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history lesson for the day...NYT style...circa 9/30/1999

Posted: Tue Mar 03, 2009 6:45 pm
by radbag
:o for whatever reason, the link to the article prevents me from posting...i can assure you that it comes direct from the NYTs

if you need it though, i can PM it



September 30, 1999
Fannie Mae Eases Credit To Aid Mortgage Lending

By STEVEN A. HOLMES
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration[/size] to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.[/size]

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''[/size]

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.[/size]

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

history lesson for the day...NYT style...circa 9/30/1999

Posted: Tue Mar 03, 2009 7:00 pm
by TheTodd
I think it was fairly common knowledge that Fannie Maes issue stemmed from policies set forth by the Clinton administration.

history lesson for the day...NYT style...circa 9/30/1999

Posted: Tue Mar 03, 2009 7:02 pm
by a1bion
Oh, Jesus, not this same stupid fucking argument yet again. You know as well as I do what caused the housing bubble and subsequent crash.

history lesson for the day...NYT style...circa 9/30/1999

Posted: Tue Mar 03, 2009 11:01 pm
by bluegrassg8r
Let me guess, A1, it was something only you can understand.

history lesson for the day...NYT style...circa 9/30/1999

Posted: Wed Mar 04, 2009 6:34 am
by a1bion
Let me guess, A1, it was something only you can understand.
Nope. It's something very easy to understand called greed. Even you would understand it. It's that simple.

history lesson for the day...NYT style...circa 9/30/1999

Posted: Wed Mar 04, 2009 2:20 pm
by MinGator
OK, I know I'm going to catch flak about this being a FoxNews clip, but the direct quotes can't be denied. Note Frank's comments starting at about 1:50 and specifically at around 2:10 were Frank insists that the government wouldn't have to bail them out if there were an issue.


http://www.youtube.com/watch?v=cMnSp4qEXNM#noexternalembed&NR=1#hq

Take it for what it's worth.

history lesson for the day...NYT style...circa 9/30/1999

Posted: Wed Mar 04, 2009 2:25 pm
by G8rMom7
^^^Buddy Hackett...is it me or he is long lost twin?

history lesson for the day...NYT style...circa 9/30/1999

Posted: Wed Mar 04, 2009 2:43 pm
by a1bion
At the height of the housing bubble, what percentage of the riskiest mortgages (subprime, Alt-A, Jumbos, HELOCs, NINJA loans, etc) were held by Fannie and what percentage were accounted for by Wall St firms who were securitizing the loans?

history lesson for the day...NYT style...circa 9/30/1999

Posted: Wed Mar 04, 2009 3:41 pm
by radbag
nothing to securitize if they weren't loans though josh.

history lesson for the day...NYT style...circa 9/30/1999

Posted: Wed Mar 04, 2009 4:04 pm
by a1bion
So are you saying that it was Fannie that took interest rates to 1% in an over-reaction to a short, mild response (basically free money)? Or are you saying that it was Fannie that was running boiler rooms the way firms like Countrywide, IndyMac, and Silverado were? Or are you saying that it was Fannie that created instruments like negative amortization and interest only loans? Or are you saying that it was Fannie that created the incentive structure in which mortgage brokers and Wall St sales desk could collect their fees up front on products that were intended to pay out over several years, thus skewing the risk/reward model? Surely, people wouldn't sell a thirty year product just with the intent to collect an upfront fee and then hightail it away.

You gotta be more specific here, Manny. You know I'm not smart enough to understand what you're driving at with a ten year old article.

history lesson for the day...NYT style...circa 9/30/1999

Posted: Wed Mar 04, 2009 6:24 pm
by radbag
i'm sayin, simply, that your argument that the 'masters of the universe' are entirely to blame is just not true.

FNMA, FHA, and all the rest of the gov't sponsored entities were loaning money to those who shouldn't have gotten it...and to AAs delight, it was the at-the-time administration who were encouraging this.

the 'masters' can't securitize something that aint there and shouldn't have been there to begin with...the 'masters' were not responsible for the screening process that SHOULD have been there...the MBS traders role was not to examine each and every pool of mortgage borrowers as to credit worthiness.

the 10 year old article is a reminder to those, a history lesson if you will, of who was really to blame here.

history lesson for the day...NYT style...circa 9/30/1999

Posted: Wed Mar 04, 2009 6:39 pm
by a1bion
Whoa, since when did Fannie start originating loans, dood? Last time I checked, they bought loans in the secondary markets and then securitized them. They did that for decades with no issues, since they only bought loans that met their standards. I seem to recall Angelo Mozilo getting pissed at them when they wouldn't buy Countrywide's shitty loans. Luckily for Angelo, the Masters of the Universe were there to buy his garbage.

I also seem to recall our old friend Hank Paulson trying to get the rules changed so that Fannie could buy jumbo backed loans from Paulson's old buddies. How'd that work out?

You gotta brush up on this stuff, Manny, or they're gonna take your 7 from you, buddy. :awesome: