HOUSING and MORTGAGE CRISIS Revisited

[RUSH LIMBAUGH is my clone!]

A more recent article from investor's Business Daily:


Congress Tries To Fix What It Broke

By INVESTOR'S BUSINESS DAILY | Posted Wednesday, September 17, 2008 4:20 PM PT

Regulation: As the financial crisis spreads, denials on Capitol Hill grow more shrill. Blame an aloof President Bush, greedy Wall Street, risky capitalism — anybody but those in Congress who wrote the banking rules.


Such denials won't hold against the angry facts banging on their doors. The only question is whether the guilty party can keep up the barricade until Election Day.

A visibly annoyed House Speaker Nancy Pelosi rejected suggestions that Democrats share blame for the meltdown. "No," she snapped at reporters who dared ask.

Stick to our narrative, she scolded: The bursting of the housing bubble was another story of market failure and deregulation.

"The American people are not protected from the risk-taking and the greed of these financial institutions," she said, while calling for investigations of the industry.

Only, the risk-taking was her idea — and the idea of all the other Democrats, along with a handful of Republicans, who over the past 30 years have demonized lenders as racist and passed regulation after regulation pressuring them to make more loans to unqualified borrowers in the name of diversity.

They were the ones who screamed — "REDLINING!" — and sent banks scurrying for cover in low-income neighborhoods, where they have been forced to lower long-held industry standards for judging creditworthiness to make the subprime loans.

If they don't comply, they are threatened with stiff penalties under the Community Reinvestment Act, or CRA, a law that forces banks to make home loans to people with poor credit risks.

No fewer than four federal banking regulatory agencies are responsible for enforcing the law. They subject lenders to racial litmus tests and issue regular report cards, the industry's dreaded "CRA rating."

The more branches that lenders put in poor neighborhoods, and the more loans they make there, the better their rating. Those lenders with low ratings can not only be fined, but also blocked from mergers and other business transactions needed to expand.

The regulation grew to monstrous proportions during the Clinton administration, obsessed as it was with multiculturalism. Amendments to the CRA in the mid-1990s dramatically raised the amount of home loans to otherwise unqualified low-income borrowers.

The revisions also allowed for the first time the securitization of CRA-regulated loans containing subprime mortgages. The changes came as radical "housing rights" groups led by ACORN lobbied for such loans. ACORN at the time was represented by a young public-interest lawyer in Chicago by the name of Barack Obama.

HUD, in turn, pressured Fannie Mae and Freddie Mac to purchase more subprime mortgages, and Fannie and Freddie, in turn, donated to the campaigns of leading Democrats like Barney Frank and Pelosi who throttled investigations into fraud at the agencies.

Soon, investment banks such as Bear Stearns were aggressively hawking the securities as "guaranteed." Wall Street's pitch was that MBSs were as safe as Treasuries, but with a higher yield.

But they weren't safe. Everyone in the subprime business — from brokers to lenders to banks to investment houses — absolved themselves of responsibility for ensuring the high-risk loans were good.

The mortgage lenders didn't care, because they were going to sell the loans to other banks. The banks didn't care, because they were going to repackage the loans as MBSs. The investors and traders didn't care, because the MBSs were backed by Fannie and Freddie and their implicit government guarantees.

In other words, nobody up and down the line — from the branch office on main street to the high-rise on Wall Street — analyzed the risk of such ill-advised loans. But why should they? Everybody was just doing what the regulators in Washington wanted them to do.

So everybody won until everybody lost, including the minorities the government originally mandated the banks to serve.

The original culprits in all this were the social engineers who compelled banks to make the bad loans. The private sector has no business conducting social experiments on behalf of government. Its business is making profit. Period. So it did what it naturally does and turned the subprime social mandate into a lucrative industry.

Of course, it was a Ponzi scheme, because they weren't allowed to play by their rules. The government changed the rules for risk.

In order to put low-income minorities into home loans, they were ordered to suspend lending standards that had served the banking industry well for centuries. No one wants to talk about it, so they just scapegoat Wall Street. Even John McCain has joined the Democrat chorus on this.

The FBI is now investigating 24 large mortgage lenders for alleged abuses. But who will investigate the pols and the lobbyists and the community agitators who made the bad decisions that ultimately forced businesses to make their bad decisions?

[Oldnslo]

A more recent article from investor's Business Daily:


Congress Tries To Fix What It Broke


***


The original culprits in all this were the social engineers who compelled banks to make the bad loans. The private sector has no business conducting social experiments on behalf of government. Its business is making profit. Period. So it did what it naturally does and turned the subprime social mandate into a lucrative industry.

***

The FBI is now investigating 24 large mortgage lenders for alleged abuses. But who will investigate the pols and the lobbyists and the community agitators who made the bad decisions that ultimately forced businesses to make their bad decisions?


Okay. So what you're saying is that there were several factors which came into play in a cascade of errors which caused this meltdown?

Got it. Thanks!

[Frozen Sooner]

:blink:

Considering that the vast majority of the loans that have gone bad and devalued the CMO market weren't subject to the CRA, this whole article is a load of horse****.

[JohnnyMack]

In Rush's world the rich never exploit the poor.

[soonerscuba]

Oversaturation of the market and the flipping craze in developing urban centers had nothing to do with, huh?

As fun as it is to blame the go-to culprits in any national downturn (Clinton & minorities), there is plenty of blame to go around, it mostly lies at the feet of lenders and dumb consumers. The ownership society concept was destined to fail given the propping up of unrealistic expectations and irrational exuberance on the part of a large segment of Trump wannabes.

[RUSH LIMBAUGH is my clone!]

Okay. So what you're saying is that there were several factors which came into play in a cascade of errors which caused this meltdown?

Got it. Thanks!You should read it more closely. It pinned the fed govt. for forcing the lending institutions to make foolish loans, under penalty of severe fines, which would ruin them. They HAD to play ball with the fools who forced the loans upon them. Everything else followed from that coercion.

[JohnnyMack]

This is SOP by the right. Everything bad that happens is the fault of the govt. Corporations and banks have no responsibility for their actions.

[RUSH LIMBAUGH is my clone!]

In Rush's world the leftists in govt. often abuse the immense and ultimate power they have been entrusted with.That would be correct.

[royalfan5]

I must of missed the part where the government forced them to plunge into the opaque derivates market (that is barely regulated, mind you) with excessive amounts of leverage and where the government forced everyone to mis-price risk by forcing the rating agencies to vastly overrate the securitized mortgage pools? Notice that the traditionally conservative banks like Wells Fargo, international banks like ING, and local banks that serve local communities haven't been the ones failing. The ones that plunged head first into a overheated market are the ones collapsing. It's a good thing the government only forced some of them into it.

[Vaevictis]

Why are you guys even bothering to respond to this guy? The conclusions always come before the facts with him.

[RUSH LIMBAUGH is my clone!]

I must of missed the part where the government forced them to plunge into the opaque derivates market (that is barely regulated, mind you) with excessive amounts of leverage and where the government forced everyone to mis-price risk by forcing the rating agencies to vastly overrate the securitized mortgage pools? Notice that the traditionally conservative banks like Wells Fargo, international banks like ING, and local banks that serve local communities haven't been the ones failing. The ones that plunged head first into a overheated market are the ones collapsing. It's a good thing the government only forced some of them into it.What specifically, do you think is erroneous in the article from IBD?

[royalfan5]

What specifically, do you think is erroneous in the article from IBD? The fact that it is an agenda driven hack job that ignores the realities of the housing market the past 10 years. They weren't drasticly overbuilding high end developments in Miami and Vegas for poor people of color. The sprawling exurbs that are collasping weren't built for poor people of color either. Plus, when you consider a lot of the bad loans originated outside the traditional banking system via mortgage brokers and associated parties, creates a drastically different picture. Countrywide wasn't and isn't a community bank subject to the CRA. Look at the banks that have collasped and why they where founded. Several of them where to serve the overheated suburban markets. Another example is Lincoln, NE based TierOne Bank, which hasn't collasped yet but isn't in great shape. They didn't get burned by poor hispanic meatpacking workers in their local markets, they got burned by bad loans in South Florida and Vegas in high end markets. When you factor in the over reliance of derivatives as a hedge, you only increase the problem.

[RUSH LIMBAUGH is my clone!]

The fact that it is an agenda driven hack job that ignores the realities of the housing market the past 10 years. They weren't drasticly overbuilding high end developments in Miami and Vegas for poor people of color. The sprawling exurbs that are collasping weren't built for poor people of color either. Plus, when you consider a lot of the bad loans originated outside the traditional banking system via mortgage brokers and associated parties, creates a drastically different picture. Countrywide wasn't and isn't a community bank subject to the CRA. Look at the banks that have collasped and why they where founded. Several of them where to serve the overheated suburban markets. Another example is Lincoln, NE based TierOne Bank, which hasn't collasped yet but isn't in great shape. They didn't get burned by poor hispanic meatpacking workers in their local markets, they got burned by bad loans in South Florida and Vegas in high end markets. When you factor in the over reliance of derivatives as a hedge, you only increase the problem.What caused traditional requirements for lending to be legally changed to allow unqualified borrowers to be accepted?

[royalfan5]

What caused traditional requirements for lending to be legally changed to allow unqualified borrowers to be accepted?

Greed. Which is bi-partisan. Do you follow financial markets at all? The housing boom, securitization, and sub-prime have been from and center for a while now. This housing boom wasn't driven by poor minorities getting loans they shouldn't. It was driven by middle income earners buying houses before they should. American's have been addicted to overconsumption and living beyond their means for awhile, and by and large and ain't the poor doing it. It's the middle income folk who want to look like upper middle income folk. Crying about how it's the government's fault for making banks lend to poor people, is just another excuse for American's not to take a good hard look in the mirror and consider what the actual problems are.

[RUSH LIMBAUGH is my clone!]

...This housing boom wasn't driven by poor minorities getting loans they shouldn't. It was driven by middle income earners buying houses before they should... What caused the lenders to relax their restrictions on lending to unqualified people?

[royalfan5]

What caused the lenders to relax their restrictions on lending to unqualified people?

Personally, I feel the lenders failed by not being smart with their loans. Instead of working to find quality opportunities within their communities, they took the easy way out by pouring money into perceived easy profit opportunities offered by sercuritization of sub-prime loans. When you can make it someone else problem, it is easy to not give an **** about who you are loaning to. As an illustration of this point, let's look at Dutch Financial Giant ING. ING holds and funds their own mortgages, including sub-prime. Earlier this summer they had a total of 15 defaults. I know other community bankers in less than prosperous communities who have no problems with the CRA because they build real relationships with clients, and hold the risk. When you create the illusion of no risk, you run into problems. The securtization and related derivatives created the illusion of no-risk when there was plenty of risk. It also allowed the risk to be passed to others and quick profits to be booked to show the street. That has nothing to do with CRA. Banks who hold their loans are going to be a hell of a lot more careful about who they loan money too. Blaming the CRA policies for this meltdown, is like blaming straw for burning when it is doused with gasoline and lit of fire.

[RUSH LIMBAUGH is my clone!]

...lenders failed by not being smart with their loans. Instead of working to find quality opportunities within their communities, they took the EASY WAY OUT by pouring money into perceived easy profit opportunities... I know other community bankers in less than prosperous communities who have no problems with the CRA because they BUILD REAL RELATIONSHIPS with clients... Blaming the CRA policies for this meltdown, is like blaming straw for burning when it is doused with gasoline and lit of fire.Are you saying there weren't credit guidelines for lending to mortgage applicants?If there were, how did they get changed?

[StoopTroup]

I'll never understand exactly how they deregulated the Airlines yet the FAA and DOT regulate the carp out of them in the name of Safety.

I understand what they did but after 911 I don't understand why they didn't go back to it.

Seeing all this bailout of these Companies is disturbing to me.

[royalfan5]

Are you saying there weren't credit guidelines for lending to mortgage applicants?If there were, how did they get changed?

Are you saying that banker's are only capable of putting forth the bare minimum of effort to ascertain they are making legit loans? It should be mentioned that the vast majority of these loans are performing and up to date. The pooling and mis-pricing of risk have created the toxicity of the mortgage market. Not some government boogeyman. Just because a bare minimum is required, doesn't mean you have to only put forth the bare minimum of effort. The banks that put forth more than the bare minimum are doing fine, the banks at only wanted to put forth the bare minimum are being bailed out.

[RUSH LIMBAUGH is my clone!]

Are you saying that banker's are only capable of putting forth the bare minimum of effort to ascertain they are making legit loans? It should be mentioned that the vast majority of these loans are performing and up to date. The pooling and mis-pricing of risk have created the toxicity of the mortgage market. Not some government boogeyman. Just because a bare minimum is required, doesn't mean you have to only put forth the bare minimum of effort. The banks that put forth more than the bare minimum are doing fine, the banks at only wanted to put forth the bare minimum are being bailed out.What claims in the IBD article are false?

[tommieharris91]

Are you saying there weren't credit guidelines for lending to mortgage applicants?If there were, how did they get changed?

RLIMC advocating more government? OMGNOWAY!!!!

[royalfan5]

What claims in the IBD article are false?

The article draws the wrong conclusion from the information. It seems to being saying that bankers are incapable of independent rational thought, and therefor are not responsible for their actions. I disagree, bankers are capable of rational independent thought, and are fully responsible for their actions. Ones failure to think isn't the government's fault. No one had a problem accepting the risk when they got into it, and know it's the government's fault? When everybody was making riding high on the hog two years ago, was the IBD giving credit to the government for creating this revolution in funding the housing market? Or was credit given to the bankers who created this products that removed the risk from everything?

[bluedogok]

Are you saying there weren't credit guidelines for lending to mortgage applicants?If there were, how did they get changed?
If you are not holding onto the loans, profit based on number of transactions, you tend to relax your standards because you are not exposed to the risk. When a 1,000 bad loans are bundled and sold with a 1,000 good loans it makes the balance sheet look good because no one "expected" the "bad" loans to really be that bad.

I know people that "owned" five to ten houses when they make less than 100K a year because it was all based on flipping and resale. How do you get loans on five to ten $250,000 homes when your salary is less than 100K a year? Most were mortgaged to the limit or beyond through false valuations, to get more loan money to pay the service on other loans. Many of them are struggling to dump their "investment" property and are hurting because of their own stupidity and greed and the mortgage brokers "paid by transaction" mentality....geez you still hear ads for the get rich quick house flipping schemes all the time. They are a major cause of this crisis, but if they didn't have access to "easy" financing the bubble wouldn't have gotten as big as it did.

My wife has works for a non-profit agency in an affordable housing program for 12 years, they have had one default and that was due to a death in the family. They work with down payment assistance, home buyer education, and accessible home modifications through various programs. They have standards higher than most banks, you have to have so many hours of home buyer education, which SHE is the one who gave the seminars. You had to have a certain credit rating and they worked with potential home owners to improve their credit rating with the education. You also can only have a "conventional" loan with a good interest rate, no exotic financing, no 110% mortgages. Many of them got hooked up with mortgage brokers who kept trying to put them into much more house than they could really afford because they were paid on a percentage of the financed price, since they had no risk they could care less if a person defaults because it was part of a bundle that someone else bought. She denied many because the financing didn't match a proper debt/income ratio, many eventually ended up buying much more affordable houses than what they were led to by the brokers.

EVERYONE involved in those schemes share the blame. The house flippers who took on way more debt load than they should, the people who bought much more house than they should and the banks/brokers who loaned them the money and the banks who bought out packaged mortgages.

This problem doesn't fall neatly along party lines, both parties are responsible for creating the bubble as it has spanned both the executive and legislative levels controlled by either party. The investment culture in the world needs to be changed from a short term profit to a long term investment strategy. Pretty much every time investment has been based on short term goals, the populace gets screwed and foots the bill.

[RUSH LIMBAUGH is my clone!]

RLIMC advocating more government? OMGNOWAY!!!!Shirley, you don't think that's what I was saying?!?!?You got it twisted up real good.

[RUSH LIMBAUGH is my clone!]

Tommie, the mortgage industry had rules and guidelines for giving credit, which were changed by the govt. to lessen the standards, UNDER PENALTY OF SANCTIONS OF VARIOUS KINDS, which were mentioned in the article. This constitutes GOVT. INTERFERENCE, which is what the article, and I, oppose.

[Veritas]

Wow, I think that's what they call an internet donkey-beating.

rf5: 1
RLIMC: 0

[mdklatt]

Wow, I think that's what they call an internet donkey punch.



:eek:

[RUSH LIMBAUGH is my clone!]

Wow, I think that's what they call an internet donkey-beating.

rf5: 1
RLIMC: 0He said there was no coersion by the govt. The article says there was. Bugeaters circle the wagons like the SEC SEC SEC.

[Veritas]

Bugeaters circle the wagons like the SEC SEC SEC.
Yeah, we don't have many wagons this year to circle. :(

[JohnnyMack]

He said there was no coersion by the govt. The article says there was. Bugeaters circle the wagons like the SEC SEC SEC.

It's important to remember that right wing moonbats like Rushie here think everything the governmet does is evil. Rush would be fine with anarcho-capitalism.

[Vaevictis]

Conclusion first, and damn the facts.

[RUSH LIMBAUGH is my clone!]

It's important to remember that right wing moonbats like Rushie here think everything the governmet does is evil. Rush would be fine with anarcho-capitalism.Need some help? http://dictionary.die.net/superfluous

[SoonerKnight]

:blink:

Considering that the vast majority of the loans that have gone bad and devalued the CMO market weren't subject to the CRA, this whole article is a load of horse****.

And the fact that deregulation occured in the first six years under Bush and the Pubs. You may want to blame Democrats that is fine but they did not tell these companies don't worry we'll bail you out as their internal memos have revealed. I'm with Mike on this it is hore sh!t!!!!!!!!!!!!!!