Posted on 10/18/2011 6:31:52 AM PDT by dennisw
Beginning in 1992, the government required Fannie Mae and Freddie Mac to direct a substantial portion of their mortgage financing to borrowers who were at or below the median income in their communities. The original legislative quota was 30%. But the Department of Housing and Urban Development was given authority to adjust it, and through the Bill Clinton and George W. Bush administrations HUD raised the quota to 50% by 2000 and 55% by 2007.
It is certainly possible to find prime borrowers among people with incomes below the median. But when more than half of the mortgages Fannie and Freddie were required to buy were required to have that characteristic, these two government-sponsored enterprises had to significantly reduce their underwriting standards.
Fannie and Freddie were not the only government-backed or government-controlled organizations that were enlisted in this process. The Federal Housing Administration was competing with Fannie and Freddie for the same mortgages. And thanks to rules adopted in 1995 under the Community Reinvestment Act, regulated banks as well as savings and loan associations had to make a certain number of loans to borrowers who were at or below 80% of the median income in the areas they served.
Research by Edward Pinto, a former chief credit officer of Fannie Mae (now a colleague of mine at the American Enterprise Institute) has shown that 27 million loans—half of all mortgages in the U.S.—were subprime or otherwise weak by 2008. That is, the loans were made to borrowers with blemished credit, or were loans with no or low down payments, no documentation, or required only interest payments.
Of these, over 70% were held or guaranteed by Fannie and Freddie or some other government agency or government-regulated institution. Thus it is clear where the demand for these deficient mortgages came from.
(Excerpt) Read more at online.wsj.com ...
“...27 million loans—half of all mortgages in the U.S.—were subprime or otherwise weak by 2008....the loans were made to borrowers with blemished credit, or were loans with no or low down payments, no documentation, or required only interest payments.”
Ain’t that the F^%#ING limit???? THESE are the clowns who are now demanding that WE ‘sacrifice’. BTW...NONE of these players will see a day in slam.
Time for a change!
I remember seeing ads for these types of loans in my early 20s, long before I was even considering a house, and wondering why would anyone do something so stupid.
My parents had to have 20% down for a house in 1987, but people that think Rent-to-Own was a great way to buy stuff were able to get a house in 2004 with nothing but a pulse?
I am not a minority and my credit is pure gold. I can’t believe the BS I went through to get MY home loan. With a long and uninterrupted work record, long uninterrupted residence in ONE place, minimum debt and THAT paid in full and punctually, I had to practically jump through my own rectum to qualify for a loan on a VERY modest home.
Most people forget that in W’s FIRST SOTU address, ( the one before 9/11) he had a proposal that, in addition to these subprime loans, the government would LOAN low-income first time home buyers the 5% or so needed for a down payment, plus funds for closing costs, etc...it was a fairly big policy initiative of his first SOTU..
Another reason that GWB was a first-rate assclown.
Yeah. Weird ain’t it? You try to do the right thing keep your credit clean and not overextend yourself and guess who has to jump through hoops to buy a house. You and me. We actually sold our house in FL and made a profit. Now we are trying to buy a short sale in NV and can’t believe all of the hoops. I guess we must be some of them scum suckers taking advantage of other peoples misery and at the same time helping take distressed property of some scum banks hands. Oh well their loss, my gain. Damn that work hard and save crap huh? What a disgrace we are. We are so ashamed. NOT!! How hard is it to do some “critcal” thinking? Let’s see, I make 22,000 per year? Of course I can afford that 450,000 house. DUH!
Once again, Rush was Right.
In the hectic days following the collapse in the fall of ‘08. he kept advising the GOP....pleading with them...to hang the albatross where it belonged, around the neck of Barney Frank.
They decided to act “bipartisan” and did not follow his advice. Dodd and Frank got to rewrite their own history, and the bulk of the population has now moved on and focused their anger at the bankers.
In 1996, as self-employed business owners, with mid-6-figures in the bank, a mid-level income and no debt,outside of a small amount left on a small mortgage, we were denied a remodeling loan on the basis that we couldn’t show steady guaranteed income to satisfy the secondary market. We were offered a 1-year ARM.
Our kids, at 23, just married, no credit history, little savings employed at the mid 5-figure level, got a subsidized loan (first time home buyers) for zero down, low interest. They re-fi’d twice, did no maintenance, and sold in 2004, in a major metropolitan area, for 3x their original cost.
It never made any sense.
Bookmarked!
The Bank! People who committed fraud on Mortgages need to be punished. But, don't neglect the fact that banks failed to follow simple procedures on applications. They had a flawed business model.
"required"? Where? How? Links & text, not opinions please.
Could someone please explain the point of "Fannie & Freddie"?
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