Skip to comments.Study Shows a Pattern of Risky Loans by F.H.A.
Posted on 12/16/2012 9:05:54 PM PST by Lorianne
A new and extensive analysis of 2.4 million loans insured by the Federal Housing Administration in recent years shows a pattern of risky lending that could generate $20 billion in losses and harm thousands of the nations most vulnerable borrowers. By ignoring risks in loans it insured in 2009 and 2010, the study concludes, the F.H.A. is imperiling both borrowers and taxpayers who stand behind the agency.
The analysis emerged less than a month after the F.H.A.s auditor submitted a troubling report on the financial soundness of its insurance fund. In mid-November, the auditor estimated that the fund, which backs $1.1 trillion in mortgages, has a value of negative $13.5 billion. In other words, if it were to stop insuring loans today, the F.H.A. fund could not cover the losses anticipated on loans it has already insured.
The new study of the potential risks in recent F.H.A.-insured loans is illuminating because it provides a level of detail, including where government-backed loans are, that is usually missing from agency analyses. In addition, the reports loss estimates are somewhat surprising given that the loans it examined were made after the mortgage crisis became evident.
(Excerpt) Read more at nytimes.com ...
Yes, and this is the effect. Thanks a lot, Community
Shamed by Publicity, Banks Stress Minority MortgagesShamed and embarrassed by their poor lending records, mortgage lenders are finally opening their doors a little wider to poor people and members of minority groups seeking home loans.
Newly released figures from a handful of big banks suggest that they are starting to reduce the obstacles that have led them to reject minority-group applicants and poor people. Although complete information will not be available until October, many banks are showing sharp increases in the number of these loans.
Chemical Bank, for example, says it more than doubled the number of home loans made to black, Asian-American and Hispanic borrowers in New York last yearto 1,522, compared with 622 in 1991. Nationsbank, the Bank of America and Wells Fargo were among others with sharply increased minority-group lending.
Community organizers say they are encouraged that at least some banks have begun to expand such lending, although they caution that only sustained action throughout the industry will have a significant effect.
The Office of Federal Housing Enterprise Oversights report says that F/M CEO Franklin Raines---a Clinton appointee---and other Fannie Mae bigwigs, deliberately and intentionally manipulated financial reports to artificially hit earnings targets in order to trigger multi-million dollar bonuses for senior F/M executives.
Ex-Fannie CEO Franklin Raines should be behind bars for life. He is a crook of the first order. This thief Raines cooked the FM books precipitating losses of $9B (that we know of) for the single purpose of creating bonuses for himself and other F/M insiders. The SEC said Raines broke accounting rules by playing with risky derivatives.
RAINES COOKS THE F/M BOOKS---WALKS AWAY A MULTI-MILLIONAIRE After Raines was fired and exposed as a fraudster for cooking the govt books, Raines walked away w/ $90 million dollars, a $26 million parachute, PLUS..... Raines gets a MONTHLY pension of $116,300 for life. Raines had already collected $4.87 million in "special performance" shares. Raines owns options giving him $5.8 million in net profit after redemptions, plus another $8.7 million in deferred compensation for his six years at the F/M helm. There's more.
Raines keeps $5 million of paid-up life insurance. He and his spouse get free medical and dental benefits for life, worth over $1 million. NOTE: Raines earned $20 million in salary, bonuses and stock awards (that we know of) in one year.
To keep Raines happy within philanthropic circles, Fannie Mae will match Raines' charitable contributions by $10,000 a year.
After he was fired, Raines told the F/M board that he's entitled to get paychecks until June 22 giving him another $600,000, which triggers a $2,000 monthly raise in his lifetime pension. He also said he's entitled to disputed options with a gross value of about $5.6 million.
GENESIS OF THE F/M BILKING--- CEO Franklin Raines' Letter to Shareholders--excerpted from 2003 Fannie Mae Annual Report
Excerpt ...Ten years ago the typical conforming mortgage required a down payment of 10-20%, and low-down payment mortgages were considered too risky. But then we helped to standardize the 3-5% down payment loan, brought it to global capital markets, and made it available to lenders and communities nationwide. Now low-down payment loans are commonplace. And we just adopted a new variance in our underwriting standards that will make the $500 down payment loan widely available as well...
In 1994, we pledged to provide $1 trillion in capital to ten million underserved families by the end of 2000. Thanks to our housing and industry partners, we met that goal early.
Then in 2000, we launched our American Dream Commitment, a pledge to provide $2 trillion in capital to 18 million underserved families by the year 2010, including $400 billion targeted specifically for minority families (later raised to $700 billion in response to President Bushs Minority Homeownership Initiative). After four of the strongest years in housing and mortgage finance history, weve already surpassed the top-line goals of this commitment. But our work is far from complete.
So in January 2004, we announced our Expanded American Dream Commitment and pledged significant new resources to tackle Americas toughest housing challenges. Our new commitment has three main goals.
First, we will expand access to homeownership for six million first-time home buyers in the next ten years, including 1.8 million minority first-time home buyers.We also will help raise the national minority homeownership rate from 49 percent to 55 percent, with the ultimate goal of closing it entirely.
Second, we will help new and long-term homeowners stay in their homes through a series of initiatives, and commit $15 billion to preserve affordable rental housing and $1.5 billion to support the revitalization of public housing communities.
Third, we will increase the supply of affordable housing and support community development activities in at least 1,000 neighborhoods across the country through our American Communities Fund, and through targeted investments like Low-Income Housing Tax Credits that help finance affordable rental housing.
It is because of initiatives like our Trillion Dollar Commitment and our American Dream Commitment that we have exceeded our HUD affordable housing goals for ten consecutive years. End excerpt.
Cong Baca created "HOGAR" (Spanish for home) in 2003 to work with the mortgage industry, F/M, lenders, banks and latino community groups to increase mortgage lending to what savvy observers consider to be unqualified Latinos.
"HOGAR" colluded w/ Cong Baca in what was to become a massive bilking of taxpayers. Cong Baca calculatedly hyped the fact that the national Latino homeownership rate was 47%, compared with 68% for the overall population.
HOGAR was coached to call the figure "alarming," and to say "a concerted effort was required to ensure that by the end of the decade Latinos will share equally in the American Dream of home ownership."
HOGAR and Cong Baca conned the public, failing to note that most of the "dreamers" were illegals, citizens of Third World countries who had violated US borders.
Predictably, HOGAR colluded w/ co-conspirators which included:
(a) shaky mortgage companies that ran into big trouble;
(b) Fannie Mae and Freddie Mac, both now under federal control after billions in taxpayer bailouts;
(c) Countrywide Financial Corp., sold to Bank of America Corp;
(d) Washington Mutual Inc., taken over by the US government and sold to J.P. Morgan Chase & Co.; and,
(e) New Century Financial Corp. and Ameriquest Mortgage Corp, both now defunct, killed by defaulted subprime Latino mortgages.
HOGAR's ties to the subprime mortgage industry were substantial. Bribery and self-dealing were rampant:
<><> Companies that donated $150,000 to Cong Baca got the right to have their own research fellow who would conduct fraudulent studies, which were cunningly used by industry lobbyists to pump lending.
<><> Bribery and extortion in the form of $100,000 annual donations to Cong Baca, for which HOGAR provided phony news releases from Cong Baca's Hispanic Caucus promoting a lender's commercial products to the Latino market,
<><> The most shocking example of bribery well-substantitated by Hogar's literature..... HOGAR announced it worked with Freddie Mac on a self-serving two-year examination of Latino homeownership in 63 congressional districts.
The "study" found Hispanic ownership on the rise thanks to "new flexible mortgage loan products" that the industry was adopting at the urging of Cong Baca's collusive coterie.
<><> HOGAR conned lenders into even more lenient down-payment and underwriting standards.
<><> As the subprime debacle unfolded, HOGAR declined repeated requests for comment despite the economic havoc their activities precipitated.
The mortgage schemes demonstrated the criminal activities of border violators with multiple identities---perhaps violent, terrorist-connected foreigners---colluding and conspiring to defraud private companies and public entities. And mortgage racketeering enterprises which employed sub rosa finance and business practices to carry out deceptions and frauds.
The alleged ring of swindlers---a Congresman, individuals with multiple identities, banks, insurance companies, mortgage nrokers--might be charged with cheating the US govt, taxpayers and bank share holders out of hundreds of millions of dollars via an elaborate web of mortgage and bank frauds.
The mortgage Dreamers used multiple phony identities, fraudulent Social Security numbers, purchased from identity forgers in order to obtain govt-subsidized benefits.
L/E will find that individuals with multiple identities obtained fraudulent mortgages then flipped the houses at ever-higher prices to family member who then absconded to foreign countries, sticking banks (and taxpayers) with hundreds of millions in fraudulent mortgages.
BACKGROUND A Wall Street Journal investigative report related that, according to the Federal Financial Institutions Examination Council examination of the borrowing spree, uncovered financial schemes by low-income housing groups, Hispanic lawmakers, a congressional Hispanic housing initiative, mortgage lenders and brokers, all colluding in fraduent schemes to increase homeownership among Latinos with forged documents which enabled massive fraud.
This was not simply the mortgage market at work. It was fueled by avarice, greed, and Congressional enabling fraudulent practices. In 2005 alone, mortgages to Hispanics jumped by 29%; Latinos with multiple fraudulent identities in low-paying jobs obtained subprime mortgages for prime properties---soaring to 169%.
(Research provided by Wall Street Journal. Some material excerpted from the NY Times).