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RULES!!!!
Posted on 09/24/2008 3:00:44 PM PDT by Syncro
THEY GAVE YOUR MORTGAGE TO A LESS QUALIFIED MINORITY September 24, 2008
On MSNBC this week, Newsweek's Jonathan Alter tried to connect John McCain to the current financial disaster, saying: "If you remember the Keating Five scandal that (McCain) was a part of. ... He's really getting a free ride on the fact that he was in the middle of the last great financial scandal in our country."
McCain was "in the middle of" the Keating Five case in the sense that he was "exonerated." The lawyer for the Senate Ethics Committee wanted McCain removed from the investigation altogether, but, as The New York Times reported: "Sen. McCain was the only Republican embroiled in the affair, and Democrats on the panel would not release him."
So John McCain has been held hostage by both the Viet Cong and the Democrats.
Alter couldn't be expected to know that: As usual, he was lifting material directly from Kausfiles. What is unusual was that he was stealing a random thought sent in by Kausfiles' mother, who, the day before, had e-mailed: "It's time to bring up the Keating Five. Let McCain explain that scandal away."
The Senate Ethics Committee lawyer who investigated McCain already had explained that scandal away -- repeatedly. It was celebrated lawyer Robert Bennett, most famous for defending a certain horny hick president a few years ago.
In February this year, on Fox News' "Hannity and Colmes," Bennett said, for the eight billionth time:
"First, I should tell your listeners I'm a registered Democrat, so I'm not on (McCain's) side of a lot of issues. But I investigated John McCain for a year and a half, at least, when I was special counsel to the Senate Ethics Committee in the Keating Five. ... And if there is one thing I am absolutely confident of, it is John McCain is an honest man. I recommended to the Senate Ethics Committee that he be cut out of the case, that there was no evidence against him."
It's bad enough for Alter to be constantly ripping off Kausfiles. Now he's so devoid of his own ideas, he's ripping off the idle musings of Kausfiles' mother.
Even if McCain had been implicated in the Keating Five scandal -- and he wasn't -- that would still have absolutely nothing to do with the subprime mortgage crisis currently roiling the financial markets. This crisis was caused by political correctness being forced on the mortgage lending industry in the Clinton era.
RULES!!!!
“Liberals” are masters at this, which pretty much requires getting down into the hole that they are in.
Taking the high road in this sound-byte demagogue mass-media culture means lost elections.
Exactly why so many are incensed at conservatives these days, because there is plenty of blame to go around, and the citizenry deserves to know all the facts, not just the drive-by medias spin - and there is this silence. Come out swingin’, I say.
Brilliant piece!
“Wouldn’t be her first time in bed with a muslim.”
Thats a pretty ignorant thing to say. She is one of the loudest voices against those attacking our country.
Bravo for Annie. The Democrats have a huge vulnerability on this financial crisis, and conservative commentators have been slow to exploit it. Ann, as usual, is in the vanguard. The more timid will now feel safe to follow her lead.
Others did not share these economists' concerns. The Wall Street Journal quoted Congressman Barney Frank in 2003 as criticizing Greg Mankiw, chairman of President Bush's Council of Economic Advisers, "because he is worried about the tiny little matter of safety and soundness rather than ‘concern about housing.'"
The changes in underwriting standards were pushed to accomplish what many called a "noble goal" -- an increase in home ownership among poor and minority Americans -- but the changes created a time bomb that was set off as soon as property values began to decline. The new rules involved eliminating verification of income or assets, little assurance of the ability to pay the mortgage, and virtually eliminating down payments.
Making it possible for otherwise unqualified people to buy homes increased demand and increased the price of houses. As long as housing prices rose, the problems inherent in not requiring down payments or relaxing other standards were hidden. While prices rose, no one had to default. Instead, if someone was unable to pay the mortgage, the obvious option was to sell the house at a profit. As long as prices continued to rise, people could accurately claim that the new standards did not have an appreciably different default rate than the old standards.
The federal government gives all sorts of subsidies to encourage home ownership. The mortgage deductibility in the income tax is a big subsidy, but that is not the only one. The Federal Housing Administration guarantees mortgages against default. Subsidies given to Fannie Mae and Freddie Mac allow them to charge less in repackaging private mortgages that are then sold to financial institutions.
There are also subsidies to certain types of mortgages. The Community Reinvestment Act bans so-called "red lining" -- requiring banks to offer mortgages in the entire geographic area in which they operate, not just to do business in suburbs. Loans in profitable areas were then used to subsidize loans in areas where banks were losing money.
Yet, there was another major change that has gotten little attention. Back in 1992, a Boston Federal Reserve study claimed to find evidence of racial discrimination -- claiming that minorities got denied mortgages at higher rates than whites even after important factors such as creditworthiness were accounted for. The data used in the study were riddled with typos and other serious errors. For example, of the 3,000 mortgages studied, 50 of the loans supposedly had the banks paying interest to the borrowers, 500 of the mortgages were not even in the data set from which the data was supposedly obtained, and some mortgages were supposedly approved for individuals who had negative net worth in the millions of dollars. When those mistakes were corrected, no evidence of discrimination remained.
Professor Liebowitz told FOX News that Lawrence Lindsey, then a member of the Federal Reserve’s Board of Governors, "was warned about these errors in this study but the Fed ignored them."
The Boston Fed still used the study to produce a manual for mortgage lenders that said: "discrimination may be observed when a lender's underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower–income minority applicants."
So what were some of the "outdated" criteria?
Credit History: Lack of credit history should not be seen as a negative factor.... In reviewing past credit problems, lenders should be willing to consider extenuating circumstances. For lower–income applicants in particular, unforeseen expenses can have a disproportionate effect on an otherwise positive credit record. In these instances, paying off past bad debts or establishing a regular repayment schedule with creditors may demonstrate a willingness and ability to resolve debts....
Down Payment and Closing Costs: Accumulating enough savings to cover the various costs associated with a mortgage loan is often a significant barrier to homeownership by lower-income applicants. Lenders may wish to allow gifts, grants, or loans from relatives, nonprofit organizations, or municipal agencies to cover part of these costs. . . .
Sources of Income: In addition to primary employment income, Fannie Mae and Freddie Mac will accept the following as valid income sources: overtime and part–time work, second jobs (including seasonal work), retirement and Social Security income, alimony, child support, Veterans Administration (VA) benefits, welfare payments, and unemployment benefits.
Accepting these new criteria was hardly voluntary. The Fed warned the banks:
"Did You Know? Failure to comply with the Equal Credit Opportunity Act or Regulation B can subject a financial institution to civil liability for actual and punitive damages in individual or class actions. Liability for punitive damages can be as much as $10,000 in individual actions and the lesser of $500,000 or 1 percent of the creditor's net worth in class actions."
And mortgage lenders followed these rules. Liebowitz explained to FOXNews.com that these changing financial standards "encouraged speculation -- potential homeowners could gamble on the price of homes going up without using any of their own money. Remember, 25 percent of homes being purchased were purchased for speculation."
Others dispute Liebowitz's claim that these changes in rules mattered. For example, James Carr notes that it "may seem on paper that these are a curious thing to count [welfare and unemployment benefits] as income, but they simply didn't matter."
One lender singled out by Fannie Mae for special praise for following these new criteria was Countrywide:
Countrywide tends to follow the most flexible underwriting criteria permitted under [Government Sponsored Enterprises] and FHA guidelines. Because Fannie Mae and Freddie Mac tend to give their best lenders access to the most flexible underwriting criteria, Countrywide benefits from its status as one of the largest originators of mortgage loans and one of the largest participants in the [Government Sponsored Enterprises] programs. When necessary — in cases where applicants have no established credit history, for example — Countrywide uses nontraditional credit, a practice now accepted by the [Government Sponsored Enterprises].
Or take a 1998 sales pitch from Bear Stearns, which also followed the Boston Fed manual:
Credit scores. While credit scores can be an analytical tool with conforming loans, their effectiveness is limited with [Community Reinvestment Act] loans. Unfortunately, [Community Reinvestment Act] loans do not fit neatly into the standard credit score framework… Do we automatically exclude or severely discount … loans [with poor credit scores]? Absolutely not.
Given these lending practices mandated by the Fed and encouraged by Fannie Mae and Freddie Mac, the resulting financial problems for financial institutions such as Countrywide and Bear Stearns are not too surprising.
Liebowitz told FOX News that "such reckless behavior by [Fannie Mae and Freddie Mac] has lead to their financial meltdown and to the financial problems for the whole country. During Franklin Raines' chairmanship of Fannie Mae, they were a major proponent of relaxing standards."
John Lott is the author of Freedomnomics and a senior research scientist at the University of Maryland.
Sorry guys I tossed my Annie books when she started stumping for Hillary.
You need to keep your ideology, not your idols.
Coulter can go straight to mecca.
Ann is absolutely right on with this. I have been a Realtor for many, many years and I called this about five years ago. I have seen the standards and unethical practices conducted by mortgage underwriters and appraisers, many of which operate in dual capacity and have dual roles in these loans. The biggest culprits are these mega developer/builders. They will develop huge subdivisions, with flashy model homes that entice buyers to go for more than they can afford. When the buyers say they can’t afford it, they are then told that they can. They are qualified on the spot, using child support, dubious income records, and they are quoted and qualified on the lowest payment based on a variable rate that will grow consideribly. In addition, the payments are quoted with the lowest tax base. By the time the buyer is in the home for the third year, they have lost child support, there never was consistent part time work, the taxes are at least $300.00 more per month than quoted and the interest rate has gone up measurably. They have probably been given a second mortgage to make ends meet, based on appraisals that are at a minimum 120% of the value of the home. The payment swing is usually about $700.00 from the inception of the sale. Guess what, the same builder/developer is the builder, seller, mortgage company, title company and the apprasiers are far from independent. Does this sound like a conflict of interest to you? These are the people that the government needs to go after, they have destroyed the housing markets in just about every urban area with their lies, over-qualifications, and grossly overpriced housing.
Breathtakingly stupid post.
bookmark
She hits hard, but she’s right on the money. Food stamp-backed mortgages. Heh Heh...
And now the Dems AND the Republicans are blaming Wall Street and the financial system for " GREED?"
Greed about what? The banks thought they were dong the government a favor in solving a housing proplem for the underpriviliged, a Utopian wet dream. Their security is a massive portfolio of abandoned homes that are in forclosure, many of them smelling of the pi$$ and $hit of over numerous pets?Thats the realization of "GREED?"
What a laugh this is. The Banks and the financial system are not to blame. Utopian politicians trying to out do gooder each other to buy minority votes, and appear "kinder and gentler" is the real reason for this mess.
I support the conservative plan of suspending Capital Gains tax and drastically reducing corporate taxes. I do not support a 700 billion "assets purchase" in order to bail out a financial system that needs to divorce itself from affirmative action finanace, now and forever in the future. That lesson needs to be driven home to the financial system and to both the Democrat and Republican parties.
Alter = Such a little man.
“So John McCain has been held hostage by both the Viet Cong and the Democrats”.
Not much difference there anymore.
Well, it takes a little abstract thinking to get Ann. Some have the capacity, some do not.
Thanks FN. A little over three years ago, a then-coworker got married; she and her husband got their first-ever mortgage between the two of them; she quit her job; she then managed to cosign her father’s (I guess first) mortgage; her father defaulted on payments, and both mortgages were foreclosed; her husband, uh, lost his job.
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