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NYT 1999: Fannie Mae Eases Credit To Aid Mortgage Lending
The New York Times | 1999 | By STEVEN A. HOLMES

Posted on 09/20/2008 4:12:48 PM PDT by Jim Robinson

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.


TOPICS: Breaking News; Crime/Corruption; Government; News/Current Events; Politics/Elections
KEYWORDS: 1999; aei; billclinton; clinton; clintonlegacy; clintonomics; clintoon; corruption; democrats; economy; elections; fanniemae; financialcrisis; hangemhigh; housingbubble; hud; lp; minorities; multiculturalism; nobama08; peterwallison; robberbarons; slickwillie; spartansixdelta; subprime; wallison; x42
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To: Jim Robinson
Ah-HA!!!
21 posted on 09/20/2008 4:23:30 PM PDT by LUV W (McCain/PALIN!!!!--'nuff said! :D)
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To: Bobkk47
Andrew Cuomo and Freddie and Fannie
22 posted on 09/20/2008 4:25:09 PM PDT by mass55th (Courage is being scared to death - but saddling up anyway...John Wayne)
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To: Jim Robinson

Hey Jim!


23 posted on 09/20/2008 4:25:22 PM PDT by SkyPilot
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To: Jim Robinson
This is the second time that real estate lending practices have led to banking meltdowns. Its time to put an end to this manipulation of the banking system.
24 posted on 09/20/2008 4:25:24 PM PDT by quadrant
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To: Jim Robinson
>>>>>''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer.

Good old Franklin Delano Raines. The man who took home $90-million from Fannie Mae between 1999-2004. The same Clintonite who is about to pay $24-million in penalites for a stay out of jail card.

25 posted on 09/20/2008 4:26:15 PM PDT by Reagan Man (With Palin on the ticket, McCain Earned My Vote --- MOST conservatives should be satisfied.)
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To: Jim Robinson
McCain need to press this matter to the hilt; damn the Rat & MSM torpedoes, full steam ahead.
26 posted on 09/20/2008 4:26:32 PM PDT by Shqipo (McCain/Palin rallies.... No rock bands required.)
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To: Jim Robinson

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.


27 posted on 09/20/2008 4:27:24 PM PDT by jessduntno (.Well King, This case is CLOSED.)
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To: Jim Robinson

What an amazing find.


28 posted on 09/20/2008 4:27:39 PM PDT by Chunga (Vote Republican)
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To: Jim Robinson

bump


29 posted on 09/20/2008 4:27:53 PM PDT by fso301
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To: Jim Robinson

fast forward...oops, maybe that wasn’t a good idea afterall!


30 posted on 09/20/2008 4:28:00 PM PDT by nobamanada
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To: Jim Robinson

‘’From the perspective of many people, including me, this is another thrift industry growing up around us,’’ said Peter Wallison a resident fellow at the American Enterprise Institute. ‘’If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.’’


31 posted on 09/20/2008 4:29:30 PM PDT by jessduntno (.Well King, This case is CLOSED.)
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To: Jim Robinson

Maybe there was a reason why those loans weren’t being made, do ya think?

Better to bring the nation to it’s knees than have any appearance that some black and Hispanic families might not be a very good credit risks at certain points in time.

This is just one instance of political correctness shaking this nation to its core.

We need to confront destructive political correctness where ever we see it.


32 posted on 09/20/2008 4:29:32 PM PDT by DoughtyOne (McCain, the Ipecac president... Obama the strychnine president...)
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To: All

RUSH: Bush proposed oversight and Democrats rejected it.

How Democrat Thieves Looted Fannie Mae and Freddie Mac



RUSH: McCain is on message, and Obama is clueless.

McCain Hammers Obama on Connection to Raines, Johnson
33 posted on 09/20/2008 4:31:12 PM PDT by Miss Didi ("Good heavens, woman, this is a war not a garden party!" Dr. Meade, Gone with the Wind)
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To: quadrant

It’s time to zero out these agencies. The last thing we need is the government distorting the housing market. Heck, this isn’t even welfare.


34 posted on 09/20/2008 4:31:45 PM PDT by TrevorSnowsrap
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To: Jim Robinson
Affirmative action for the housing market.

We don't want to be painted as bigots do we?

35 posted on 09/20/2008 4:32:27 PM PDT by right way right (Do not mistake religion for God.)
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To: Miss Didi

Nice graphic with McCain and the hammer. Hope he uses it!


36 posted on 09/20/2008 4:33:49 PM PDT by right way right (Do not mistake religion for God.)
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To: Jim Robinson

Thanks for posting this. I was just flipping by CNN where they are talking about the Wall Street Crisis and they are taking calls and one caller called in and basically made the points entailed in this article. Of course the CNN people immediately cut him off and a panelists said the common liberal line “you can’t blame this on poor people” line.


37 posted on 09/20/2008 4:35:22 PM PDT by fkabuckeyesrule (Sarah Palin 2012)
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To: Jim Robinson
Good catch Jim, bears repeating:

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

38 posted on 09/20/2008 4:37:22 PM PDT by DouglasKC (.)
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To: downtownconservative

‘’From the perspective of many people, including me, this is another thrift industry growing up around us,’’ said Peter Wallison a resident fellow at the American Enterprise Institute. ‘’If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.’’

Precognitive? I’ll say.


39 posted on 09/20/2008 4:38:07 PM PDT by EDINVA
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To: DouglasKC
BTTT
40 posted on 09/20/2008 4:38:11 PM PDT by ConservativeMan55 (Obama is the Democrats guy. They bought the ticket, now they must take the ride.)
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