Mortgages for "low and moderate income families" (whatever that means) are not bad loans.
They may or may not be. If regulators require a fixed percentage - 50% - of all loans be to a certain economic group, they they may well have to make some bad loans to get to the target. Just like quotas in college enrollment, meeting a fixed quota for a particular group may involve lowering admission stds for that group.
The fact that the regulators made a fixed percentage quota tells you that level (50%) wouldn't have been reached under normal circumstances. Else why set a percentage quota?
Mostly they are for low or moderately priced property, many places that were redlined.
The idea that redlining was widespread I think is unproven. To the extent an area would be redlined, it likely reflects an underlying reality that there are few if any worthwhile loans to be made there.
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Funny how you took that out of context and didn't continue with:
"The Securities and Exchange Commission (SEC), based on OFHEO’s September 17, 2004 “Report of Findings to Date,” undertook a review of Fannie Mae’s accounting and on December 15, 2004 directed Fannie Mae to restate accounting treatments for SFAS 133 and SFAS 91 for previously reported financial statements. The disallowed hedging treatments (SFAS 133) result in an estimated $9 billion cumulative reduction in core capital as of September 30, 2004 as disclosed by Fannie Mae. This capital level places Fannie Mae below its minimum capital requirement and results in a classification of significantly undercapitalized. Fannie Mae’s critical capital level remains above the required threshold and Fannie Mae continues to meet its risk-based capital requirement. (See page 2). OFHEO has directed Fannie Mae to provide OFHEO with a capital restoration plan to bring core capital into compliance with the minimum capital requirement plus a targeted surplus of 30 percent over the minimum capital requirement level, as set forth under OFHEO’s Agreement with the Board of September 27, 2004. OFHEO will work with Fannie Mae’s Board on the capital plan and its implementation."
Nice creative cut and paste...
I put in the title and first paragraph of the article. Figured that was enough. I think you're doing the creative selection above - you highlight "Fannie Mae’s critical capital level remains above the required threshold and Fannie Mae continues to meet its risk-based capital requirement" but not the immediately preceding sentence, "This capital level places Fannie Mae below its minimum capital requirement and results in a classification of significantly undercapitalized".
It appears there is total capital, critical capital, and risk-based capital, presumably all defined differently (undoubtedly the latter two are subsets of the total capital). It met the latter two requirements, but was still significantly undercapitalized as to total capital. I think thats enough to say it was not "pretty solid" prior to 2005, which is what I took issue to.
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Politicians in Washington CAUSED the crisis. They used FMN/FRE as a tool to achieve political ends.
Actually social ends. Having low and moderate income people owning homes that they can afford is a very good thing.
Like all things there are trade-offs. You can't say its a good thing at any cost - for example, if to put more people in home ownership, one has to debase lending stds so much that a lending crisis is created, then a drastic mistake has been made. Its not worth that to get another percent or several in owned homes.
Most of this problem came from moderately well off and well off people buying homes they couldn't afford.
Its caused by people of all means buying homes beyond their means, whatever they are. I read recently that millions of illegal aliens have gotten mortgage loans.
And those loans were issued by orignators, not Fanny/Freddy.
Since FMN/FRE don't originate loans, thats certainly true.
And they were sold mostly to investment banks.
I'm not sure who has bought loan certificates, perhaps pension funds, insurance companies, foreign investors. All kinds of investors.
re: The first lowering of standards was in response to government mandates. Thats a matter of record. Go back to the Village Voice article and read it again. You'll see "required", "mandated", you'll see specific %'s of loans to go to specific classes of borrowers.
Listen, anyone that bought in or prior to 2001 are not the problem... their houses went up in value and down, but they are still mostly above their mortgage balance.
We don't know that. People who bought early on in the home runup may still have equity in their homes even after prices have fallen. But having equity isn't the same thing as meeting payments. There've been a lot of creative mortgage writing, refis, with all kinds of loan features - variable rates, balloons, whatever. I don't think you can justifiably say - none of our problem started before Bush was President - which seems to be your goal here.
As a Bush supporter, I'll readily admit plenty of problems have occurred under his watch. While he and others tried to reform oversight in this area, he didn't push hard enough to make it happen.
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And I know you don't think low income people should be allowed to own even modest homes
LOL. Yes, as a conservative I hate poor people unlike you liberals who are compassionate and decent. Thats what you're saying and its bull. It not compassionate to make people loans they can't handle. |
