Where Did The Mortgage Meltdown Start???

 Fannie Mae Eases Credit To Aid Mortgage Lending

  freemoney

  I have been getting some very emotional emails from people telling me that Former President Bush caused the Mortgage Meltdown.  This could not be any further from the truth.  If you want to say that he did not force the issue hard enough to correct the problem I can get behind that.  I have had many email conversations with readers discussing this situation which for the most part have fallen on deaf ears.  I understand that this is a serious issue.  Let’s look at a few historical news posting.  At the end of this posting you will find an article that the liberal New York Times posted discussing the beginning of the Mortgage Meltdown.  Yes the Beginning because this is what put the wheels in motion.

 

  Bush did make several attempts to address the pending mortgage meltdown only to come up against serious pressure from Democrats Chris Dodd and Barney Frank telling us that nothing is wrong.  Bush clearly believed Dodd and Frank or enjoyed telling us that home ownership was at an all time high repeatedly.  He should have gotten Fannie and Freddie to tighten up the guidelines a bit to head off the pending Mortgage Meltdown.  In any case it is easy to talk after the fact about what should have been done. 

  

  I am just one guy that deals with the mortgage industry on a dally bases.  I live and breathe it.  I have to wonder why main stream media is unwilling to report accurate information about real estate, mortgages, foreclosures, loan modifications, the economy, ect, ect ,ect.  What has happened to real journalist?  Ratings are so bad at MSNBC & CNN that even Geraldo has moved over to FOX.  Today Vise President Bidden is meeting with Union Leaders at a plush resort, The Fontaine Bleau, in Miami Florida and only hand picked reporters will be allowed to attend.  This is not change!  This is clearly take it and like it!  Is this “Change” you can believe in?

 

    Below is the article posted on September 27, 2008 that the Democrats and Bill Clinton are not happy with.  I am bringing up these past articles to show the beginning of the problem.  Now that we know where the problem began let’s fix the problem.  We need to stop the all of this bailout money to these companies that did bad business.  They need to file for bankruptcy protection just as the system has already set in place.  To keep these brain dead companies on life support is ridiculous.  So why are we doing it?  Who is it benefiting? Where or who’s hands is all of this money ending up in?

 

 

 

Clinton, Raines, Fannie Mae and Obama – 9/30/1999

Quoting The New York Times from 9/30/1999:

 

“In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.”“Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

 

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.

 ‘Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements,’ said Franklin D. Raines

“In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.”

 

 

 

 

 

New York Times Article

By STEVEN A. HOLMES

Published: Thursday, September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.

”Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements,” said Franklin D. Raines, Fannie Mae’s chairman and chief executive officer. ”Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.”

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

Under Fannie Mae’s pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 — a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation’s biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

Home ownership has, in fact, exploded among minorities during the economic boom of the 1990’s. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University’s Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

 

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