Increasing Homeownership (mortgage crisis partly Bush's fault)

Bush Administration ^ | 2003

[reaganaut1]

The Accomplishments Increasing Homeownership: The US homeownership rate reached a record 69.2 percent in the second quarter of 2004. The number of homeowners in the United States reached 73.4 million, the most ever. And for the first time, the majority of minority Americans own their own homes.

The President set a goal to increase the number of minority homeowners by 5.5 million families by the end of the decade. Through his homeownership challenge, the President called on the private sector to help in this effort. More than two dozen companies and organizations have made commitments to increase minority homeownership - including pledges to provide more than $1.1 trillion in mortgage purchases for minority homebuyers this decade.

President Bush signed the $200 million-per-year American Dream Downpayment Act which will help approximately 40,000 families each year with their downpayment and closing costs.

The Administration proposed the Zero-Downpayment Initiative to allow the Federal Housing Administration to insure mortgages for first-time homebuyers without a downpayment. Projections indicate this could generate over 150,000 new homeowners in the first year alone.

President Bush proposed a new Single Family Affordable Housing Tax Credit to increase the supply of affordable homes.

The President has proposed to more than double funding for the Self-Help Homeownership Opportunity Program (SHOP), where government and non-profit organizations work closely together to increase homeownership opportunities.

The President proposed $2.7 billion in USDA home loan guarantees to support rural homeownership and $1.1 billion in direct loans for low-income borrowers unable to secure a mortgage through a conventional lender. These loans are expected to provide 42,800 homeownership opportunities to rural families across America.

[reaganaut1]

The Bush Administration continued and expanded Democratic policies to give mortgages to people, especially minorities, who are not credit-worthy. Therefore Bush, the Republicans, and indirectly us, people who mostly voted for Bush, are partly to blame for this mess. I'm not saying that Bush's policies were the sole cause but that he aggravated the problem.

Sorry, this is not a good sound bite for the McCain campaign, but I think it is true. If elected I hope McCain governs as a fiscal conservative, not a "compassionate" conservative.

[WayneS]

You are correct, IMO.

[BenLurkin]

http://www.freerepublic.com/focus/f-news/2084047/posts

[Always Right]

But Bush also pushed for major reforms and new oversight of Fannie and Freddie back in 2003.

[KarlInOhio]

I've seen this blamed, but how much of the mortgage crisis was caused by giving loans to poor people who couldn't afford the mortgage vs. giving someone yet another loan for another speculative condo in Florida/Arizona/Nevada where the rental income could not cover anywhere close to the mortgage?

The first wass stupid social engineering, while the second was just stupid.

[babble-on]

Partly yes. And of course Snow and O’Neal were people who never should have been Treasury Secretaries. They were simply too stupid to do the job at that time, and Greenspan just ran policy by default because Treasury was completely neutered.

Still, I think Democrats wear the lion’s share of the political blame (and Greenspan wears the lion’s share of the blame in general). Dems refused to allow tighter regulation of Fannie and Freddie when even the CLINTON administration wanted to bring it about.

[reaganaut1]

I am aware of that IBD editorial which blames the Democrats, and my post is in response to it. Bush extended the Democrats’ approach to politicized mortgage lending to benefit the poor, especially the minority poor.

[offduty]

I have to respectfully disagree. The Administration came up with an idea to help minorities and low-income families gain home ownership through programs. It was the seller agents and the mortgage brokers who took advantage of the program to line their pockets. I doubt there is any language in the programs that said to place a person in a house they couldn’t afford; not verify income; and/or use due dilligence from an economic standpoint. It is no different that some of the Dem’s answer to worthwhile programs, abuse it , make myself rich, and to heck with the consequesnces. I don’t see anyone who was “stuffed” into one of these mortgages walking away with millions in their pockets like Jamie Gerellick and the other crooks did.

[Always Right]

 

New York Times, September 11, 2003

New Agency Proposed to Oversee Freddie Mac and Fannie Mae

By STEPHEN LABATON

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

''There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises,'' Treasury Secretary John W. Snow told the House Financial Services Committee in an appearance with Housing Secretary Mel Martinez, who also backed the plan.

Mr. Snow said that Congress should eliminate the power of the president to appoint directors to the companies, a sign that the administration is less concerned about the perks of patronage than it is about the potential political problems associated with any new difficulties arising at the companies.

The administration's proposal, which was endorsed in large part today by Fannie Mae and Freddie Mac, would not repeal the significant government subsidies granted to the two companies. And it does not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enables them to issue debt at significantly lower rates than their competitors. Nor would it remove the companies' exemptions from taxes and antifraud provisions of federal securities laws.

The proposal is the opening act in one of the biggest and most significant lobbying battles of the Congressional session.

After the hearing, Representative Michael G. Oxley, chairman of the Financial Services Committee, and Senator Richard Shelby, chairman of the Senate Banking Committee, announced their intention to draft legislation based on the administration's proposal. Industry executives said Congress could complete action on legislation before leaving for recess in the fall.

''The current regulator does not have the tools, or the mandate, to adequately regulate these enterprises,'' Mr. Oxley said at the hearing. ''We have seen in recent months that mismanagement and questionable accounting practices went largely unnoticed by the Office of Federal Housing Enterprise Oversight,'' the independent agency that now regulates the companies.

''These irregularities, which have been going on for several years, should have been detected earlier by the regulator,'' he added.

The Office of Federal Housing Enterprise Oversight, which is part of the Department of Housing and Urban Development, was created by Congress in 1992 after the bailout of the savings and loan industry and concerns about regulation of Fannie Mae and Freddie Mac, which buy mortgages from lenders and repackage them as securities or hold them in their own portfolios.

At the time, the companies and their allies beat back efforts for tougher oversight by the Treasury Department, the Federal Deposit Insurance Corporation or the Federal Reserve. Supporters of the companies said efforts to regulate the lenders tightly under those agencies might diminish their ability to finance loans for lower-income families. This year, however, the chances of passing legislation to tighten the oversight are better than in the past.

Reflecting the changing political climate, both Fannie Mae and its leading rivals applauded the administration's package. The support from Fannie Mae came after a round of discussions between it and the administration and assurances from the Treasury that it would not seek to change the company's mission.

After those assurances, Franklin D. Raines, Fannie Mae's chief executive, endorsed the shift of regulatory oversight to the Treasury Department, as well as other elements of the plan.

''We welcome the administration's approach outlined today,'' Mr. Raines said. The company opposes some smaller elements of the package, like one that eliminates the authority of the president to appoint 5 of the company's 18 board members.

Company executives said that the company preferred having the president select some directors. The company is also likely to lobby against the efforts that give regulators too much authority to approve its products.

Freddie Mac, whose accounting is under investigation by the Securities and Exchange Commission and a United States attorney in Virginia, issued a statement calling the administration plan a ''responsible proposal.''

The stocks of Freddie Mac and Fannie Mae fell while the prices of their bonds generally rose. Shares of Freddie Mac fell $2.04, or 3.7 percent, to $53.40, while Fannie Mae was down $1.62, or 2.4 percent, to $66.74. The price of a Fannie Mae bond due in March 2013 rose to 97.337 from 96.525.Its yield fell to 4.726 percent from 4.835 percent on Tuesday.

Fannie Mae, which was previously known as the Federal National Mortgage Association, and Freddie Mac, which was the Federal Home Loan Mortgage Corporation, have been criticized by rivals for exerting too much influence over their regulators.

''The regulator has not only been outmanned, it has been outlobbied,'' said Representative Richard H. Baker, the Louisiana Republican who has proposed legislation similar to the administration proposal and who leads a subcommittee that oversees the companies. ''Being underfunded does not explain how a glowing report of Freddie's operations was released only hours before the managerial upheaval that followed. This is not world-class regulatory work.''

Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said.

[babble-on]

But by 2003, we were staring down the risk of a major recession. The time to rein in financial institutions was 1999, and an effort was under way to do so, with Richard Baker of Louisiana working with the Dems in the Treasury. It was killed by Fannie and Freddie, and their enormous financial gifts to Democrats in congress.

[WayneS]

“The Administration came up with an idea to help minorities and low-income families gain home ownership through programs.”

Please, if you can, tell me WHERE in the United States Constitution is the President empowered to do that?

[all the best]

Government intervention in the economy is always an attempt to cheat reality. Lets’ pretend people who can’t afford a house, who haven’t earned a house, can own a house. We’ll do whatever it takes. Ban discrimination against high-risk individuals and neighborhoods, pour money into the economy, lower interest rates, subsidize house mortgages. Anything but accept reality.
In the end reality wins out. Every time. CRASH!!!!!!!!!

[WayneS]

Closing barn door... after horse... etc.

[raybbr]

Look into Bush’s “State of the Union” addresses. I would sit and listen to him brag about the increase of homeownership among minorities is way up. If he was to take credit for the increase based on crummy policies then he has to take the blame when those policy failures cause problems.

[biff]

Too true. Sadly, we had hoped Bush was a fiscal conservative when we elected him but we have found out he was not even close.

Unfortunately, if it had not been for the inflated housing market we would have technically been in a recession for the last three or four years. A recession, something a so called conservative Republican did not want on his watch.

Now look, McCain has a very steep uphill battle.

[am452]

Please, if you can, tell me WHERE in the United States Constitution is the President empowered to do that

Where in the constitution did Bush find the clause allowing him to give $15 billion to Africa for that promiscious sex disease Aids? Medicare part D etc etc

[markomalley]

And Bush consistently refuses to nail the dems to the wall.

Yes, he advocated far too expansive mortgage loans...but he also did NOT cook the books.

[raybbr]

The Administration came up with an idea to help minorities and low-income families gain home ownership through programs.

What programs? Who funded them?

Remember how Washington Mutual and Bank of America started flaunting giving loans to illegals. Publicly flaunting it. Did the Bush admin. EVER speak out against it? Just once?

[WayneS]

I don’t know.

[silverleaf]

A huge weakness of Bush in retrospect was his inability or unwillingness to root out entrenched corrupt disloyal democrat partisans from every agency of the government- CIA, State Department and FNMA and FMAC. The looting of FNMA and FMAC that started in earnest under Clinton cronies and hacks continued right under the noses of Bush, his cabinet and the congress when it was supposedly controlled by the GOP.

And yet Bush treated these people (like Nancy Pelosi whining for a private jet for her family's travels, and Jamie Gorelick, and her outrageous inclusion in a 9-11 Commission to which Condi Rice and others were forced to testify) - Bush treated these corrupt rats as if they deserved a seat at the table in doing the people's business.

And here we are, with the chief of the rats Nancy Pelosi, stabbing Bush in the back, while Chris Dodd and Barney Frankfurter hide behind her wide legged pantsuit and Obama criticizes lobbyists while using Franklin Raines as an economic consultant and choosing Jim Johnson to vet his VP.

[raybbr]

Unfortunately, if it had not been for the inflated housing market we would have technically been in a recession for the last three or four years.

The policies of Bush just stalled the recession and created a false recovery and we are now seeing the results of these policies. In fact, stalling the recession with a false recovery actually made the situation worse. The debt that should NOT have been supported was and is now ruining the economy because it was allowed to grow to such a huge debt.

[reaganaut1]

“Lets’ pretend people who can’t afford a house, who haven’t earned a house, can own a house. We’ll do whatever it takes. Ban discrimination against high-risk individuals and neighborhoods, pour money into the economy, lower interest rates, subsidize house mortgages. Anything but accept reality.”

You are right. Some Bush defenders say he wanted to tighten regulation of Fannie and Freddie. But if the administration encourages sub-prime lending, Fannie and Freddie, the government agencies that guarantee mortgages, will almost inevitably be taking some of that risk.

[VOA]

Sorry, this is not a good sound bite for the McCain campaign,
but I think it is true.

That would be a reasonable analysis.
But from what I've read/heard lately, I feel McCain/Palin are actually
turning this to their advantage.'
As in there's been a big mess made...and McCain/Palin are the adults
that will fix the problem.
As compared to Obama/Biden being the team that will helped make
the mess (Biden) and will (Obama) appoint all sorts of social
engineers that may make the problem worse.

As for Dubya, for all his good intentions, I used to groan when
he was pushing for the government to help people into homes...
as I was in California and saw some of the insanity that was
happening at ground-level of the insanity.
He should have known that expanding a program started by Bill Clinton
(as admitted by Robert B. Reiche on TV recently)...might have not
been such a great idea.

[TADSLOS]

Clinton is to blame, Bush is to blame. Obama and Biden are caught up in it. Phil Gramm has a major hand in this debacle and McCain, who is wrapping himself in the flag over this, is just as complicit in setting the conditions for Wall Street investment banks to run amok with bad paper.

[Always Right]

Closing barn door... after horse... etc.

This was FIVE years ago. Three years before the real estate market started to tumble.

[ChinaThreat]

You can thank Bill Clinton and Robert Reuben for this mess.

http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act

[VOA]

PS:
Within the last week, the Wall Street Journal in an article on the
housing/financing mess had two photos: one of Dubya in 2004 talking about
how government had a real role to help people into homes with financial assistance.

Compared with a photo of McCain in 2008 saying that the government shouldn’t
be helping with home financing UNLESS the home buyer had invested substantial
amounts of the home buyer’s money in the enterprise!
There McCain goes with those old-fashioned concept of down-payments!
(proven to be a sane approach by the recent mess).

Plus Palin has been mentioning the need for really investigating
groups like FreddieMac/FannieMae.

McCain/Palin, to my mind, have “stolen a march” on these issues as
compared to Obama/Biden.
Pretty amazing when Obama/Biden could have really spun (propagandized!)
these issues to really spank McCain/Palin.

[CarryingOn]

Congress passed the “Community Reinvestment Act (CRA)” in the late 70’s to direct bank's to lend to certain demographic’s, especially “low-income.” During the Clinton administration, the law was rewritten to enable Federal bank regulators to force bank's to meet lending quotas established by Clinton appointees. Basically, bank's were forced to make high-risk loans that were not subjesct to customary, and prudent lending practice. A large volume of loans, called low-doc or no-doc, were made with NO borrower income verification. A government CRA examination report for one New York bank stated that “ it is noted that borrower income data was not available for 62.9% and 45.6% of loans originated” for a two year period. A Federal Reserve Governor noted in 2008 that “when we looked at the loan-level data we saw a clear correlation between “low-doc” or “no-doc” lending and performance problems, particularly early payment defaults.” The “Mortgage Crisis” originated in Congress, and is being fueled by political control of the nation's banks.

[SFC Chromey]

They did that because EEOC and the programs mentioned above HELPED ensure that everyone who wanted a home loan got one.

WaMu and BofA just did what they had to so they wouldn’t be sued by EEOC.

[VA_Gentleman]

Amen brother.

[VA_Gentleman]

Amen brother.

[raybbr]

WaMu and BofA just did what they had to so they wouldn’t be sued by EEOC.

Huh? Show me the lawsuits against lenders that DIDN'T lend to illegals?

[WayneS]

Correction noted. Thank you. Please keep in mind that I only hold Mr. Bush PARTIALLY responsible for this mess. His predecessor Mr. Clinton, and our “esteemed” (what is it now, 9% approval?) Congress need to take their own more substantial lumps as well.

However, truth be told, even five years ago was NOT “before” this crisis started. The “set-up” was building for YEARS before then. This crisis actually STARTED during the Clinton administration. I was working as a civil engineer doing development designs in private practice at that time, and I saw some truly AMAZING things being perpetrated by banks and developers.

For nearly ten years I have railed, to anyone who will listen, against the practically criminal loan and financial practices going on in the real-estate development business. VERY few would listen back in 1999. I was basically told I didn’t know what I was talking about and was full of crap by MOST of the “experts”. It took a while for reality to set in, but set in it did. And now it seems those same experts want to lecture ME on what needs to be done to “fix” the problem. But, after all, they ARE the “experts”.

[CarryingOn]

Actually, EEOC was not the weapon used by the Federal government to coerce banks to meet their demands. Federal Bank regulators of the Federal Reserve Bank have the power to cause bank's a lot of pain, besides heavy financial sanctions. The regulator's can force management changes and virtually freeze a bank's operation. No lawsuit is needed to bring a financial institution to its knees.

[Always Right]

There is plenty of blame to go around, but Mr. Bush takes more than his fair share. We don’t need to pile on. We need to show what a worthless pile Obama is. It is not like there aren’t enough people blaming ‘Bush’s policies’ on this. I want someone to name the Bush policy.

[WayneS]

I think it lies more in a LACK of policy that could/would have prevented it.

[Always Right]

I think it lies more in a LACK of policy that could/would have prevented it.

But at least Bush (and McCain as a co-sponsor of the legislation) can point to policies he tried to implement. The Democrats made sure the bill never came to a vote. It is doubtful it would have prevented the current situation, but it could have cut it off sooner and controlled the damage better.

[raybbr]

Actually, EEOC was not the weapon used by the Federal government to coerce banks to meet their demands. Federal Bank regulators of the Federal Reserve Bank have the power to cause bank's a lot of pain, besides heavy financial sanctions.

I know. That's why I challenged the previous poster to back up his claim.

[WayneS]

You make an excellent point.

However, I don’t remember hearing him give any fiery speeches about this issue around that time. Perhaps Mr. Bush should have “talked up” the coming crisis a bit more back in 2003. It would at least give him ammo NOW against those who are trying to blame the ENTIRE thing on him.

[raybbr]

I want someone to name the Bush policy.

President Bush's Policies Promoting the Ownership Society

And From here:

In June, President Bush announced an aggressive homeownership agenda to dismantle barriers to homeownership by providing down payment assistance, increasing the supply of affordable homes, increasing support for self-help homeownership programs, and simplifying the homebuying process and increasing education. The President also issued "America's Homeownership Challenge" to the real estate and mortgage finance industries to join in his effort to increase the number of minority homeowners by taking concrete steps to tear down the barriers to homeownership that face minority families.

That wasn't too hard.

[Moonman62]

Unfortunately, if it had not been for the inflated housing market we would have technically been in a recession for the last three or four years. A recession, something a so called conservative Republican did not want on his watch.

W also gave us inflated government and inflated commodities. There hasn't been much organic economic growth during his administration. A flat stock market and a financial crisis are the results.

[raybbr]

Perhaps Mr. Bush should have “talked up” the coming crisis a bit more back in 2003.

In my links from 2004 he was doing the exact opposite.

[Scarlet Pimpernel]

“Sadly, we had hoped Bush was a fiscal conservative”

Nonsense. Just like Obamanuts and Clintonoids, you REFUSED to see reality. Bush was never any kind of Conservative and he never did much to hide that fact. Granted he was probably the best of a lot of poor choices, but don’t kid yourself that he was to blame for pretending to be something he quite obviously was not.

[WayneS]

“Granted he was probably the best of a lot of poor choices...”

You got THAT right:

1) Algore in 2000
2) Jeanpierre Kerry in 2004

How could ANYONE not least have CONSIDERED voting for Mr. Bush despite the fact that he was obviously not a real conservative.

ALMOST like Obama vs. McCain here in 2008, eh?

[Always Right]

Yes, but did Bush's programs have an impact? The significant program that came out of that was the American Dream Downpayment Initiative (ADDI). Several years after those programs were put into effect, the GAO looked into their effectiveness and found:

Officials from the jurisdictions GAO contacted indicated that ADDI has not had a significant impact on local homeownership rates because the program has been modestly funded and is relatively new. In addition, some jurisdictions reported difficulties in serving populations that the program targeted for outreach, such as recipients of rental housing assistance.

So Bush's program had a negligible impact inflating the housing crisis.

[raybbr]

You asked for his policy. I gave it to you.

You also just picked one aspect of the plan which was called "America's Homeownership Challenge". There were many initiatives listed .

Has Bush ever made a mistake in your opinion?

[Always Right]

You also just picked one aspect of the plan which was called "America's Homeownership Challenge". There were many initiatives listed .

ADDI was the cornerstone. The other were education, self-help programs, and some non-used tax credit.

Has Bush ever made a mistake in your opinion?

Absolutely, the prescription drug program was the worst. Keeping Rumsfeld around for too long almost costing us victory in Iraq was another. But the Housing crisis is not a result of Bush's policies. There are dozens of other who rank above him. IMHO, the last thing we need to be doing now is parroting Obama's talking points.

[SFC Chromey]

Huh? Show me the lawsuits against lenders that DIDN’T lend to illegals?

They never mention “illegals”, just ‘minorities’. I’ll get those for you, after I get home from work.

[SFC Chromey]

Or you can search for it yourself. It is out there in public records, and official EEOC statements.

[dalebert]

Well a lot of people could afford there homes when they moved in but by the time countys and citys raised appraisals every year to get more taxes and insurance cost went up to match appraisals. its not just the mortgage companies causing this. then price of gas rose and they had to make a choice about house payment or food and going to work.
I will admit that i did see people who should never have been homeowners buying homes but and awful lot were had the problem of local governmenst cashing in on them.

check our what a house payment is vs taxes and insurance. Very unbalanced.