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triple
09-26-2008, 10:50 AM
http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon

Fannie Mae Eases Credit To Aid Mortgage Lending

By STEVEN A. HOLMES
Published: 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.

In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

Mr. Laz
09-26-2008, 10:52 AM
implying that all this is "Clinton's fault"????

HonestChieffan
09-26-2008, 10:59 AM
Well no. Carter actually started the ball rolling, Clintom got it done and Frank and his cronies crashed the entire thing.

triple
09-26-2008, 11:32 AM
implying that all this is "Clinton's fault"????

just posting a relevant article on a current event

The_Grand_Illusion
09-26-2008, 01:02 PM
I don't care which side of the aisle you are on. We do need to understand how we got to this point. This is the best video I've seen on how we got here. What should piss off all Americans, regardless of your party affilliation is how the same people responsible for this mess is trying to pass off a big CYA to cover up for this mess. There is people responsible on both sides. I hate the political arena these days but we DO need to understand how we got here and have a VERY responsible solution to this problem. I feel it's very, very important. Like the video says, we all make mistakes, but we need good solutions, not a CYA solution.

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BucEyedPea
09-26-2008, 01:10 PM
implying that all this is "Clinton's fault"????

That is when those regs in Glass-Stegall were proposed. And it's those de-regs the Dems are saying caused this. But it's not just Clinton's fault, as it was done with a Republican congress. Clinton did sign it though. I actually posted this fact last week. Both parties are selling us down the river. The are both owned by the same special interests.

All the ex-CEO's of Goldman have been Democrats.
They scratch each other's backs using govt. Don't you find it ironic that the Dems are backing this bailout but not the Republicans? They really can't make it without govt. The market punishes the right people.

jidar
09-26-2008, 01:57 PM
That is when those regs in Glass-Stegall were proposed. And it's those de-regs the Dems are saying caused this. But it's not just Clinton's fault, as it was done with a Republican congress. Clinton did sign it though. I actually posted this fact last week. Both parties are selling us down the river. The are both owned by the same special interests.

All the ex-CEO's of Goldman have been Democrats.
They scratch each other's backs using govt. Don't you find it ironic that the Dems are backing this bailout but not the Republicans? They really can't make it without govt. The market punishes the right people.

What are you talking about? The republicans are pushing this bailout, they were the ones who originally proposed the first draft.

jidar
09-26-2008, 02:09 PM
I don't care which side of the aisle you are on. We do need to understand how we got to this point. This is the best video I've seen on how we got here. What should piss off all Americans, regardless of your party affilliation is how the same people responsible for this mess is trying to pass off a big CYA to cover up for this mess. There is people responsible on both sides. I hate the political arena these days but we DO need to understand how we got here and have a VERY responsible solution to this problem. I feel it's very, very important. Like the video says, we all make mistakes, but we need good solutions, not a CYA solution.

<object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/H5tZc8oH--o&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><embed src="http://www.youtube.com/v/H5tZc8oH--o&hl=en&fs=1" type="application/x-shockwave-flash" allowfullscreen="true" width="425" height="344"></embed></object>

Twice I've responded to that video posting this, but it was deleted both times:

The video is misleading, it builds up the impression that Fannie and Freddie were required to carry $5trillion in subprime debt which suddenly went bad, but that's not what happened at all. Fannie was not required to loan $5trillion in bad mortgages, on way no how. What happened was the entire investment banking industry went into subprime in a big way because they found it was making money on paper, not because regulations said they had to. There were simply no regulations saying they had to invest this much into subprime, they did it out of greed.

The irony of this argument is twofold:
1: The deregulation of the late 90s is what allowed this behavior to continue, prior to the deregulation these investment vehicles are illegal.

2: That here are republicans trying to say this is the democrats fault because they wanted to regulate and the dems wouldn't let them. Maybe that happened, but it's pretty whacky. Even so regulating F&F out of that market doesn't stop the private banks from continuing with the same practice just like they were doing all along.

The point here is that yes Fannie and Freddie had their hand in the cookie jar, but in this context they were just one of many doing so and not the root cause of the problem, which was lack of oversight in the first place.

BucEyedPea
09-26-2008, 02:21 PM
What are you talking about? The republicans are pushing this bailout, they were the ones who originally proposed the first draft.
No they are not, not in the House, they are stalling it.
Barney Frank is pushing it hard too, and he's a Democrat.
The Dems are willing to go along because afterall, they are socialists and thinks it saves Main street.
Just because Bush and Paulson originated it doesn't mean all the Rs are for it...they aren't.

jidar
09-26-2008, 02:24 PM
No they are not, not in the House, they are stalling it.
Barney Frank is pushing it hard too, and he's a Democrat.
The Dems are willing to go along because afterall, they are socialists and thinks it saves Main street.
Just because Bush and Paulson originated it doesn't mean all the Rs are for it...they aren't.

Yep, you're right. I wasn't up to speed with the latest developments.

Apparently the Republican party still has a few people against corporate welfare in it.

The_Grand_Illusion
09-26-2008, 02:33 PM
Twice I've responded to that video posting this, but it was deleted both times:

The video is misleading, it builds up the impression that Fannie and Freddie were required to carry $5trillion in subprime debt which suddenly went bad, but that's not what happened at all. Fannie was not required to loan $5trillion in bad mortgages, on way no how. What happened was the entire investment banking industry went into subprime in a big way because they found it was making money on paper, not because regulations said they had to. There were simply no regulations saying they had to invest this much into subprime, they did it out of greed.

The irony of this argument is twofold:
1: The deregulation of the late 90s is what allowed this behavior to continue, prior to this these investment vehicles are illegal.

2: That here are republicans trying to say this is the democrats fault because they wanted to regulate and the dems wouldn't let them. Maybe that happened, but it's pretty whacky. Even so regulating F&F out of that market doesn't stop the private banks from continuing with the same practice just like they were doing all along.

The point here is that yes Fannie and Freddie had their hand in the cookie jar, but in this context they were just one of many doing so and not the root cause of the problem, which was lack of oversight in the first place.

I'm not saying there isn't enough blame to go around. What ticks me off and should any responsible American, is there were attempts to fix this in the past and it was obstructed, mostly by high ranking Democrats. Hell, Dodd should have been the one to oversee this but he was too busy taking the most campaign contributions from FM & FM. Barack, Kerry, Hillary, as well as other top Dems and some Repubs were at the head of the list in receiving campaign contributions from FM & FM. The Dems stopped any attempt to fix this mess before we got to this point.

Look, this started out as a good idea but eventually went corrupt. Talk about the law of unintended consequences going FUBAR. This is definitely it and should be investigated. What also gets my blood boiling is the same folks mainly responsible for this mess are out there blaming everyone else for this mess and asking the American people for tons of money to cover their ass. I'm so against just throwing money at the problem, we all need to work together to come up with a solution that is good for all. I believe it's that important.

jidar
09-26-2008, 02:40 PM
I'm not saying there isn't enough blame to go around. What ticks me off and should any responsible American, is there were attempts to fix this in the past and it was obstructed, mostly by high ranking Democrats. Hell, Dodd should have been the one to oversee this but he was too busy taking the most campaign contributions from FM & FM. Barack, Kerry, Hillary, as well as other top Dems and some Repubs were at the head of the list in receiving campaign contributions from FM & FM. The Dems stopped any attempt to fix this mess before we got to this point.

Look, this started out as a good idea but eventually went corrupt. Talk about the law of unintended consequences going FUBAR. This is definitely it and should be investigated. What also gets my blood boiling is the same folks mainly responsible for this mess are out there blaming everyone else for this mess and asking the American people for tons of money to cover their ass. I'm so against just throwing money at the problem, we all need to work together to come up with a solution that is good for all. I believe it's that important.

Um. One of the things you should have taken from what I said was that this legislation would have done precisely nothing to stop this crisis.

The_Grand_Illusion
09-26-2008, 02:50 PM
Um. One of the things you should have taken from what I said was that this legislation would have done precisely nothing to stop this crisis.

Well, if you want to frame the issue that way, you have a point. But, and this is a big but, you ignore all the prior warnings coming from so many people, Bush, Greenspan, McCain, Elizebeth Dole, all documented, that something needed to be done and any attempt for change was obstructed by these Democrats. All the while, those top Dems and some Repubs were taking big campaign money from these corrupt companies. There is much in that video that can be verified and the author gives people the links. While you may have a point and are trying to downplay this in such a way, there is so much more to this corrupt story. It needs to be investigated.

triple
09-26-2008, 02:51 PM
the whole point of the program was social engineering, to elevate minority and low income home ownership. an admirable goal in the objective, but which party do you really think would be throwing themselves in front of trains for that?

tiptap
09-26-2008, 06:19 PM
That is when those regs in Glass-Stegall were proposed. And it's those de-regs the Dems are saying caused this. But it's not just Clinton's fault, as it was done with a Republican congress. Clinton did sign it though. I actually posted this fact last week. Both parties are selling us down the river. The are both owned by the same special interests.

All the ex-CEO's of Goldman have been Democrats.
They scratch each other's backs using govt. Don't you find it ironic that the Dems are backing this bailout but not the Republicans? They really can't make it without govt. The market punishes the right people.


I thought Poulson was an old Erlichman's aide from the Nixon era. What other CEO's do you suggest are Democrats. I am not saying they didn't donate to the Dems.

banyon
09-26-2008, 06:24 PM
the whole point of the program was social engineering, to elevate minority and low income home ownership. an admirable goal in the objective, but which party do you really think would be throwing themselves in front of trains for that?

Certainly not the Republicans. :rolleyes:

President Reiterates Goal on Homeownership
Remarks by the President on Homeownership
Department of Housing and Urban Development
Washington, D.C.

http://www.whitehouse.gov/news/releases/2002/06/20020618-1.html
Policy in Focus: Home-Ownership


10:30 A.M. EDT

THE PRESIDENT: Well, thank you all very much for that kind welcome. I'm here for a couple of reasons. First, I want to thank you all for your service to the greatest nation on the face of the Earth. (Applause.) I'm here to celebrate National Homeownership Month, because I believe owning a home is an essential part of economic security. And I'm concerned about the security of America. (Applause.)

I had the pleasure on June the 12th of speaking to the last President who visited HUD. I wish number 41 a happy birthday. (Applause.) And I'm glad you've invited me here today, I really am. I first am really proud of Mel Martinez and Alphonso Jackson. I've known Mel for a while, I've known Alphonso for a long time. There was no question in my mind that these two fine Americans would do a great job in leading this important agency. (Applause.)

I want to thank all those who have assumed leadership roles, who have left your states and your friends to come and serve America. And that's important. Service to our country is an incredibly important part of being an American.

I want to thank all those who have worked here for a short time and long time, who will be here after we leave. I want to thank a man named Larry Thompson, who has worked here for -- where's Larry? (Applause.) Larry's been here for 30 years. And I want to -- appreciate your service, Larry, and thank you for setting such a fine example for many others inside this building who serve the country.

Let me first talk about how to make sure America is secure from a group of killers, people who hate -- you know what they hate? They hate the idea that somebody can go buy a home. They hate freedom; that's what they hate. They hate the fact that we worship freely. They don't like the thought of Christian, Jew and Muslim living side by side in peace. They don't like that at all. And therefore, they -- since they resent our freedoms, they feel like they should take out their resentment by destroying innocent lives. And this country will do everything we can possibly do to protect America. (Applause.)

And that's going to mean making sure our homeland is secure, and I appreciate the progress we're making on setting up a Department of Homeland Security. I know it's going to be hard for some in Congress to give up a little power here and there, but I think it's going to happen because people realize we're here to serve the American people, not here to serve a political party or turf in the United States Congress. (Applause.)

But the best way to secure the homeland is to hunt them down one by one. And I mean hunt them down one by one and bring them to justice, which is precisely what America will do. (Applause.)...


...But I believe owning something is a part of the American Dream, as well. I believe when somebody owns their own home, they're realizing the American Dream. They can say it's my home, it's nobody else's home. (Applause.) And we saw that yesterday in Atlanta, when we went to the new homes of the new homeowners. And I saw with pride firsthand, the man say, welcome to my home. He didn't say, welcome to government's home; he didn't say, welcome to my neighbor's home; he said, welcome to my home. I own the home, and you're welcome to come in the home, and I appreciate it. (Applause.) He was a proud man. He was proud that he owns the property. And I was proud for him. And I want that pride to extend all throughout our country.

One of the things that we've got to do is to address problems straight on and deal with them in a way that helps us meet goals. And so I want to talk about a couple of goals and -- one goal and a problem.

The goal is, everybody who wants to own a home has got a shot at doing so. The problem is we have what we call a homeownership gap in America. Three-quarters of Anglos own their homes, and yet less than 50 percent of African Americans and Hispanics own homes. That ownership gap signals that something might be wrong in the land of plenty. And we need to do something about it.

We are here in Washington, D.C. to address problems. So I've set this goal for the country. We want 5.5 million more homeowners by 2010 -- million more minority homeowners by 2010. (Applause.) Five-and-a-half million families by 2010 will own a home. That is our goal. It is a realistic goal. But it's going to mean we're going to have to work hard to achieve the goal, all of us. And by all of us, I mean not only the federal government, but the private sector, as well.

And so I want to, one, encourage you to do everything you can to work in a realistic, smart way to get this done. I repeat, we're here for a reason. And part of the reason is to make this dream extend everywhere.

I'm going to do my part by setting the goal, by reminding people of the goal, by heralding the goal, and by calling people into action, both the federal level, state level, local level, and in the private sector. (Applause.)

And so what are the barriers that we can deal with here in Washington? Well, probably the single barrier to first-time homeownership is high down payments. People take a look at the down payment, they say that's too high, I'm not buying. They may have the desire to buy, but they don't have the wherewithal to handle the down payment. We can deal with that. And so I've asked Congress to fully fund an American Dream down payment fund which will help a low-income family to qualify to buy, to buy. (Applause.)

We believe when this fund is fully funded and properly administered, which it will be under the Bush administration, that over 40,000 families a year -- 40,000 families a year -- will be able to realize the dream we want them to be able to realize, and that's owning their own home. (Applause.)

The second barrier to ownership is the lack of affordable housing. There are neighborhoods in America where you just can't find a house that's affordable to purchase, and we need to deal with that problem. The best way to do so, I think, is to set up a single family affordable housing tax credit to the tune of $2.4 billion over the next five years to encourage affordable single family housing in inner-city America. (Applause.)

The third problem is the fact that the rules are too complex. People get discouraged by the fine print on the contracts. They take a look and say, well, I'm not so sure I want to sign this. There's too many words. (Laughter.) There's too many pitfalls. So one of the things that the Secretary is going to do is he's going to simplify the closing documents and all the documents that have to deal with homeownership.

It is essential that we make it easier for people to buy a home, not harder. And in order to do so, we've got to educate folks. Some of us take homeownership for granted, but there are people -- obviously, the home purchase is a significant, significant decision by our fellow Americans. We've got people who have newly arrived to our country, don't know the customs. We've got people in certain neighborhoods that just aren't really sure what it means to buy a home. And it seems like to us that it makes sense to have a outreach program, an education program that explains the whys and wherefores of buying a house, to make it easier for people to not only understand the legal implications and ramifications, but to make it easier to understand how to get a good loan.

There's some people out there that can fall prey to unscrupulous lenders, and we have an obligation to educate and to use our resource base to help people understand how to purchase a home and what -- where the good opportunities might exist for home purchasing.

Finally, we want to make sure the Section 8 homeownership program is fully implemented. This is a program that provides vouchers for first-time home buyers which they can use for down payments and/or mortgage payments. (Applause.)

So this is an ambitious start here at the federal level. And, again, I repeat, you all need to help us every way you can. But the private sector needs to help, too. They need to help, too. Of course, it's in their interest. If you're a realtor, it's in your interest that somebody be interested in buying a home. If you're a homebuilder, it's in your interest that somebody be interested in buying a home.

And so, therefore, I've called -- yesterday, I called upon the private sector to help us and help the home buyers. We need more capital in the private markets for first-time, low-income buyers. And I'm proud to report that Fannie Mae has heard the call and, as I understand, it's about $440 billion over a period of time. They've used their influence to create that much capital available for the type of home buyer we're talking about here. It's in their charter; it now needs to be implemented. Freddie Mac is interested in helping. I appreciate both of those agencies providing the underpinnings of good capital.

banyon
09-26-2008, 06:24 PM
I thought Poulson was an old Erlichman's aide from the Nixon era. What other CEO's do you suggest are Democrats. I am not saying they didn't donate to the Dems.

He was Nixon and then Goldman-Sachs.