Here is where this economic mess all started

Discussion in 'Politics, Religion, Social Issues' started by Wotan31, Sep 29, 2008.

  1. Wotan31 macrumors 6502

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    #1
    Note the date on the article.

    http://query.nytimes.com/gst/fullpa...933A0575AC0A96F958260&sec=&spon=&pagewanted=1
    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.
     
  2. bobber205 macrumors 68020

    bobber205

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    #2
    That last sentence is as important as the rest of it. :)
     
  3. kavika411 macrumors 6502a

    kavika411

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  4. diamond.g macrumors 603

    diamond.g

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    #4
    That almost sounds like giving "minorities" the ability to own a house is the downfall of our economy. Serves us right for trying to let everyone get a piece of the "American Pie". :rolleyes:

    I am not sure loaning money to people that can't afford it is completely the fault of the loanee. Maybe the loaner has some fault as well... Bah, what a silly thought that was...
     
  5. leekohler macrumors G5

    leekohler

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    #5
    We've been through this before, haven't we? Haven't we discussed this to death?
     
  6. Queso macrumors G4

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    #6
    Erm....no. Partially right, but the economic mess started when people were convinced that spending beyond their means was actually a good idea. That was caused by Western banks to channel the huge amount of cheap money banks in the Far East were offering them and make profits in the meantime.

    And it most certainly is not related to any particular ethnic nor income group. Far too many people, right the way through the social spectrum, have spent beyond their income for too long, fooled into thinking spending power equals prosperity.
     
  7. leekohler macrumors G5

    leekohler

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    #7
    Exactly- I've seen this article posted in these forums already. It's disgusting how the right is trying to paint this as a problem caused by poor minorities.
     
  8. bobber205 macrumors 68020

    bobber205

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    #8
    I think, unfortunately, there is some truth in this. Though it's not all the fault of the minority groups.

    Minority groups tend to worse off financially. That's a fact.
    Worse off financially = less ability pay loans.

    Now I think the real blame lies in the stupidity of the banks to give loans that poorer people had no hopes in ever paying... :(

    If this has been said, I am sorry for echoing it. :)
     
  9. Queso macrumors G4

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    #9
    You wait, if that mud doesn't stick it'll all be down to terrorists :rolleyes:
     
  10. atszyman macrumors 68020

    atszyman

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    #10
    If that's where the mess started why are there bank failures beyond Freddie Mac and Fannie May?

    Sure bad loans may have caused their failures, but just because they were making bad loans did not force other banks to do that as well, or force the trading of debt (much of it bad) on Wall Street.

    Bad loans, deregulation and the housing bubble all led to this, no one party is to blame.

    Based on their performance so far in the crisis, Obama has been more calm, collected, and able to handle more than one thing at a time. McCain had to stop campaigning, threaten to cancel the debate and couldn't even trust his running mate to campaign in his stead while he went to D.C. to help "fix" the problems. With all of the responsibilities that the President has, I tend to put more confidence in one who can multitask and utilize their VP to do critical tasks than one who has to do it all and can only handle one thing at a time. Of course it does help that I'm more in line with the Democrat's platform than the GOP at this point in time.
     
  11. Wotan31 thread starter macrumors 6502

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    #11
    Bingo! This has nothing to do with race. Nothing. It has everything to do with the borrowers ability to repay the loan, and also with mis-guided government initiatives that ultimately lowered the standard for lending.

    It's disgusting how the left is trying to paint anyone as racist who dares to point out the inherently high risk in sub-prime lending.
     
  12. heehee macrumors 68020

    heehee

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    #12
    WOW! I guess it's the same as people blaming McDonalds or cigarette companies for heart attacks. What happened to people taking responsibilities for their actions? It's always someone else's fault. :rolleyes:
     
  13. Wotan31 thread starter macrumors 6502

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    In 1999, everyone was talking tech stocks and tech bubble. No one was predicting a government bailout of the financial industry due to failures in sub-prime lending. Nobody. This author hit the nail on the head with that prediction!!
     
  14. Peace macrumors P6

    Peace

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    #14
    If you really read that Lee you'll see they are trying to do the same thing they did in the last two elections..

    Blame Clinton..

    They don't want to discuss the current situation choosing rather to go after Clinton as usual.
     
  15. Queso macrumors G4

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    It has everything to do with promoting the ideal that consumerism and material possessions are the only thing we should measure ourselves by.

    The philosophy of consumerism's natural destination is always ruin. As time progresses, more and more of society's financial resources become locked up into just sustaining the current position. Debt increases, and more and more people get caught in a cycle of having to borrow money to pay off those debts. Eventually the tipping point is reached whereby the money supply cannot keep up with the need for debt and the entire house of cards collapses.

    The alarm bells for the current mess started ringing when people re-mortgaging their homes continually released equity to fund their consumerism. By the time debt consolidation loans started advertising on TV the klaxons were deafening.....but by that point governments actually required people to consume in order to keep the machines of both production and tax collection running.

    Always remember:- Whatever they tell you, you are NOT a consumer. You are a human being. You don't NEED any of that crap they try and sell you.

    And an even bigger thing to remember :- Consumerism ≠ Capitalism!
     
  16. leekohler macrumors G5

    leekohler

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    #16
    Of course they are. It's a tactic as old as the hills and it's not working this time.
     
  17. Wotan31 thread starter macrumors 6502

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    #17
    I agree with you! Yes I do!

    However - with McDonalds and cigarettes, the consequences are purely for the individual to bear. And rightly so.

    With lending and the financial industry, as we've clearly seen, the individual responsibility (or lack there of) of a large number of borrowers can have a profound and detrimental impact on the entire economy. That's why government and commercial organizations exist to regulate interest rates and lending practices - which they clearly did a piss-poor job of by implementing the policy described in the article.
     
  18. GfPQqmcRKUvP macrumors 68040

    GfPQqmcRKUvP

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    #18
    How about when the government "encourages" McDonalds (by exerting political and economic pressure) to practically give away their cheeseburgers to already-obese people?
     
  19. Wotan31 thread starter macrumors 6502

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    #19
    Ha! I love it! Discussing this topic too much? Or avoiding the topic altogether?
    It's BOTH!! Hahahahahaa! How typical!
     
  20. hulugu macrumors 68000

    hulugu

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    #20
    F&F spent a massive amount of money lobbying Congress. If this was such a problem and F&F felt they (along with other mortgage companies) were being forced by the government to extend out bad loans, then this either proves that their money was poorly spent or, and I think more likely, they were making money and thus ignored the problem.

    This also conveniently ignores companies like Countrywide, who knew exactly what they were doing and made millions writing not only sub-prime loans, but 110% or 100% LTV, or loans without any financial safeguards: including the lack of credit or income checks. In many cases, people were allowed to "write down" their income and were encouraged to lie.
    This didn't come down from F&F or HUD or the CRI, this came because the agents knew they could pass these loans up into the system and make huge amounts of money.

    In reality, the whole thing was an inverted pyramid scheme with the loan officers at the bottom and Wall Street at the top. Wall Street got left holding the bag.

    Furthermore, the system has been designed, through incompetence, to falter once the housing boom ended. Blame the government all you want, blame the borrowers all you want, but remember that these are convenient scapegoats for the real scalawags who made huge amounts of money while wrecking the economy.


    To the OP, this is the third thread on this subject, did you read the others?
     
  21. leekohler macrumors G5

    leekohler

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    #21
    The topic hasn't been avoided at all. It's been discussed quite a bit. And new threads on old news are far from encouraged here. If you could be bothered to search the forums once in a while, you'd know that.

    http://forums.macrumors.com/showthread.php?t=568741&page=3

    Please use your mouse or scroll wheel to scroll near the bottom of the page.
     
  22. CorvusCamenarum macrumors 65816

    CorvusCamenarum

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    #22
    I posted a link to a similar article in the Ron Paul/bailout thread and got the same treatment. I guess IOKIYTNYT.

    Actually I blame Bush more than I ever would Clinton in this case. Bush is the one who pushed the F&F quotas to untenable levels.
     
  23. Ugg macrumors 68000

    Ugg

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    #23
    This is what it was all about, the financial institutions wanting a guarantee on unviable loans. Anyone who thinks this is about minorities obviously has a racist agenda. This is about the banks wanting guarantees to make stupid loans.
     
  24. leekohler macrumors G5

    leekohler

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    #24
    No- it's never OK. It's a completely inaccurate POV, as was also pointed out in that thread.


    Thank God for small miracles. ;)
     
  25. Aranince macrumors 65816

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    #25
    I'm pretty sure its partially the Democrats fault, and partially the people's fault, and it's Bush's fault. The democrats pulled the whole discrimination card to pretty much force the banks into giving out loans. It's the people's fault because they should not have gotten loans they could not pay for. People really need to take personal responsibility and not glide through life expecting the government to hold their hand.
     

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