Posted on 09/20/2008 4:12:48 PM PDT by Jim Robinson
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 to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
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.''
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.
''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.
September 30, 1999
Fannie Unveils ‘Timely Pay’ Mortgage
Fannie Mae has announced a new product aimed at borrowers with slightly impaired credit who do not qualify for a lower-cost conventional mortgage. Under the Timely Payment Rewards mortgage, borrowers who qualify will be able to obtain a mortgage rate as much as 2% lower than what credit-impaired borrowers typically pay, and will be guaranteed a mortgage rate reduction of 1% after 24 monthly payments without a delinquency. “Through dramatic improvements in our risk-assessment technology, which enables us to more precisely identify a borrower's risk of defaulting on his or her home, we can say ‘yes’ to more borrowers and extend our service to them at lower costs,” Fannie Mae chairman and CEO Franklin D. Raines said at a news conference. (Mr. Raines also announced a new Fannie Mae Foundation educational campaign to inform consumers about the role credit plays in the homebuying process.) Under the new program, a borrower with slightly impaired credit may be eligible for a 30-year, fixed-rate $100,000 mortgage at an initial interest rate of 9.5% and a monthly payment of $841, compared with an average interest rate of 11.5% and a monthly payment of $990 for a loan originated in the subprime market, Fannie Mae said.
I haven’t yet read through the thread, so I’m not sure if anyone pointed this out yet. While this may have begun in the Clinton Administration, Bush may a HUGE push in 2002 to see to it that lenders delivered on these mortgages and boy did they. This is, without a doubt, a bipartisan effort. IMO, and I’ve been saying all along, we are where we are today because of the pandering to illegal aliens who should NEVER have been given mortgages in the first place. The ‘powers that be’ pushed this on us, destroyed our economy, and now WE will be the ones to pick up the tab. And, I’m also not convinced yet that this hasn’t been part of a greater plan, via NAFTA, the bipartisan CFR, and Open Borders Lobby to see to it that Americans will more readily accept a North American Union and Amero as a solution, thus forwarding their agenda, when for most of us, the loss of our sovereignty would be unthinkable.
This is one of the most despicable speeches I’ve ever read.
The White House
For Immediate Release
Office of the Press Secretary
June 17, 2002
President Calls for Expanding Opportunities to Home Ownership
Remarks by the President on Homeownership
St. Paul AME Church
Atlanta, Georgia
THE PRESIDENT: Thank you all very much for that wonderful Atlanta welcome. It’s nice to be back in this incredibly important community.
You know, our nation faces a lot of huge challenges. Right now, we’ve got 60,000 troops fighting terrorism so that we can be free, all of us can be free. I appreciate so very much the resolve and unity and determination of this great land. I appreciate our military for their sacrifices. We’re also doing everything we can to secure the homeland, to make sure that those who hate us won’t take innocent life again.
President George W. Bush and new home owner Al Smith tour Pryor Road Corridor Development in Atlanta, Georgia, Monday, June 17. White House photo by Eric Draper. And as we work for a more secure world, we’ve got to work for a better world, too. (Applause.) And that means as we work on our security from possible attacks by terrorists, we also work on economic security. The two securities go hand in hand. Anybody who wants a job who can’t find one means we’ve got a problem. In Washington, they talk statistics all the time, and that’s important — people who count numbers need to make a living, too. (Laughter and applause.)
But my attitude is, if somebody can’t find work and they want to work, we’ve got to continue to work on expanding the job base. And part of economic security is owning your own home. (Applause.) Part of being a secure America is to encourage homeownership. So somebody can say, this is my home, welcome to my home.
Now, we’ve got a problem here in America that we have to address. Too many American families, too many minorities do not own a home. There is a home ownership gap in America. The difference between Anglo America and African American and Hispanic home ownership is too big. (Applause.) And we’ve got to focus the attention on this nation to address this.
And it starts with setting a goal. And so by the year 2010, we must increase minority home owners by at least 5.5 million. In order to close the homeownership gap, we’ve got to set a big goal for America, and focus our attention and resources on that goal. (Applause.)
And I picked a good man to help realize that goal, in Mel Martinez. I don’t know if you know Mel’s story, but — (applause) — it’s an interesting story. Mel was born in Cuba. (Applause.) Yes. Mel brought his cousins with him. (Laughter.) All two of them, anyway. (Laughter and applause.)
But Mel’s mother and daddy — Mel’s mother and dad put him on an airplane to come to America when he was a young boy, because they didn’t want his son growing up in a country that wasn’t free. Think about that, think about the courage of a mom or a dad, and their love for freedom — love freedom so much, they had put their child in the hands of loving Americans, and mom and dad eventually came. And here he now sits, as a member of the President’s Cabinet. What a great country we have. (Applause.)
My point is, Mel understands what it means to dream, and then to work to realize the dreams. I’ve also picked a fine friend of mine from Texas, named Alphonso Jackson, to serve as the Deputy of HUD. And where are you, Alphonso? There he is; I appreciate you. (Applause.) These are can-do people. So when we set a goal, they understand their job is to work toward that goal.
I also want to thank the Mayor of Atlanta, Georgia, Shirley Franklin, thank you for coming Madam Mayor. (Applause.) Much of the success of this program is going to depend — depends upon the ability for the federal government to work with state and local governments. And I know the Mayor has got a strong commitment to housing for all people, and to end the ownership gap. Madam Mayor, thanks for coming.
I appreciate as well Johnny Isakson and John Linder, members of the Georgia congressional delegation for coming today. Thank you all for being here. (Applause.) I want to thank Franklin Raines, of Fannie Mae and Leland Brendsel of Freddie Mac. Thank you all for coming. (Applause.)
Today I had the pleasure of seeing an entrepreneur’s work first-hand. An Atlanta citizen who also dreamt a dream, and that is to develop a piece of blighted property, so others could benefit from her vision and hard work. Masharn Wilson is here. (Applause.) She is a President and CEO — Masharn is the President and CEO of her own company. Part of the economic security is not only owning a home, part of it is if you have the entrepreneurial instincts is to own your own business, as well. (Applause.) So I want to appreciate you, Masharn. I appreciate your hard work.
And one other person I want to announce is a fellow named Darryl Hicks. Where are you, Darryl?
MR. HICKS: Right here.
THE PRESIDENT: There you are. Darryl Hicks is here. I want to — Darryl is — one of the things I remind our fellow citizens, if you’re interested in defeating evil, do some good. You see, we’re going to fight with our military, but we can also fight with our hearts. And a country which has been under attack can respond by loving your neighbor like you’d like to be loved yourself.
And this man right here is a fellow — Darryl Hicks — who works for Habitat for Humanity programs. He’s interested in lending his heart and his talents to helping a neighbor in need. America can be changed one heart, one soul, one conscience at a time, so long as we are willing to love a neighbor like we’d like to be loved ourselves. (Applause.)
I want to thank you, Darryl. I want to thank Darryl for being a soldier in the army of compassion. And I also want to thank Reverend Dr. Thomas Bess for opening up this beautiful church. You know, one of my passions is the faith-based initiative. It is important that Congress not fear faith-based programs, but welcome faith-based programs, so we can help change people’s lives. (Applause.)
I find it most interesting that we would be talking about how we help people in a church. After all, that’s why churches exist.
AUDIENCE: Mm-hmm.
THE PRESIDENT: And so I am — I want to thank the church staff for opening up this beautiful facility to the army which follows me around. (Laughter.)
I do believe in the American Dream. I believe there is such a thing as the American Dream. And I believe those of us who have been given positions of responsibility must do everything we can to spotlight the dream and to make sure the dream shines in all neighborhoods, all throughout our country. Owning a home is a part of that dream, it just is. Right here in America if you own your own home, you’re realizing the American Dream.
You know, today I went to the — to some of the home — met some of the homeowners in this newly built homes and all you’ve got to do is shake their hand and listen to their stories and watch the pride that they exhibit when they show you the kitchen and the stairs — so people like Ken Beatty, who is an environmentalist; or Al Smith, a probation officer; or Geary Jefferson a data base administrator; or Darrin West, an Atlanta police officer, Tamika Henry — Tomika Henry Cole.
These are all people that I’ve met; they’ve come over here today. They showed me their home. They didn’t show me somebody else’s home, they showed me their home. And they are so proud to own their home and I want to thank them for their hospitality, because it helps the American people really understand what it means.
And what we’ve got to do is to figure out how to make sure these stories are repeated over and over and over again in America. Three-quarters of white America owns their homes. Less than 50 percent of African Americans are part of the homeownership in America. And less than 50 percent of the Hispanics who live here in this country own their home. And that has got to change for the good of the country. It just does. (Applause.)
And so here are some of the ways to address the issue. First, the single greatest barrier to first time homeownership is a high downpayment. It is really hard for many, many, low income families to make the high downpayment. And so that’s why I propose and urge Congress to fully fund the American Dream Downpayment Fund. This will use money, taxpayers’ money to help a qualified, low income buyer make a downpayment. And that’s important.
One of the barriers to homeownership is the inability to make a downpayment. And if one of the goals is to increase homeownership, it makes sense to help people pay that downpayment. We believe that the amount of money in our budget, fully approved by Congress, will help 40,000 families every year realize the dream of owning a home. (Applause.) Part of the success of Park Place is that the city of Atlanta already does this. And we want to make the plan more robust. We want to make it more full all across America.
Secondly, there is a lack of affordable housing in certain neighborhoods. Too many neighborhoods, especially in inner city America, lack affordable housing units. How can you promote homeownership if people can’t afford a home?
And so what I’ve done is propose what we call a Single Family Affordable Housing Tax Credit, to encourage the development of affordable housing in neighborhoods where housing is scarce. (Applause.) Over five years, the initiative amounts to $2.4 billion in tax credits. And that will help. It will help a lot to build homes where people can — where when fully implemented, people will be able to say, I own my home.
A third major barrier is the complexity and difficulty of the home buying process. There’s a lot of fine print on these forms. And it bothers people, it makes them nervous. And so therefore, what Mel has agreed to do, and Alphonso Jackson has agreed to do is to streamline the process, make the rules simpler, so everybody understands what they are — makes the closing much less complicated.
We certainly don’t want there to be a fine print preventing people from owning their home. We can change the print, and we’ve got to. We’ve got to be wise about how we deal with the closing documents and all the regulations, but also wise about how we help people understand what it means to own their home and the obligations and the opportunities.
And so, therefore, education is a critical component of increasing ownership throughout America. Financial education, housing counseling, how to help people understand that there are unscrupulous lenders. And so one of the things we’re going to do is we’re going to promote education, the education of owning a home, the education of buying a home throughout our society. And we want to fully implement the Section 8 housing program, homeownership program. The program will provide vouchers that first-time home buyers can use to help pay their mortgage or apply to their downpayment.
Many of the partners today, many of the people here today, many of the business leaders here today are creating a market for the mortgages where Section 8 vouchers are a source of the payment. And that’s good — see, it’s an underpinning of capital. It helps move capital to where we want capital to go.
And so these are important initiatives that we can do at the federal government. And the federal government, obviously, has to play an important role, and we will. We will. I mean, when I lay out a goal, I mean it. But we also have got to bring others into the process, most particularly the real estate industry. After all, the real estate industry benefits when people are encouraged to buy homes. It’s in their self interest that we encourage people to buy homes. (Applause.)
And so one of the things that I’m going to talk about a little bit today is how to create a sustained commitment by the private sector that will have a powerful impact. First of all, we want to make sure that we help work to expand capital available to buyers, and as I mentioned, overcome the barriers that I’ve delineated, as well as provide the education component. In other words, this is not just a federal responsibility.
That’s why I’ve challenged the industry leaders all across the country to get after it for this goal, to stay focused, to make sure that we achieve a more secure America, by achieving the goal of 5.5 million new minority home owners. I call it America’s home ownership challenge.
And let me talk about some of the progress which we have made to date, as an example for others to follow. First of all, government sponsored corporations that help create our mortgage system — I introduced two of the leaders here today — they call those people Fannie May and Freddie Mac, as well as the federal home loan banks, will increase their commitment to minority markets by more than $440 billion. (Applause.) I want to thank Leland and Franklin for that commitment. It’s a commitment that conforms to their charters, as well, and also conforms to their hearts.
This means they will purchase more loans made by banks after Americans, Hispanics and other minorities, which will encourage homeownership. Freddie Mac will launch 25 initiatives to eliminate homeownership barriers. Under one of these, consumers with poor credit will be able to get a mortgage with an interest rate that automatically goes down after a period of consistent payments. (Applause.)
Fannie Mae will establish 100 partnerships with faith-based organizations that will provide home buyer education and help increase homeownership for their congregations. I love the partnership. (Applause.)
The Enterprise Foundation and the local initiative support corporation will increase efforts to build and rehabilitate more homes in inner cities at affordable prices by working with local community development corporations.
In my home state of Texas, Enterprise helped turn the once decaying ideal neighborhood of Dallas into a vibrant community, by building homes that were sold to residents at affordable prices. The National Association of Home Builders will team up with local officials, home builder associations and community groups in 20 of our nation’s largest housing markets, to focus on how to eliminate barriers, and encourage homeownership.
The Neighborhood Reinvestment Corporation will dramatically expand financial and home buyer education efforts to 380,000 minority families. The Neighborhood Housing Services of America will raise $750 million to promote homeownership initiatives in many communities. We’re beginning to use the Internet better, so that realtors all across the country will be able to call up programs all designed to help minority home buyers understand what’s available, what’s possible, and what to avoid. The National Realtors Association will create a central data bank of affordable housing programs, which will be made available to agents, real estate agents, to help people.
So these are some of the beginnings of a national effort. And I want to thank all those who are responsible for the organizations I just named for lending your talents to this important effort for America. You know, one of the things Presidents can do, is they can call the old conference. So I’m going to call one — (laughter) — just to make sure people understand, not only are we serious, but to let them check in. If they’ve signed up and said they’re going to help, this will give everybody a chance to say, here’s what I’ve done to help. It’s what we call accountability. (Applause.)
And so this fall, we’re going to have a White House conference. It is a White House conference specifically designed to address the homeownership gap. It is a White House conference that will not only say, what have you done to date, have you got any new ideas that we can share with others as well. I’m serious about this. This is a very important initiative for all of America. See, it is a chance for us to empower people. We’re not going to talk about empowering government, we’re talking about empowering people, so they have got choices over their lives. (Applause.)
I want to go back to where I started. I believe out of the evil done to America will come incredible good. I believe that as sure as I’m standing here. I believe we can achieve peace. I believe that we can address hopelessness and despair where hopelessness and despair exist. And listen, I understand that in this great country, there are too many people who say, this American Dream, what does that mean; my eyes are shut to the American Dream, I don’t see the dream. And we’d better make sure, for the good of the country, that the dream is vibrant and alive.
It starts with having great education systems for every single child. (Applause.) It means that we unleash the faith-based programs to help change people’s hearts, which will help change their lives. (Applause.) It means we use the mighty muscle of the federal government in combination with state and local governments to encourage owning your own home. That’s what that means. And it means — it means that each of us, each of us, have a responsibility in the great country to put something greater than ourselves — to promote something greater than ourselves.
And to me, that something greater than yourself is to love a neighbor like you’d like to be loved yourself. In order to change America and to make sure the great American Dream shines in every community, every community, we must unleash the compassion and kindness of the greatest nation on the face of the earth.
I’m honored to be here today. I want to thank you for your interest. God bless you all, and God bless America. (Applause.)
I can’t even read about this any more. My blood just boils.
Interesting this has not been buried. Where is Sandy Berger when you need him Bill?
(No link)
Fannie Mae , Freddie Mac fiscally sound, panel told
The Advocate (Baton Rouge, La.) - May 17, 2000
Author: JOAN McKINNEY
The chief executives who run Fannie Mae and Freddie Mac told Congress Tuesday that they’re meeting their mandate to make home ownership “affordable,” and that their enterprises are financially strong.
They said their operations are virtually collapse-proof and pose no risk to taxpayers.
The testimony came at a hearing of a U.S. House banking subcommittee, chaired by U.S. Rep. Richard Baker , R-Baton Rouge. Baker has proposed a regulatory overhaul of Fannie Mae , Freddie Mac and the Federal Home Loan Bank - also known as GSEs (or government-sponsored enterprises).
(snip)
Baker’s allies, mostly Republican subcommittee members, likened the situation to taxpayer exposures during the 1980s collapses of banks and thrifts, when government insurance funds were forced to pay off depositors.
(snip)
“There’s no conceivable default” under Fannie Mae’s current capital structure, Raines said. Even if the enterprise faced bankruptcy, its regulators would force a sell-off of assets, which are easily sold because they are, in essence, backed by equity in houses, Raines testified.
(No link)
Critics seek to curb power of Fannie Mae , Freddie Mac
Star-Ledger, The (Newark, NJ) - July 9, 2000
Author: Pamela Yip, DALLAS MORNING NEWS
EXCERPT
Too much influence, say critics who are seeking to curb the power of Fannie and Freddie. They say the companies have gotten too big and pose a serious risk if the economy gets into real trouble and the government has to bail them out.
One of the critics , U.S. Rep. Richard Baker (R-La.), is sponsoring legislation that would streamline oversight of Fannie Mae and Freddie Mac and remove what critics call their line of credit with the U.S. Treasury Department.
“I have long been a strong supporter of the mission that Fannie and Freddie were designed to fulfill,” said Baker, chairman of the House Banking Subcommittee on Capital Markets, Securities and Government-Sponsored Enterprises. “Clearly, American home ownership has benefited by the existence of a strong secondary mortgage market, and I would never support legislation that would weaken the secondary market.”
At the same time, he also wants to ensure that “taxpayers are not left to pay off the debt of these enterprises,” Baker said.
Fannie Mae and Freddie Mac issue debt to finance their purchases of mortgages from lenders.
“Keep in mind, any profits they make, they keep,” Baker said. “If there are any losses, taxpayers pay. Not a bad deal, wouldn’t you say?”
Baker’s bill, called the Housing Finance Regulatory Improvement Act, is scheduled for committee hearings. Baker said he doesn’t expect it to pass this year, although that could change if momentum picks up.
This is ground zero for the current banking/housing fiasco.
Thanks!
May 17, 2000
Looks like it, doesn’t it?
http://www.nationalmortgagenews.com/premium/archive/?ts=958579203
Fannie Slammed for Lobbying Tactics
Two Republican members of the House Banking Committee have slammed Fannie Mae for its lobbying tactics to stop a bill that would tighten federal oversight of government-sponsored enterprises and take away their lines of credit to the U.S. Treasury. Rep. Donald Manzullo, R-Ill., accused Fannie Mae of conducting a “bogus” grassroots lobbying campaign against the GSE bill sponsored by Rep. Richard Baker, R-La. The Illinois congressman said his office received 2,000 letters from constituents in his district who had been contacted by Fannie Mae and its newly formed Coalition for Homeownership to sign petitions in support of lowering the cost of homeownership and lowering mortgage interest rates. “Most of my constituents are upset that their good name had been used by your company,” Rep. Manzullo told Fannie Mae chairman Franklin D. Raines. “I am upset also. No one knew that a letter was being sent in their behalf on a specific piece of legislation.” Rep. John Sweeney, R-N.Y., also complained that he has been barraged with letters, mail-grams, and e-mails from Fannie Mae and the Coalition for Homeownership. Mr. Raines told the congressmen during a hearing Tuesday before the House Banking subcommittee on GSEs that Fannie Mae has a right to defend itself when the company is under “attack.” A Fannie Mae spokesman said the GSE is building a coalition of organizations and consumers to protect the housing finance system.
(No link)
Fannie, Freddie deny use of threats
The Washington Times - March 9, 2001
Author: BLOOMBERG NEWS
EXCERPTS
Fannie Mae and Freddie Mac threatened to pull business from several financial institutions as punishment for criticizing the government-sponsored mortgage companies, according to a group that lobbies against the agencies.
J.P. Morgan Chase & Co. and American International Group Inc. said they were threatened for their involvement in FM Watch, a group that pushes for more controls on Fannie Mae and Freddie Mac, the Wall Street Journal reported yesterday, citing financial industry executives. Fannie and Freddie own or guarantee more than 40 percent of the $5.5 trillion in U.S. home mortgages.
“Members of the FM Watch board of directors have been subject to attempts of intimidation and threats by both Fannie Mae and Freddie Mac,” said Gerald Friedman, FM Watch’s executive director.
“The message was the same: Stop supporting the activities of FM Watch or be prepared to see your business opportunities and products suffer.”
(snip)
Critics, led by Rep. Richard H. Baker , Louisiana Republican and a member of the House Financial Services Committee, have argued that Fannie Mae is growing too large and that, in the event of a financial slump, taxpayers could be on the hook to bail it out. Some banks are concerned that Fannie Mae will expand into their businesses, such as lending to consumers.
J.P. Morgan Chairman and Chief Executive William Harrison Jr. resigned from FM Watch’s board this week because of pressure from Fannie Mae and Freddie Mac, and the board disbanded, said Beneva Schulte, a spokeswoman for FM Watch.
(snip)
This also reminds me of the Clinton Justice Dept. The infamous Jamie Gorlick created the infamous “Wall” which prohibited any information sharing between the FBI and CIA. This was the smoking gun behind our inability to ‘catch’ some of the 911 terrorists, particularly Mohmamed Atta. So appropriate that Ms. Gorelick was also a Fannie Director who received huge Director fees for a long time too.
Defending Home Turf From Attack; Fannie Mae Is Facing Assault By House Panel and Business Rivals
By RICHARD W. STEVENSON
Published: April 22, 2000
EXCERPT
At a Banking Committee hearing earlier this month, Mr. Baker said he was concerned about the risks that government-sponsored enterprises would pose to the financial system in an economic downturn, and he compared the companies to Long-Term Capital Management, the giant hedge fund that rocked world markets when it nearly failed in 1998.
Even as he stressed that Fannie Mae and Freddie Mac were healthy and profitable, Mr. Baker said that to ignore ‘’the potential impact of a misstep’’ by one or both of the companies ‘’is to flirt with a potential disaster.’’
Should the government-sponsored housing companies continue to grow unchecked in size and influence, Mr. Baker told the hearing, the government might ultimately find itself on the hook for a bailout that would be financed out of ‘’your constituent’s wallet.’’
Fannie Mae quickly responded that the comparison to a high-risk hedge fund was ‘’unfounded,’’ and that the company exceeds all regulatory standards for financial strength.
Invoking the defense that his company has used successfully for years, David Jeffers, a spokesman for Fannie Mae, said that a proposal by Mr. Baker to tighten regulation of Fannie Mae and Freddie Mac ‘’is going nowhere because it is antihousing.’’
Hey Jim, scroll down here... covered:
http://astuteblogger.blogspot.com
PMI is generally required if the loan is for 80% or more of the VALUE of the house. However, back in 2005 and 2006 values were going up so quickly that even on no-money-down mortgages the PMI came off within a year.
My guess is that a lot of mortgage companies failed to put PMI back on when values dropped.
It is not for lack of regulation that lending institutions are in deep doo-doo, but rather too much "guidance" from such as HUD and its subordinate agencies, in a misguided attempt to make every American part of the "ownership society." This delusion is bipartisan, race-neutral and totally against every sound economic principle.
As Ludwig von Mises observed way before the welfare state became the American way of life, each government intervention has unintended consequences which eventually leads to a demand for more intervention. The first intervention was creation of the pseudo-private mortgage guarantee corporations, Fannie Mae and Freddie Mac, which all along have been run by political hacks. Now we see both Obama and McCain proposing additional regulations -- and new regulatory agencies to match -- in answer to the unfolding crisis.
The only lasting solution to the banking/real estate/debt morass we're in is for the government to butt the heck out of it and let the dominoes fall.
They also got around it with 80/20 loans.
You’d take the first loan for only 80% of the value. The 2nd loan would be at home equity loan rates for the remaining 20%. Neither of them triggered the PMI.
This is probably what should have been illegal. In this instance, no one is covered, and the whole point of collateral - that someone have a real interest in the house - is lost.
I do think that this is not a saving society, so asking 20% down would mean that many would not get homes. However, if you’ve got to sink 20-40 thousand of your own money into something, then you’re far more inclined to work like heck to pay that monthly payment.
This can also be really loused up by phony appraisals and by, as you pointed out, wildly speculative housing prices.
Jim, it is a sad place we are indeed.
With the rush that Bush has put on the bailout bill I fear we have already lost the battle against socialism in America.
We are bailing out worldwide investors who took a risk and lost.
No where do I hear Bush or others saying anyone will be prosecuted.
All who caused this mess will retire with millions of stolen dollars.
I fear for the Republic.
I see almost no way to stop the evil that has engulfed our nation.
Bush and Paulson should have stopped this long ago.
Now just may be too late.
President Bush tried, the commie Democrats killed it.
A September 11, 2003 New York Times article shows that President Bush proposed “the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.” His proposal: An agency within the Treasury Department to supervise mortgage giants Fannie Mae and Freddie Mac. Fearing that mortgages would no longer be available to people who were unable to pay them back, Democrats eventually killed the proposal. The current meltdown in the mortgage industry is a direct result of giving mortgages to people who could not pay them back, a practice protected by Congressional Democrats.
Here’s what I posted yesterday re the proposed bailout:
The “cure” appears to be worse than the disease. Let ‘em die. They’re rotten to the core anyway. We may suffer in the short term but we’ll survive and be stronger for it. Long live the Republic!
http://www.freerepublic.com/focus/news/2086601/posts?page=59#59
When all of this started a year ago then the Dems forced even more crap onto the backs of Fannie and Freddie. Now as the leaders all sit down there in DC working on this “Bailout” Bill for banks. The Dems can’t resist the temptation to add even more support of this nonsense into the bill.
I totally agree with you. I know it will be bad, it is coming no matter what. The longer we put it off then the worse it is going to be.
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