The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: tejek who wrote (262563)	7/21/2010 12:09:37 AM
From: Les H	Read Replies (2) of 306849

"Freddie and Fannie are buyers of mortgages in the secondary market. By the time they got involved the damage had already been done hundred fold. " They got involved in 2006 because Washington saw that private mortgage origination had fallen off dramatically after Katrina and the housing market threatened the economy with a recession. In fact, GDP went negative for one quarter by Q3 2006. "I think blaming Bernanke and Greenspan is nonsense." A lot of the housing inflation between 2000 and 2004 can be traced to the much lower rates for loans. Remember that Greenspan & Bernanke forced down bonds rates by holding down short-term rates at 1 pct for a couple of years and threatening outright purchases of treasuries. Greenspan also promoted the use of ARMS which became very popular from 2004 to 2006. As a result, the typical rate for mortgages dropped from 8.5% (30yr fixed) to below 4.0% (5yr ARMs) by 2004. Greenspan was also petitioned to crack down on abusive subprime lending by banks but refused. This was just before subprime mortgage lending took off.

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