Private sector loans, not Fannie or Freddie, triggered crisis

[tony286]

http://www.mcclatchydc.com/251/story/53802.html

WASHINGTON ? As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.

Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems.

Federal housing data reveal that the charges aren't true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.

Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height vrom 2004 to 2006.

Federal Reserve Board data show that:

_ More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

_ Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

_ Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics

[aico]

Removing legal liability from giving the loans is what caused the problem.

[PurrrsianPussyKat]

Oh tony.. where were you with this info earlier today... before I had to listen to my ultra conservative father carry on about freddie and fannie. ;)

[slavdogg]

Its been well documented and reported in some financial sites.
That ibanks and financial institutions followed Fannie or Freddie after the relaxed their landing standards to issue MBS's for subprime and alt A loans. Not the other way around. Of course private investment backed institutions bought a lot more subprime and alt A loans that Freddie or Fannie could, thats just the nature of the markets. You need to keeps this in prespective they all followed Fannie and Freddy. Thinking was if its good for them its good for us.

[tony286]

Originally Posted by PurrrsianPussyKat

Oh tony.. where were you with this info earlier today... before I had to listen to my ultra conservative father carry on about freddie and fannie. ;)

I sent it to my rnc father tonight, sunday dinner should be interesting. lol

[PurrrsianPussyKat]

My dad doesn't use the internets much. I'll have to send it to my mom and make her show him.

[slavdogg]

Originally Posted by tony404

http://www.mcclatchydc.com/251/story/53802.html

WASHINGTON ? As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.

Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems.

Federal housing data reveal that the charges aren't true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.

Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height vrom 2004 to 2006.

Federal Reserve Board data show that:

_ More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

_ Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

_ Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics

There is another reason for banks issuing so many subprime loans. You might remember how in mid to late 90s there was a bunch of law suits targeting banks to force em to give out more and more loans to low income families. Law firms were calling it discrimination that low income families, maybe of them being minorities were unable to get a home loan.

[tony286]

Originally Posted by slavdogg

There is another reason for banks issuing so many subprime loans. You might remember how in mid to late 90s there was a bunch of law suits targeting banks to force em to give out more and more loans to low income families. Law firms were calling it discrimination that low income families, maybe of them being minorities were unable to get a home loan.

read the whole article

[mynameisjim]

You guys are learning how the right operates. They realized a long time ago that all you have to do is throw out some counter argument and the people will argue over which side is right instead of zeroing in on the real culprit and fixing it.

Think global warming. Most mainstream articles are about whether or not it's actually happening so the focus is on the debate, not the fixes.

Look at the recent oil spikes. They just put out a few arguments that it was being caused by high demand or "peak oil" so all the talk was about what the real cause of the spike was instead of getting rid of all the companies and traders manipulating the market.

But it's not just the right that does this, scumbags all over the world use this technique. Just throw some doubt about the real cause of something and you never have to fess up to the actual problem.

[L-Pink]

Originally Posted by slavdogg

There is another reason for banks issuing so many subprime loans. You might remember how in mid to late 90s there was a bunch of law suits targeting banks to force em to give out more and more loans to low income families. Law firms were calling it discrimination that low income families, maybe of them being minorities were unable to get a home loan.

And many loans were at higher rates.

[Snake Doctor]

Originally Posted by slavdogg

There is another reason for banks issuing so many subprime loans. You might remember how in mid to late 90s there was a bunch of law suits targeting banks to force em to give out more and more loans to low income families. Law firms were calling it discrimination that low income families, maybe of them being minorities were unable to get a home loan.

That would be accurate in the case of bank loans that were made and then sold to Fannie and Freddie. Those banks were sued for violating the Community Reinvestment Act.

As the article tony404 pointed out said, 84% of subprime loans were made by private lending institutions. (i.e. mortgage brokers who then sold the loans to Wall Street)
Regular commercial banks were not offering alot of the loan products that got us into this mess.
The lawsuits you're referring to were made by people who had adequate down payment and couldn't get a loan because of the neighborhood the house was in or other things like that.
I challenge you to find me one lawsuit (that was won) where a person sued because they couldn't buy a house with no money down, or couldn't get an interest only or negative amortization loan.

I started my own thread about this awhile ago
http://www.gofuckyourself.com/showthread.php?t=860280

I basically put together the same dots that McClatchy newspapers did in this article Tony posted. Good find Tony.

[Snake Doctor]

Also, let's all just use logic for a moment.

The current credit crisis has been caused by the toxic mortgage securities that are on bank balance sheets. Until they can unload them OR put a value on them, they can't loan money because of reserve requirements.

IF those securities conformed to Fannie and Freddie standards, they could very easily sell them to Fannie and Freddie for FULL BOOK VALUE and go on with life.
The problem with the securities that are clogging up the system is that they DON'T CONFORM TO FANNIE AND FREDDIE STANDARDS, and that's why they're sold on the open bond market.

Fannie and Freddie loans are already guaranteed by the government, by virtue of the government taking them over. So while they did contribute to the overall housing bubble and subsequent pop, they have absolutely nothing to do with the current credit crisis or the $700 billion bailout package or the current carnage on Wall Street.

[IllTestYourGirls]

The fed printed too much money period. That is why we are here now. Now all the people that got us in the mess say print more money! Its insanity.