Posted on 11/14/2009 4:05:50 AM PST by Halfmanhalfamazing
Over at the Wall Street Journal, there's a very interesting article that connects the dots between ACORN, the mortgage-lending-standard-destroying Community Reinvestment Act legislation, Fannie Mae and the eventual inflation and collapse of the housing bubble in last decade:
As Allen Fishbein, currently an adviser for consumer policy at the Federal Reserve, has noted, Acorn and other community groups were informally deputized by then House Banking Chairman Henry Gonzalez to draft statutory language setting the law's affordable-housing mandates. Interim goals were set at 30% of the single-family mortgages purchased by Fannie and Freddie, and the Department of Housing and Urban Development has increased that percentage over time. The goal of the community groups was to force Fannie and Freddie to loosen their underwriting standards, in order to facilitate the purchase of loans made under the CRA.
Thus a provision was inserted into the law whereby Congress signaled to the GSEs that they should accept down payments of 5% or less, ignore impaired credit if the blot was over one year old, and otherwise loosen their lending guidelines.
And rather than fight the attempt to force them into making obviously risky loans, Fannie Mae rolled over because they saw an opportunity to protect their own corrupt hide:
The proposals of Acorn and other affordable-housing advocacy groups were acceptable to Fannie. Fannie had been planning to use the carrot of affordable-housing lending to maintain its hold over Congress and stave off its efforts to impose a strong safety and soundness regulator to oversee the company. (It was not until 2008 that a strong regulator was created for Fannie and Freddie. A little over a month later both GSEs were placed into conservatorship; they have requested a combined $112 billion in assistance from the federal government, and much more will be needed over the next few years.)
The result of loosened credit standards and a mandate to facilitate affordable-housing loans was a tsunami of high risk lending that sank the GSEs, overwhelmed the housing finance system, and caused an expected $1 trillion in mortgage loan losses by the GSEs, banks, and other investors and guarantors, and most tragically an expected 10 million or more home foreclosures.
Liberal commentators have been twisting themselves into pretzels ever since the housing collapse. They refuse to believe liberal activist groups' well-intentioned attempt to extend huge taxpayer-subsidized mortgage loans to those who can't afford them did not contribute to the collapse of housing market and Government Sponsored Entity bailout fiasco and blame either simple greed, Wall Street antics or some combination thereof. (To be fair, there were a number of contributing factors to the housing bubble but the problems of politically-motivated attempts to undercut mortgage standards shouldn't be underestimated. Further, while liberals and Democrats favorite housing scapegoat is Wall Street, they rarely acknowledge that the haphazard slicing and dicing of mortgage securities was an attempt to to cover the risk brought on after lending standards were gutted by congress.) But the narrative laid out in today's Wall Street Journal is pretty clear and convincing, especially since it was authored by Edward Pinto, a former chief credit officer at Fannie Mae.
bump
it’s about time this stuff starts getting said
Assuming that the point of all these programs was to put people into home ownership who couldn’t afford it, failure was the only outcome. You can give someone a cow, but you can’t make them milk it.
In the so-called Boston Fed Study, banks and mortgage lenders were shown to be using addresses within a city to practice discrimination against minority applicants.
Congress changed the law so that banks and mortgage companies were forced to make loans to borrowers with poor credit and ACORN was at the center of the enforcement.
One little problem though, the numbers used in the study were fraudulent and the authors refused to allow other researchers to see the data for for many years.
Read more at: http://www.fraserinstitute.org/commerce.web/product_files/CaseforDueDiligence_Cda.pdf.
The paper discusses due diligence in studies used for policy decisions but the case studies (the Boston Fed study is on page 13) are really interesting.
Congress changed the law so that banks and mortgage companies were forced to make loans to borrowers with poor credit and ACORN was at the center of the enforcement.
That’s the key statement.. Congress changed the law.. Government F’s up everything it touches so there’s no surprise there. America is in the mess it’s in because of government.
This was TOP down!
Clinton placed Harold Raines and Jamie Gorelick at Fannie, Rahm Emanual at Freddie, and Andrew Cuomo at HUD.
Janet Reno was the enforcer, with the help of Acorn and other community groups.
Cris Dodd and Bawney Frank ran interference.
With the above setup they could run wild.....which they did.
>>>”....To be fair, there were a number of contributing factors to the housing bubble but the problems of politically...”
That seems to be standard text in any analysis these days. Has anyone seen something similar from the left? Do they say “To be fair, the Democrats and their armies have been almost forcing poor lending habits from the banks.” ???
They achieved their goal of getting a lawyer for ACORN in the White House and creating a financial crisis that would allow them to increase the government’s control of the economy.
Most of the noise about the cause of the crisis has calmed down and almost the entire blame placed on the “evil” bankers and mortgage lenders. The media has managed to exculpate the true villains, big government and Dem pols, from any blame in the whole matter.
If you think ACORN starte this then you are going to love how Obama’s HAMP...Hurting Any Modification Possibility” Program is going to finish off US Homeowners by giving Indymac and Foreign owned Deutsche Bank a reason to NOT help US Homeowners by blaming our OWN government!
http://www.associatedcontent.com/article/2389112/indymac_not_doing_modifications_for.html?cat=3
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