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To: Riskmgmt who wrote (2519)	1/3/2016 1:55:17 AM
From: John Vosilla	Respond to of 2722

It took over 20 years from the Saving and Loan crisis to the 2006 crisis so I thought it would be at least that long before the craziness in lending returned but maybe your right John, it's starting already Yes I would have thought in 2009 and 2010 it was going to be at least 15-20 years before we'd have to worry again. Well if you take 1988 and 2005 as tops that took us to 2022 as the earliest next top<g> But life moves on seems few people learn and the cycles seem more condensed. December 5, 2015 Subprime Mortgages On March Again, As Obama Pressures Easier Lending A new crop of mortgage companies with ties to Countrywide Financial and other now-defunct subprime lenders are making loans to riskier and riskier borrowers. And the Obama regime is encouraging them. 'All are headquartered in Southern California, the epicenter of the last decade's subprime lending industry," the Los Angeles Times reports in a front-page piece, "After subprime collapse, nonbank lenders again dominate riskier mortgages." "And all are run by former executives of Countrywide Financial, the once-giant mortgage lender that made tens of billions of dollars in risky loans that contributed to the 2008 financial crisis," the Times added, without noting how the Clinton regime conscripted Countrywide to open up lending to poor minorities. With housing-price bubbles re-forming in California and other major markets, housing experts fear a replay of massive defaults on these shaky mortgages if home values drop. But didn't Dodd-Frank's offspring, the Consumer Financial Protection Bureau, set new mortgage rules to stop underwriting of subprime loans? Yes, but the new rules set no minimum requirements for the two key predictors of defaults: credit scores and down payments. With President Obama's blessing, the Federal Housing Administration has loosened credit-score and down-payment requirements, along with other underwriting standards, for FHA loans for first-time and bad-credit buyers. So these Countrywide clones don't actually have to adhere to "strict new lending standards," as the administration claims. It should come as no surprise, then, that these new subprime-tied lenders have cornered the market for FHA and other government loans, and now control 64% of those riskier loans. At the same time, Obama appointee Mel Watt has launched a handful of initiatives as head of the Federal Housing Finance Agency to help more low-income and first-time buyers afford homes, including allowing down payments as low as 3% for home loans backed by Fannie Mae and Freddie Mac. The goal is to bring many subprime borrowers who lost their homes to foreclosure back into the market, as "rebound borrowers." The regime also seeks to expand access to credit for first-time buyers who can't otherwise qualify for home loans due to low income and bad credit. As a result, the share of first-time buyers in the market is soaring. It stood at 56% in October, thanks mostly to easier FHA and agency lending. "This increased first-time buyer share comes with a downside: greater reliance on looser lending," American Enterprise Institute analyst Tobias Peter warns. AEI's first-time buyer risk index (FBMRI), which measures the risk of all government-backed mortgages, stood at 15.6% in October, up 1.2 percentage points from a year earlier. The index estimates the share of first-time buyer mortgages that would default under stress comparable to the 2007-08 financial crisis. The FBMRI is six percentage points higher than the mortgage risk index for repeat homebuyers, Peter says, and the gap has been widening. In October, 70% of first-time buyer mortgages had down payments of 5% or less. More, the median FICO credit score for first-time buyers with agency mortgages was 708, slightly below the U.S. median of 713. For first-time buyers with FHA loans, the median FICO score in October was 677 - well below the U.S. median. "These findings suggest that lending standards are already loose," Peter said, "and that a return to more prudent standards is called for." History shows that loosening credit terms creates artificial demand pressures that pump housing prices higher and higher, leading to feral booms and painful busts. Obama and his social engineers are dooming the nation to repeat a very ugly chapter in economic history. realclearmarkets.com