Posted on 09/30/2008 6:55:09 AM PDT by RDasher
Nice work!
The legal term is 'illegal alien'. 'Illegal immigrant' is the PC term used by democrats or other criminal-coddlers. There's a reason why illegal aliens were not allowed into the US banking and financial system before 2001.
Fannie Mae and Freddie Mac set money aside every year, long before Bush became president, to help low income citizens get loans. This $440 billion is simply the amount that would be set aside over these particular years 2005 - 2009. This was not additional money for Bush's zero down Dream program.
Citizens. Not illegal aliens.
I never said the $440 billion was a part of Bush's American Dream Downpayment Fund. Bush's American Dream Downpayment Fund was a separate appropriation of up to $200 million dollars per year between FY2004 and FY2007 for a total of $800 million. IOW, it was in addition to the $440 billion Bush called for in 2002.
The crisis we now have is a result of plummeting property values, not just sub prime interest rate loans. Property values have never gone down before.
Did all property values across the country drop by the same amount? If not, then which areas did the values drop the most? Why did these areas drop in value?
Any losses that can be attributed to Bush, specifically, can only be attributed to minorities who were helped by his specific HUD Dream program.
Do you have a source for this assertion and exactly which minority groups you're describing and in which areas of the country this occurred?
If oversight regulations were put into place as Bush wanted, there wouldn't be all these defaults and none of these loans to illegals.
The Republicans have been in charge of the government for most of Bush's time in office. Do you have any links to actions the Republican-controlled House and Senate took to implement Bush's wishes?
Even if the Repubicans were blocked by the Democrats, there still should be some proof of what they tried to do, right?
As I have said many times, I believe both the democraps and Bush are equally responsible.
It is you who has insisted that Bush is blameless and that the full responsibility for this mess rests on the Democraps in Congres.
I guess neither of us needs to prove that Bush repeatedly asked Congress to do something.
Why did the Republicans in Congress ignore Bush's warnings, even while they were the majority party?
I never said he is blameless. I have said he deserves credit for asking for reform.
Many Republicans worked for reform.
I'm sure some Democrats may have wanted reform. I'm just not aware of his/their name/names.
Who did what and when?
For what does Bush deserve blame?
For expressing irrational exuberance that all Americans could own houses.
The Senate Banking Committee, then under Republican control, adopted much stronger legislation in 2005, but unanimous Democratic opposition to the bill in the committee doomed it when it reached the floor.Without any significant Democratic support, debate could not be ended in the Senate, and the bill was never brought up for a vote.
This was a crucial missed opportunity.
The bill prohibited the GSEs from holding portfolios of mortgages and mortgage-backed securities (MBS); that measure alone would have prevented the disastrous investment activities of the GSEs in the years that followed.
You could have found this out on your own, IF you REALLY cared to learn the truth.
This article shows that Fannie Mae's "American Dream" program began in 2000, not 2004. So it was not Bush's "American Dream" program. It was Clinton's and Fannie Mae's.
In spring 2000 Fannie Mae pledged 2 trillion over several years for minorities and low income people. The goal was to get 5 million more minorities into homes. By 2004, Fannie Mae had already lent out the whole 2 trillion dollars - about 6 years ahead of time. So they had to pledge more money to the program. This is the $440 billion Bush seems to be taking credit for.
All Bush ever did was take half of HUD's regular yearly budget and give half of it to his zero down "American Dream" program. This cost 200 million a year and only 6% default. He stopped his program in July 2007 but a bipartisan congress wants to vote it back in. He had nothing to do with the lending crisis. Congress approved his budget for this.
http://fhaloanadvice.com/h.-r.-6694-passes-out-of-committee/
The republican bill to oversee Fannie Mae took 4 years to pass congress, senate, president. It finally passed in 2007 only because there was a crisis.
Someone at YouTube nicknamed this scandal
Thanks for providing the infomation!
Ah, so that's why Bush met with Vicente Fox 3 weeks after his inauguration to discuss the terms of the Partnership for Prosperity Agreement (with Mexico) and signed it 7 months later, changed the banking rules to allow Mexican Matricula Consular ID cards and formed the New Alliance Task Force.
To help Americans own houses. Ri-ight...
You asked. I answered. :-)
at the intersection of Congress and Fannie Mae ....you will find......the DEMron Scandal.
Thanks for the link. I'd read this article earlier, but have read so many since, I'd forgotten about it.
The Senate Banking Committee, then under Republican control, adopted much stronger legislation in 2005, but unanimous Democratic opposition to the bill in the committee doomed it when it reached the floor.
First, as I have consistently said, both Bush and Congress are equally to blame for this mess. BTW, where is the blame in this article for what Clinton did with the CRA? ;)
Second, democrats attempting to hold on to their power over Fannie and Freddie is not what caused the mess. That is Bush spin designed to conceal his culpability in this mess, as I have been saying all along.
Fannie and Freddie reaped significant benefits from the careful management of their political risk. In June 2003, in the wake of the failures of Enron and WorldCom, Freddie's board of directors suddenly dismissed its three top officers and announced that the company's accountants had found serious problems in Freddie's financial reports. In 2004, after a forensic audit by OFHEO, even more serious accounting manipulation was found at Fannie, and Raines, its chairman, and Timothy Howard, its chief financial officer, were compelled to resign. ...
Nevertheless, the GSEs' problems were mounting quickly. The accounting scandal, although contained well below the level of the Enron story, gave ammunition to GSE critics inside and outside of Congress. Alan Greenspan, who in his earlier years as Federal Reserve chairman had avoided direct criticism of the GSEs, began to cite the risks associated with their activities in his congressional testimony. In a hearing before the Senate Banking Committee in February 2004, Greenspan noted for the first time that they could have serious adverse consequences for the economy. Referring to the management of interest rate risk--a key risk associated with holding portfolios of mortgages or MBS--he said:
"To manage this risk with little capital requires a conceptually sophisticated hedging framework. In essence, the current system depends on the risk managers at Fannie and Freddie to do everything just right, rather than depending on a market-based system supported by the risk assessments and management capabilities of many participants with different views and different strategies for hedging risks."
Then, and again for the first time, Greenspan proposed placing some limit on the size of the GSEs' portfolios. Greenspan's initial idea, later followed by more explicit proposals for numerical limits, was to restrict the GSEs' issuance of debt. Although he did not call for an outright reduction in the size of the portfolios, limiting the issuance of debt amounts to the same thing. If the GSEs could not issue debt beyond a certain amount, they also could not accumulate portfolios. Greenspan noted:
"Most of the concerns associated with systemic risks flow from the size of the balance sheets that these GSEs maintain. One way Congress could constrain the size of these balance sheets is to alter the composition of Fannie and Freddie's mortgage financing by limiting the dollar amount of their debt relative to the dollar amount of mortgages securitized and held by other investors. . . . [T]his approach would continue to expand the depth and liquidity of mortgage markets through mortgage securitization but would remove most of the potential systemic risks associated with these GSEs."
This statement must have caused considerable concern to Fannie and Freddie. Most of their profits came from issuing debt at low rates of interest and holding portfolios of mortgages and MBS with high yields. This was a highly lucrative arrangement; limiting their debt issuance would have had a significant adverse effect on their profitability.
In addition, in January 2005, only a few months after the adverse OFHEO report on Fannie's accounting manipu-lation, three Federal Reserve economists published a study that cast doubt on whether the GSEs' activities had any significant effect on mortgage interest rates and concluded further that holding portfolios--a far risker activity than issuing MBS--did not have any greater effect on interest rates than securitization: "We find that both portfolio purchases and MBS issuance have negligible effects on mortgage rate spreads and that purchases are not any more effective than securitization at reducing mortgage interest rate spreads."[11] Thus, the taxpayer risks cited by Greenspan could not be justified by citing lower mortgage rates, and, worse, there was a strong case for limiting the GSEs to securitization activities alone--a much less profitable activity than issuing MBS. ...
Affordable housing loans and subprime loans are not synonymous. Affordable housing loans can be traditional prime loans with adequate down payments, fixed rates, and an established and adequate borrower credit history. In trying to increase their commitment to affordable housing, however, the GSEs abandoned these standards. In 1995, HUD, the cabinet-level agency responsible for issuing regulations on the GSEs' affordable housing obligations, had ruled that the GSEs could get affordable housing credit for purchasing subprime loans. Unfortunately, the agency failed to require that these loans conform to good lending practices, and OFHEO did not have the staff or the authority to monitor their purchases. The assistant HUD secretary at the time, William Apgar, later told the Washington Post that "[i]t was a mistake. In hindsight, I would have done it differently." Allen Fishbein, his adviser, noted that Fannie and Freddie "chose not to put the brakes on this dangerous lending when they should have."[13] Far from it. In 1998, Fannie Mae announced a 97 percent loan-to-value mortgage, and, in 2001, it offered a program that involved mortgages with no down payment at all. As a result, in 2004, when Fannie and Freddie began to increase significantly their commitment to affordable housing loans, they found it easy to stimulate production in the private sector by letting it be known in the market that they would gladly accept loans that would otherwise be considered subprime. ...
One of the sources of Krugman's confusion may have been Fannie and Freddie's strange accounting conventions relating to subprime loans. There are many definitions of a subprime loan, but the definition used by U.S. bank regulators is any loan to a borrower with damaged credit, including such objective criteria as a FICO credit score lower than 660.[15] In their public reports, the GSEs use their own definitions, which purposely and significantly understate their commitment to subprime loans--the mortgages with the most political freight. For example, they disclose the principal amount of loans with FICO scores of less than 620, leaving the reader to guess how many loans fall into the category of subprime because they have FICO scores of less than 660. In these reports, too, Alt-A loans--which include loans with little or no income or other documentation and other deficiencies--are differentiated from subprime loans, again reducing the size of the apparent GSE commitment to the subprime category. These distinctions, however, are not very important from the perspective of realized losses in the subprime and Alt-A categories; loss rates are quite similar for both, even though they are labeled differently. In its June 30, 2008, Investor Summary report, Fannie notes that credit losses on its Alt-A portfolio were 49.6 percent of all the credit losses on its $2.7 trillion single-family loan book of business.[16] Fannie's disclosures indicate that when all subprime loans (including Alt-A) are aggregated, at least 85 percent of its losses are related to its holdings of both subprime and Alt-A loans. They are all properly characterized as "junk loans." ...
Beginning in 2004, after the GSEs' accounting scandals, the junk loan share of all mortgages in the United States began to rise, going from 8 percent in 2003 to about 18 percent in 2004 and peaking at about 22 percent in the third quarter of 2006. It is likely that this huge increase in commitments to junk lending was largely the result of signals from Fannie and Freddie that they were ready to buy these loans in bulk. For example, in speeches to the Mortgage Bankers Association in 2004, both Raines and Richard Syron--the chairmen, respectively, of Fannie and Freddie--"made no bones about their interest in buying loans made to borrowers formerly considered the province of nonprime and other niche lenders."[17] Raines is quoted as saying, "We have to push products and opportunities to people who have lesser credit quality."
There are few data available publicly on the dollar amount of junk loans held by the GSEs in 2004, but according to their own reports, GSE purchases of these mortgages and MBS increased substantially between 2005 and 2007. Subprime and Alt-A purchases during this period were a higher share of total purchases than in previous years. For example, Fannie reported that mortgages and MBS of all types originated in 2005–2007 comprised 49.8 percent of its overall book of single-family mortgages, which includes both mortgages and MBS retained in their portfolio as well as mortgages they securitized and guaranteed. But the percentage of mortgages with subprime characteristics purchased during this period consistently exceeded 49.8 percent, demonstrating that Fannie was substantially increasing its reliance on junk loans between 2005 and 2007. For example, in its 10-Q Investor Summary report for the quarter ended June 30, 2008, Fannie reported that mortgages with subprime characteristics comprised substantial percentages of all 2005–2007 mortgages the company acquired, as shown in table 1. Based on these figures, it is likely that as much as 40 percent of the mortgages that Fannie Mae added to its single-family book of business during 2005–2007 were junk loans.
If we add up all these categories and eliminate double counting, it appears that on June 30, 2008, Fannie held or had guaranteed subprime and Alt-A loans with an unpaid principal balance of $553 billion. In addition, according to the same Fannie report, the company also held $29.5 billion of Alt-A loans and $36.3 billion of subprime loans that it had purchased as private label securities (non-GSE or Ginnie Mae securities).[18] These figures amount to a grand total of $619 billion--approximately 23 percent of Fannie's book of single-family business on June 30, 2008--and reflect a huge commitment to the purchase of mortgages of questionable quality between 2005 and 2007.
Freddie Mac also published a report on its subprime and Alt-A mortgage exposures as of August 2008. Freddie's numbers were not as detailed as Fannie's, but the company reported that 52 percent of its entire single-family credit guarantee portfolio was from book years 2005–2007 (slightly more than Fannie) and that these mortgages had subprime characteristics, as shown in table 2. Based on these figures, it appears that as much as 40 percent of the loans that Freddie Mac added to its book of single-family mortgage business during 2005–2007 also consisted of junk loans.
Freddie's disclosures did not contain enough detail to eliminate all of the double counting, so it is not possible to estimate the total amount of its subprime loans from the information it reported. Nevertheless, we can calculate the minimum amount of Freddie's exposure. In the same report, Freddie disclosed that $190 billion of its loans were categorized as Alt-A and $68 billion had FICO credit scores of less than 620, so that they would clearly be categorized as subprime. Based on the limited information Freddie supplied, double counting of $7.6 billion can be eliminated, so that as of August 2008, Freddie held or had guaranteed at least $258 billion of junk loans. To this must be added $134 billion of subprime and Alt-A loans that Freddie purchased from private label issuers,[19] for a grand total of $392 billion--20 percent of Freddie's single-family portfolio of $1.8 trillion. ...
Why did the GSEs follow this disastrous course? One explanation--advanced by Lockhart--is that Fannie and Freddie were competing for market share with the private label securitizers and had to purchase substantial amounts of subprime mortgages in order to retain their position in a growing market. Fannie and Freddie's explanation is that they were the victims of excessively stringent HUD affordable housing goals. Neither of these explanations is plausible. For many years before 2004, Fannie and Freddie had followed relatively prudent investment strategies, even with respect to affordable housing, but they suddenly changed their approach in 2005. Freddie Mac's report, for example, shows that the percentage of mortgages in its portfolio with subprime characteristics rose rapidly after 2004. In addition, Freddie Mac's disclosures indicate that of the loans added to its portfolio of single-family loans between 2005 and 2007, 97 percent were interest-only mortgages, 85 percent were Alt-A, 72 percent were negative amortization loans, 67 percent had FICO scores lower than 620, and 68 percent had original loan-to-value ratios greater than 90 percent. It seems unlikely that competing for market share or complying with HUD regulations--which contained no enforcement mechanism other than disclosure and delay in approving requests for mission expansions--could be the reason for such an obviously destructive course.
According to this article, 'For many years before 2004, Fannie and Freddie followed relatively prudent investment strategies even with respect to affordable housing, but they suddenly changed their approach in 2005.'
So, you can bury your head in the sand and say that the problems over at Fannie and Freddie were cause by democrats blocking Bush's attempts at 'meaningful reform' or blame what Clinton did or the CRA slush fund, but the reality shows that the subprime meltdown was mostly related to Bush's policies and actions to bring Mexican illegal aliens into the US banking and financial system, specifically, home loans.
Thanks for the link. It is a most interesting article that gives a significant amount of background behind what Bush said in 2002.
I think that's a different beastie. According to Bush's 2002 speech, or at least the way I read it, Bush proposed a new "American Dream Downpayment Fund."
"...And so that's why I propose and urge Congress to fully fund the American Dream Downpayment Fund..."
Bush signed the American Dream Downpayment Act into law on December 16, 2003.
All Bush ever did was take half of HUD's regular yearly budget and give half of it to his zero down "American Dream" program. This cost 200 million a year and only 6% default. He stopped his program in July 2007 but a bipartisan congress wants to vote it back in. He had nothing to do with the lending crisis. Congress approved his budget for this.
Then again, it may be that he's just taking credit for legislation/changes that were already in the pipeline as many of the things in this article are also a part of his 2002 speech.
For example:
"In 2000, Fannie Mae launched several new mortgage products, processes and partnerships to help the mortgage finance system deliver low-cost mortgage credit, on flexible terms, to people and places outside the mainstream," Raines reported. "We are widening the mainstream - lifting more boats - with very low down payment loans, special community lending products for financial institutions, targeted investments in urban renewal plans, cooperative arrangements with faith-based organizations and other affinity groups, and accelerating our investment in affordable rental housing."
The National Minority Homeownership Initiative
Fannie Mae has challenged the public and private sectors to join in setting a national goal of creating five million new minority homeowners by 2010. Through the American Dream Commitment's National Minority Homeownership Initiative, Fannie Mae has committed to contribute at least $420 billion in mortgage investments to serve more than three million minority households over the decade.
And,
-- Fannie Mae launched the "Welcome Initiative: A New Home in a New Country," a comprehensive bilingual marketing campaign to help our lenders address the needs of immigrant borrowers nationwide. Through this effort, lenders have been able to offer immigrant families a Fannie Mae mortgage with small down payments, knocking down a major obstacle to homeownership. A total of $111 million in loans was made to immigrant families under this initiative in 2000.
And,
-- The "Casa" Channel. Fannie Mae, together with the online subsidiary of Univision Communications and Countrywide Home Loans, Inc. launched the "Casa" channel on Univision.com. Casa is the first online Spanish-language resource for home buying and homeownership. Casa was created to help increase the homeownership rate among the nation's 33 million Hispanics by providing the necessary home buying information, tools, and the ability to apply for a loan from Countrywide online.
If Fannie was already making home loans to 'immigrants', then I don't understand why the changes to banking system to allow Mexican Matricula Consular card to be used as ID were necessary, or even mentioned in the USA PATRIOT Act.
Also, giving 111 million per year over a 10-year period only totals 1.11 billion and Fannie was talking about expanding this to $420 billion over ten years.
The only reasonable explanation I can think of is that these loans (" A total of $111 million in loans was made to immigrant families under this initiative in 2000") was made to resident aliens and the banks wanted to expand into the illegal alien market.
That is clearly what is said in the FDIC's own web page about the P4P and NATF. (See: Partnership for Prosperity)
The most significant recent waves of immigrants to this country, according to the 2000 Census, are from Latin American countries. This group's purchasing power is expected to almost double from $491 billion in 2000 to $926 billion by 2007.1 The international remittance market, particularly in Latin America and the Caribbean, also is expected to grow considerably. Billions of dollars are flowing from the United States to Mexico and other countries, and a significant share of these transactions is taking place outside the formal banking system.
These impressive numbers provide a compelling incentive for U.S. banks to enter this largely untapped market. Studies show that as many as 10 million households in the United States are "unbanked" (without access to mainstream bank products and services) and a significant number of these unbanked households are Latino immigrants. This article focuses on the size and economic potential of the Latino immigrant market, the innovative approaches that some banks are using to capture this new customer base, and key risks and regulatory issues that banks should consider in offering remittance products.
...
In addition, a growing number of U.S. banks accept alternative forms of identification to help taxpaying immigrants open bank accounts and secure other banking services; these include the Individual Taxpayer Identification Number (ITIN) and foreign government issued identification, such as the Mexican Matricula Consular card. The USA PATRIOT Act allows financial institutions to accept both forms of identification, enabling insured financial institutions to serve unbanked immigrants who live and work in the United States.
...
Recent economic and demographic trends, coupled with increased financial flows across international borders, have significant implications for U.S. banks and thrifts. As more insured financial institutions reach out to the Latino immigrant market, these institutions are expected to experience more rapid deposit and loan growth. In the Midwest, both small and large banks are capitalizing on remittance flows as a short-term strategy to draw immigrants into the formal banking system. Leveraging these relationships will help these institutions offer a broader range of financial services, positively contributing to their bottom line.
Many Latino immigrants will eventually settle in the United States and raise families. Banks in the Midwest are taking steps to capitalize on the growing presence of this immigrant group. The continued success of the New Alliance Task Force demonstrates that unbanked Latin American immigrants can be brought into the financial mainstream. As a result, the FDIC is considering the feasibility of expanding the NATF pilot to other parts of the country where there are significant immigrant populations. These broad-based private-public sector alliances will help immigrants increase savings, build assets, and strengthen their financial security.
NP.
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