not have made, but the banks were not the problem in this, the big problem was the fraudulent mortgage companies, and they were not under the CRA, because the CRA only pertained to "depositories", which is why your post is wrong.

You can't prove that CRA forced Countrywide to make loans that could not be repaid, because it DID NOT!

That is why your argument is wrong.

Three Ways The CRA Pushed Countrywide To Lower Lending Standards

1. The Creation Of Artificial Demand For Low-Income Mortgages

2. The Threat Of Regulation Is Often As Good As Regulation

3. The CRA Distorted the Mortgage Market.
Read more: Three Ways The CRA Pushed Countrywide To Lower Lending Standards

 

[bigrebnc1775]

the historical illiteracy / revisionism on the part of the big government types is quite thick in this thread.

Here's a reality check:

of course, the new federal standards couldn’t just apply to minorities. If they could pay back loans under these terms, then so could the majority of loan applicants. Quickly, in other words, these became the new standards in the industry. In 1999, the new york times reported that fannie mae and freddie mac were easing credit requirements for mortgages it purchased from lenders, and as the housing market boomed, banks embraced these new standards with a vengeance. between 2004 and 2007, fannie mae and freddie mac became the biggest purchasers of subprime mortgages from all kinds of applicants, white and minority, and most of these loans were based on the lending standards promoted by the government.

realclearmarkets - articles - the long road to slack lending standards


the one root cause of the mortgage fueled financial bubble is big government interference in private transactions. In order to compensate (bribe) the financial industry to comply with loosened lending standards, the feds derisked them with taxpayer money via fannie mae and freddie mac.

i agree, and it was the republican hud that controlled fannie and freddie from 2001-2008. The hud secretary is a cabinet level post reporting to gwb at that time.

you do mean from 2001 until 2006?

 

[finebead]

the historical illiteracy / revisionism on the part of the big government types is quite thick in this thread.

Here's a reality check:

of course, the new federal standards couldn’t just apply to minorities. If they could pay back loans under these terms, then so could the majority of loan applicants. Quickly, in other words, these became the new standards in the industry. In 1999, the new york times reported that fannie mae and freddie mac were easing credit requirements for mortgages it purchased from lenders, and as the housing market boomed, banks embraced these new standards with a vengeance. between 2004 and 2007, fannie mae and freddie mac became the biggest purchasers of subprime mortgages from all kinds of applicants, white and minority, and most of these loans were based on the lending standards promoted by the government.

realclearmarkets - articles - the long road to slack lending standards


the one root cause of the mortgage fueled financial bubble is big government interference in private transactions. In order to compensate (bribe) the financial industry to comply with loosened lending standards, the feds derisked them with taxpayer money via fannie mae and freddie mac.

i agree, and it was the republican hud that controlled fannie and freddie from 2001-2008. The hud secretary is a cabinet level post reporting to gwb at that time.

you do mean from 2001 until 2006?

No, I mean 2001 - 2008, which is how long GWB served as president, and HUD is a CABINET level post appointed by the president. Fannie and Freddie goals were set by HUD.