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Over at the Washington Post, in the comments section, "Brad" sums it up nicely
http://www.washingtonpost.com/ ^

Posted on 08/27/2010 7:06:17 AM PDT by cycle of discernment

"Brad" commnets:

Below is a brief history of why the housing bubble burst.

» 1977: Democrat Jimmy Carter signs the Community Reinvestment Act, guaranteeing home loans to low-income families.

» 1999: Democrat Bill Clinton puts the CRA on steroids by pushing Fannie Mae and Freddie Mac to increase the number of subprime loans.

» September 1999: The New York Times publishes an article headlined "Fannie Mae Eases Credit to Aid Mortgage Lending," which warned of the coming crisis due to lax lending policies of the Clinton administration.

» 2003: The White House calls Fannie and Freddie a "systemic risk" and the Republican Bush administration pushes Congress to enact new regulations.

» 2003: Rep. Barney Frank, D-Mass., says Fannie and Freddie are "not in a crisis," bashes Republicans for crying wolf and calls F&F "financially sound." Democrats block Republican-sponsored regulation legislation.

» 2005: Federal Reserve Chairman Alan Greenspan voices warning over F&F accounting, saying, "We are placing the total financial system of the future at a substantial risk."

» 2005: Sen. Charles Schumer, D-N.Y., says he thinks F&F "over the years have done an incredibly good job and are an intrinsic part of making America the best-housed people in the world."

» 2006: Sen. John McCain, R-Ariz., again calls for reform of the regulatory structure that governs F&F.

» 2006: Democrats again block reform legislation.

» 2008: The housing market collapses; Democrats blame the Republicans.

(Excerpt) Read more at washingtonpost.com ...


TOPICS: Business/Economy; Government; Politics/Elections
KEYWORDS: cra; fanniemae; freddiemac; housingbubble
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To: Lurker
Right -- but now take it one step further.

When interest rates fall, the banking industry deals with billions of dollars in refinancing at lower rates -- but they're still obligated to pay higher long-term rates on term deposits. A bank that must cast mortgages at 5% while paying out 6% on long-term certificates of deposit isn't going to stay in business very long.

This is precisely why banks have run into so much trouble in recent decades (the S&L crisis of the 1980s being a good example of this) during periods of falling interest rates. When rates decline and large numbers of people refinance their mortgages, the banks that held the original mortgages do (as you said) get lump-sum cash payments representing the outstanding balances on those mortgages. But they are getting this cash at a time when interest rates -- and therefore investment returns on this money -- are LOWER than they had been before.

This is why the banking industry has been resorting to all kinds of other sources of revenue -- including credit card interest rates, late fees, overdraft fees, etc. -- when interest rates are low.

61 posted on 08/27/2010 11:27:35 AM PDT by Alberta's Child ("Let the Eastern bastards freeze in the dark.")
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To: Lurker

I would imagine this is why it’s so hard to pay off stuff because everything is frontloaded with loan shark interest rates.


62 posted on 08/27/2010 11:31:04 AM PDT by freekitty (Give me back my conservative vote; then find me a real conservative to vote for)
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To: cycle of discernment

Don’t forget that it was Obama who was one of the lawyers who filed the law suit to force banks to make some of those loans.


63 posted on 08/27/2010 11:35:53 AM PDT by CynicalBear
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To: freekitty
because everything is frontloaded with loan shark interest rates.

If you consider 4-3/4% loan shark rates I suppose so. Of course you could always do the Mortgage Ladder technique and end up paying off your loan in half the time and save literally tens of thousands on interest.

64 posted on 08/27/2010 12:21:03 PM PDT by Lurker (The avalanche has begun. The pebbles no longer have a vote.)
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To: cycle of discernment

Want to know what caused the mortgage meltdown? Read “The Big Short” by Michael Lewis.


65 posted on 08/27/2010 12:23:17 PM PDT by Non-Sequitur
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To: Lurker

I pay cash.


66 posted on 08/27/2010 12:37:39 PM PDT by freekitty (Give me back my conservative vote; then find me a real conservative to vote for)
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To: Lurker

If I don’t have the cash, I don’t buy. No interest at all. Problem solved.


67 posted on 08/27/2010 12:38:47 PM PDT by freekitty (Give me back my conservative vote; then find me a real conservative to vote for)
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To: freekitty
I pay cash.

A very wise policy that. Unfortunately we weren't able to come up with 90K in cash when we bought our home.

68 posted on 08/27/2010 12:40:48 PM PDT by Lurker (The avalanche has begun. The pebbles no longer have a vote.)
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To: aflaak

ping


69 posted on 08/27/2010 1:53:48 PM PDT by r-q-tek86 ("It doesn't matter how smart you are if you don't stop and think" - Dr. Sowell)
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To: Rennes Templar
"Why the GOP hasn’t been shouting this from the rooftops is beyond me."

Because that would require being aggressive. The GOP is not familiar with the concept.

70 posted on 08/27/2010 4:15:55 PM PDT by mlo
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To: cycle of discernment

Well written, succinct, and to the point! As such, it will either be ignored, or attacked, by libs.


71 posted on 08/27/2010 11:20:53 PM PDT by SuziQ
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To: sailor4321
Because when the controlled both the White House and both houses of Congress they failed to change it

That's because in the committee that would have passed it on to the floor for a vote, the Democrats voted as a bloc against the reining in of Fannie and Freddie. In addition, after an ACORN sponsored rent-a-mob invaded the hearing, yelling and screaming, a couple of RINOS on the committee went along with the Dems, and the changes died before they ever made it to a vote of the full body.

72 posted on 08/27/2010 11:23:53 PM PDT by SuziQ
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To: MrB

In one of his SOTU speeches, Buch bragged about increasing the percentage of home ownership.


73 posted on 08/27/2010 11:46:12 PM PDT by whence911 (Here illegally? Go home. Get in line!)
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To: cycle of discernment

Excellent!
Bookmarked.


74 posted on 08/27/2010 11:50:22 PM PDT by Lancey Howard
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