And here, factors leading up to the crisis, starting in 1997, again at wiki:
en.wikipedia.org
1997: Mortgage denial rate of 29 percent for conventional home purchase loans.[26] Investors purchased more than $60 billion of subprime mortgage backed securities, six times more than 1991’s volume of $10 billion.[27] (private label securities, not GSE backed)
July: The Taxpayer Relief Act of 1997 expanded the capital-gains exclusion to $500,000 (per couple) from $125,000, encouraging people to invest in second homes and investment properties.[28]
November: Freddie Mac helped First Union Capital Markets and Bear Stearns & Co launch the first publicly available securitization of CRA loans, issuing $384.6 million of such securities. All carried a Freddie Mac guarantee as to timely interest and principal.[29][30] First Union was not a subprime lender.[31]
1998: Incipient housing bubble as inflation-adjusted home price appreciation exceeds 10% per year in most West Coast metropolitan areas.[32]
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1998-2008: With increase in sales of mortgage-backed securities, companies buy more credit default swaps, unregulated insurance contracts used to protect debt holders; these increased 100-fold from, with estimates of the debt covered by such contracts, as of November 2008, ranging from $33 to $47 trillion.[35
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1999:
September: Fannie Mae eases the credit requirements to encourage banks to extend home mortgages to individuals whose credit is not good enough to qualify for conventional loans.[36]
November: Gramm-Leach-Bliley Act "Financial Services Modernization Act" repeals Glass-Steagall Act, deregulates banking, insurance and securities into a financial services industry allow financial institutions to grow very large; limits Community Reinvestment Coverage of smaller banks and makes community groups report certain financial relationships with banks[33]
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2002-2006: Fannie Mae and Freddie Mac combined purchases of subprime securities (from banks and mortgage brokers) rise from $172 billion to over $500 billion before dropping to $450 billion per year, thus fulfilling their government mandate to help make home buying more affordable.[47]
Lenders began to offer loans to higher-risk borrowers,[48] including illegal immigrants.[49] Subprime mortgages amounted to $600 billion (20%) by 2006.[50][51]
Speculation in residential real estate rose. During 2005, 28% of homes purchased were for investment purposes, with an additional 12% purchased as vacation homes. During 2006, these figures were 22% and 14%, respectively.[52] As many as 85% of condominium properties purchased in Miami were for investment purposes which the owners resold ("flipped") without the seller ever having lived in them.[53]
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2004: U.S. homeownership rate peaks with an all time high of 69.2 percent.[60]
Following example of Countrywide Financial, the largest U.S. mortgage lender, many lenders adopt automated loan approvals that critics argued were not subjected to appropriate review and documentation according to good mortgage underwriting standards.[61] In 2007, 40% of all subprime loans resulted from automated underwriting.[62][63]Mortgage fraud by borrowers increases.[64]
HUD ratcheted up Fannie Mae and Freddie Mac affordable-housing goals for next four years, from 50 percent to 56 percent, stating they lagged behind the private market; they purchased $175 billion in 2004 -- 44 percent of the market; from 2004 to 2006, they purchased $434 billion in securities backed by subprime loans[20]
October:SEC effectively suspends net capital rule for five firms - Goldman Sachs, Merrill Lynch, Lehman Brothers, Bear Stearns and Morgan Stanley. Freed from government imposed limits on the debt they can assume, they levered up 20, 30 and even 40 to 1, buying massive amounts of mortgage-backed securities and other risky investments.[65] |
