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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (262575)	7/21/2010 12:53:20 AM
From: tejek	Read Replies (1) \| Respond to 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. Freddie and Fannie have been buyers in the secondary markets since their inception.....I think since the 1930s. "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. Once again, just because rates are low is not a cue for people to be dishonest. The bad appraisals, the falsified income documentation, the clever CDOs were all illegal. How can anyone blame low interest rates for the avarice and greed of individuals? Greenspan was also petitioned to crack down on abusive subprime lending by banks but refused. This was just before subprime mortgage lending took off. If so, then he needed to do something but I don't remember hearing too many complaints about subprime housing before the roof caved in.