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From Clinton to Obongo

I wouldn't worry about it. My plan is to bundle up all these risker mortgages and then slice them up into tranches with different risk/return characteristics. I bet those guys on wall street will snap them right up.

We'll take out insurance on them too, so there's no way they can fail.
 
I hate to tell you, but government lending programs didn't cause the housing meltdown, and blaming it on Clinton was some right wing spin so absurd people are still laughing about it.
 
Eh I'd argue that the GLBA definitely played a role and as such Clinton deserves a share of the blame. But yeah, the idea that lax lending standards / GSEs were the causes has been discredited so many times over I dont even think the current GOP is running with that line anymore.
 
mrplunkey said:
The CRA definitely helped getting the ball rolling.
Click to expand...

Nah, it really didnt.

goose333 said:
so government had nothing to do with the crash?? You really believe that?
Click to expand...

Government, how? Last I checked Bill Clinton was affiliated with this thing you call the government, and that he signed a bill which effectively contributed to the situation. It's right there in my previous post.
 
Headholio said:
84.3 percent of subprime loans in 2006 were made by financial institutions not governed by the CRA.

http://www.traigerlaw.com/publicati..._llp_cra_foreclosure_study_1-14-08.pdf#page=2
Click to expand...

Yessir, although to be fair you should have given a warning that the data included would challenge their dogma. Some folks cant handle stuff like that.

Here's another one w/r/t fannie/freddie, and this one is considered to be one of the most comprehensive and informative.

ETA while the study you posted provides some high level value (despite being restricted to a 1 year time frame), it's also important to realize that historically loans provided by CRA "member" banks have similar if not lower default rates than their private counterparts.

Data like that is a big reason why the GOP moved away from the CRA talking point and got back to simply shouting "government."
 
Despite the fact that CRA appears to have increased bank and thrift lending in low- and moderate-income communities, such institutions are not the only ones operating in these areas. In fact, with new and lower-cost sources of funding available from the secondary market through securitization, and with advances in financial technology, subprime lending exploded in the late 1990s, reaching over $600 billion and 20% of all originations by 2005. More than half of subprime loans were made by independent mortgage companies not subject to comprehensive federal supervision; another 30 percent of such originations were made by affiliates of banks or thrifts, which are not subject to routine examination or supervision, and the remaining 20 percent were made by banks and thrifts. Although reasonable people can disagree about how to interpret the evidence, my own judgment is that the worst and most widespread abuses occurred in the institutions with the least federal oversight.
The housing crisis we face today, driven by serious problems in the subprime lending, suggests that our system of home mortgage regulation, including CRA, is seriously deficient. We need to fill what my friend, the late Federal Reserve Board Governor Ned Gramlich aptly termed, "the giant hole in the supervisory safety net." Banks and thrifts are subject to comprehensive federal regulation and supervision; their affiliates far less so; and independent mortgage companies, not at all. Moreover, many market-based systems designed to ensure sound practices in this sector-broker reputational risk, lender oversight of brokers, investor oversight of lenders, rating agency oversight of securitizations, and so on -- simply did not work. Conflicts of interest, lax regulation, and "boom times" covered up the extent of the abuses -- at least for a while, at least for those not directly affected by abusive practices. But no more.

http://financialservices.house.gov/uploadedfiles/061411barr.pdf


http://financialservices.house.gov/uploadedfiles/061411barr.pdf
 
Yeah, let's completely discount the fact that the government created the market in the first place.

With that logic, Steve Jobs didn't play a role in the development of the PC industry because only 5.2% of the PCs shipped worldwide last year were macs.
 
Yeah, I'm old fashioned that way.

If an organization invented it, I tend to give them credit for "getting the ball rolling".
 
Financial Crisis Inquiry Commission:

The Commission concludes the CRA was not a significant factor in subprime lending or the crisis. Many subprime lenders were not subject to the CRA. Research indicates only 6% of the high cost loans - a proxy for subprime loans - had any connection to the law. Loans made by CRA-regulated lenders in the neighborhoods in which they were required to lend were half as likely to default as similar loans made in the same neighborhoods by independent mortgage originators not subject to the law.

http://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf
 
How was it created by the government? Subprime lending is the spawn of greed. No government regulation forced banks to loan 125% loan to value, or to give loans without income verification, or to loan on homes that were never even appraised. It was irresponsible decision making, primarily by the least regulated lenders. The CRA requirements were more stringent than many banks wanted to follow, which is why CRA loans had a lower default rate.
 
but lenders lend based on guidelines. Someone else will buy that loan based on it being written by their guidelines. It ain't those smaller lenders making the loans either. The loans get sold off quick as they're made.

You tell me to go lend money to people based on a set of guidelines that you write and you will pay me xx% to do so and I will go get you what you asked for. Now it's my fault?
 
HUD became Frannie and Freddie's regulator in '92. In '95, HUD allowed Frannie and Freddie to loosen their guidelines and allow subprime loans to be written. The market really took off in around 200-2001. Clinton allowed it all to happen. A ton of other things happened that made it snowball out of control, but it started with him.
 
Headholio said:
How was it created by the government? Subprime lending is the spawn of greed. No government regulation forced banks to loan 125% loan to value, or to give loans without income verification, or to loan on homes that were never even appraised. It was irresponsible decision making, primarily by the least regulated lenders. The CRA requirements were more stringent than many banks wanted to follow, which is why CRA loans had a lower default rate.
Click to expand...

Fannie and Freddie are regulated by HUD. All home loans are, aside from private notes. There are FHA loans available right now that allow you to borrow more than the home is worth.
 
ceo said:
but lenders lend based on guidelines. Someone else will buy that loan based on it being written by their guidelines. It ain't those smaller lenders making the loans either. The loans get sold off quick as they're made.

You tell me to go lend money to people based on a set of guidelines that you write and you will pay me xx% to do so and I will go get you what you asked for. Now it's my fault?
Click to expand...

The guidelines you talk about are guidelines created by the banks, not the government. The community reinvestment act has guidelines, but only 6% of the subprime loans had anything to do with the CRA, and only a small portion of those failed. In other words, the CRA had nothing to do with the housing melt down. It also had a better track record than non-CRA loans during the same time period.

Lending abuse and irresponsible decision making were the result of greedy bankers. The idea that the government forced banks to do these things is false, plain and simple. I documented it pretty well in this thread already.
 
jnevin said:
HUD became Frannie and Freddie's regulator in '92. In '95, HUD allowed Frannie and Freddie to loosen their guidelines and allow subprime loans to be written. The market really took off in around 200-2001. Clinton allowed it all to happen. A ton of other things happened that made it snowball out of control, but it started with him.
Click to expand...

HUD did indeed allow it, but again youre overstating the contribution that Fannie/Freddie played.

There is clear evidence that Fannie and Freddie started purchasing lower quality loans at the peak of the housing market. However, it is also evident that they did so to regain market share from less-regulated private-label security issuers and finance companies. Housing goals do not appear to have played a significant role because Fannie and Freddie remained less concentrated in low-income market segments compared to the private market. Still, the high LTV, low FICO score, and alternative documentation loans that Fannie and Freddie purchased are performing significantly better than private subprime loans, suggesting the enterprises retained stronger risk management procedures than private financial companies.

Ultimately, profit not policy was what motivated Fannie and Freddie and loan products not borrowers were what caused their collapse. These facts have important implications for reform of the housing system, including countercyclical liquidity and how to approach low-income homeownership in the future.
Click to expand...

That's settled.

You're right about Clinton's role though. However, the GLBA and CFMA are where we should hold him and the government accountable.
 
mrplunkey said:
Yeah, I'm old fashioned that way.

If an organization invented it, I tend to give them credit for "getting the ball rolling".
Click to expand...

Ok, so you realize your comment didnt make any sense and you have no data to support it. Thanks - kudos on the strawman attempt, though.
 
jnevin said:
HUD became Frannie and Freddie's regulator in '92. In '95, HUD allowed Frannie and Freddie to loosen their guidelines and allow subprime loans to be written. The market really took off in around 200-2001. Clinton allowed it all to happen. A ton of other things happened that made it snowball out of control, but it started with him.
Click to expand...

You are making a strong case for more government regulation. :lmao:
 
mrplunkey said:
The CRA definitely helped getting the ball rolling.
Click to expand...

The CRA was basically put in place to avoid redlining. Equal opportunity for home buyers. Fannie and Freddie had a number of SISA and no doc loans that are really responsible for the inflation in home values and a ton of foreclosures. A lot of sub prime borrowers used the loans as band aids and refi'd into FHA loans. FHA loans don (or didn't) have a minimum credit score. You just had to be current on your loan or rental history, your debt ratios had to be in check, and there were BK seasoning requirements. Thing is, DU, DO, and LP would assess all of the information put into an application and would allow exceptions. So you'd get FHA borrowers that usually had unstable employment, low income, and shaky credit history into gov't backed loans.
 
75th said:
HUD did indeed allow it, but again youre overstating the contribution that Fannie/Freddie played.



That's settled.

You're right about Clinton's role though. However, the GLBA and CFMA are where we should hold him and the government accountable.
Click to expand...

Right, but what's the amount of conventional conforming loans that went into default compared to subprime vs the percentage of them that did?
 
Headholio said:
You are making a strong case for more government regulation. :lmao:
Click to expand...

Nice job redsam. You went down a path that nobody was on, threw out a statement that had nothing to do with what was being talked about, and used a dumb fucking smiley to act like you proved some sort of point.
 
jnevin said:
Right, but what's the amount of conventional conforming loans that went into default compared to subprime vs the percentage of them that did?
Click to expand...

Not sure off the top of my head (would be interesting to know), however wasnt one of the significant problems was lenders pushing folks that didnt need conforming loans (eg folks with good employment/credit) into these types of loans due to incentives?

That sort of supports the theory that greed was the primary driver of the crisis.

Subprime Debacle Traps Even Very Credit-Worthy - WSJ.com
 
75th said:
Not sure off the top of my head (would be interesting to know), however wasnt one of the significant problems was lenders pushing folks that didnt need conforming loans (eg folks with good employment/credit) into these types of loans due to incentives?

That sort of supports the theory that greed was the primary driver of the crisis.

Subprime Debacle Traps Even Very Credit-Worthy - WSJ.com
Click to expand...

Well, there were conforming loans backed by fannie and freddie called EA (Expanded Approval) loans that were honestly worse than subprime loans. I do think there were brokers that would try to get borrowers that were prime, or on the bubble of being prime, to take subprime loans on second homes or investment properties. Less $$ down, and there were usually kickers on back end pricing if their credit was at certain scores.

One thing to keep in mind is, a 720+ fico doesn't make a borrower prime in home lending.
 
jnevin said:
Well, there were conforming loans backed by fannie and freddie called EA (Expanded Approval) loans that were honestly worse than subprime loans. I do think there were brokers that would try to get borrowers that were prime, or on the bubble of being prime, to take subprime loans on second homes or investment properties. Less $$ down, and there were usually kickers on back end pricing if their credit was at certain scores.

One thing to keep in mind is, a 720+ fico doesn't make a borrower prime in home lending.
Click to expand...

Good call. The elephant weve ignored is the substantial role our cohorts on Wall St played in this. Foreclosures and a housing bubble burst would have sucked on their own, but the primary reason for the economic woes we went through was due to the compounding effects of this brought on by greed/lack of oversight on firms such as AIG, JPM, etc. Which, again, is why Clinton deserves a ton of the blame. The GLBA and CFMA set the stage. Folks like $50k incomes buying $500k homes played a role, but that role was literally peanuts compared to the role of financial firms.

And then, of course, we bailed them out. That was our governments biggest addition to this crisis.
 
75th said:
Not sure off the top of my head (would be interesting to know), however wasnt one of the significant problems was lenders pushing folks that didnt need conforming loans (eg folks with good employment/credit) into these types of loans due to incentives?

That sort of supports the theory that greed was the primary driver of the crisis.

Subprime Debacle Traps Even Very Credit-Worthy - WSJ.com
Click to expand...

http://www.ritholtz.com/blog/wp-content/uploads/2011/07/Unbenannt1.png

That kind of answers the question, but the important thing to see in that graph is that Fannie and Freddie higher risk loans performed better than the private sector, roughly the same as the national default rate, and did not account for the much larger subprime crisis.
 
jnevin said:
Nice job redsam. You went down a path that nobody was on, threw out a statement that had nothing to do with what was being talked about, and used a dumb fucking smiley to act like you proved some sort of point.
Click to expand...

Listen plunkey jr. just because you are too stupid to understand the point, doesn't mean I didn't make one.

The point is that Republicans argue against Government regulation but at the same time blame Clinton for loosening regulation.
Hypocricy.

Now onward, I've already shown that your initial presumption about CRA loans caused the meltdown is wrong, and now I'm going to show you that you other talking point concerning Fannie and Freddie being to blame is also wrong, so pay attention.
 
Did Fannie and Freddie buy high-risk mortgage-backed securities? Yes. But they did not buy enough of them to be blamed for the mortgage crisis. Highly respected analysts who have looked at these data in much greater detail than Wallison, Pinto, or myself, including the nonpartisan Government Accountability Office, the Harvard Joint Center for Housing Studies, the Financial Crisis Inquiry Commission majority, the Federal Housing Finance Agency, and virtually all academics, have all rejected the Wallison/Pinto argument that federal affordable housing policies were responsible for the proliferation of actual high-risk mortgages over the past decade.
Click to expand...

Wallison: Still Wrong About Genesis of Housing Crisis | The Big Picture
 
Federal Housing Finance Agency Found That Fannie, Freddie Loans Posed Less Credit Risk Than Those Financed With Private-Label Mortgage-Backed And Asset-Backed Securities. According to a September 2010 report by the Federal Housing Finance Agency, single-family mortgage loans originated from 2001 through 2008 and financed by Fannie and Freddie had higher credit scores, which are "associated with" lesser "mortgage credit risk," than did mortgages financed with private-label mortgage-backed securities. The report further found that loans financed by Fannie and Freddie were more likely to be fixed-rate -- which means they performed better than adjustable-rate loans in the analyzed data -- and were less likely to ever be "90-days delinquent" than mortgages financed with private-label mortgage-backed securities.
Click to expand...

http://www.fhfa.gov/webfiles/16711/RiskChars9132010.pdf
 
CONCLUSIONS OF THE
FINANCIAL CRISIS INQUIRY COMMISSION

We conclude that these two entities contributed to the crisis, but were not a primary cause. Importantly, GSE mortgage securities essentially maintained their value throughout the crisis and did not contribute to the significant financial firm losses that were central to the financial crisis.

The GSEs participated in the expansion of subprime and other risky mortgages, but they followed rather than led Wall Street and other lenders in the rush for fool's gold
Click to expand...

http://fcic-static.law.stanford.edu/cdn_media/fcic-reports/fcic_final_report_conclusions.pdf
 
Headholio said:
Listen plunkey jr. just because you are too stupid to understand the point, doesn't mean I didn't make one.

The point is that Republicans argue against Government regulation but at the same time blame Clinton for loosening regulation.
Hypocricy.

Now onward, I've already shown that your initial presumption about CRA loans caused the meltdown is wrong, and now I'm going to show you that you other talking point concerning Fannie and Freddie being to blame is also wrong, so pay attention.
Click to expand...

You haven't shown anyone anything. You focused on CRA loans. CRA and subprime aren't the same thing.
 
Just submitted an offer on a place this morning. Gotta get me some of that 3.4% Obama money.
 
Be sure to get your dat der Obama phone too.
 
So "greedy bankers" caused the housing bubble? How exactly did these greedy bankers come to power in 2008 when we all know "greed" has been around since humanity.

It's interesting that Alan Greenspan wasn't mentioned; He brought out monetary WMD to deal with a run of the mill recession. The fed created real negative interest rates and then Bernake created negative yield curves that created more bad incentives. Federal government policies helped channel investments in housing which had an exponentially detrimental outcome because housing is a consumption good; At least commercial real estate would have been a capital investment, which exacerbated the crash.

Fannie and Freddie were a major part of the problem because of their pseudo government status that allowed them to have a greater impact on the secondary market than in a free market.
 
Last edited:
Why does everyone blame the lenders and the Gov't? Nobody forced all the uneducated, minimum wage makers to buy enormous homes. About time people realized that the American Dream isn't for everyone.
 
WoodyO said:
Why does everyone blame the lenders and the Gov't? Nobody forced all the uneducated, minimum wage makers to buy enormous homes. About time people realized that the American Dream isn't for everyone.
Click to expand...

People respond to incentives, you're correct in a sense but without government and pseudo government incentives the housing bubble never would have occurred. When you shift the demand curve to the left with low interest rates it creates a bubble.
 
You can't blame anyone but the consumers who were too stupid to read the fine print on the 100 some odd pages of lending papers they signed. It's the American dream to live beyond your means and not have to worry about paying for it.

The government knew how to take advantage of us and knew what would happen but you have to be smart enough to not put yourself in a bad situation.
 
javaguru said:
Nobody wants to acknowledge the 800 lb gorilla in the room?
Click to expand...

You, apparently.

Captain FT said:
You can't blame anyone but the consumers who were too stupid to read the fine print on the 100 some odd pages of lending papers they signed.
Click to expand...

You can and should blame consumers for the deluge of foreclosures. You cant really blame them for AIG and Lehman collapsing (and our entire financial system nearly following suit). That's where Clinton / Wall Street come into play.
 
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