I feel like I need to debunk this conservative argument

[fhl]

Quote from jonbig04:



If you're lazy, it's a clip of President Bush in 2002 endorsing a program that "...uses tax payer's money to help a <b>qualified</b> low-income buyer make a down payment". And that's not taken out of context.
.

How exactly is loaning money to <b>qualified</b> people (per your above quote) supposed to have lead to this problem? Why would anyone think it did, unless they're stupid.

Congress passed a law called the CRA that mandated certain people that banks had previously considered
<u>unqualified</u> to receive mortgage loans. The Clinton administration then harrassed financial institutions to comply with this law. The reason they had to harrass is that banks aren't as stupid as liberals think. They wouldn't make the loans. Only when cdo's were created and gse's began accepting these low quality loans, so banks could offload them, did the avalanche begin.

How anyone could think that congress and liberals in the Clinton admin haranguing banks to make lousy loans did not get this whole ball rolling is beyond me. But then, most things liberals <s>think</s> dream up, are beyond me. he-he

 

[jficquette]

10% subprime is way to much when consider the levearge. 1% should have been the limit.

 

[jonbig04]

Quote from fhl:

How exactly is loaning money to <b>qualified</b> people (per your above quote) supposed to have lead to this problem? Why would anyone think it did, unless they're stupid.

Congress passed a law called the CRA that mandated certain people that banks had previously considered
<u>unqualified</u> to receive mortgage loans. The Clinton administration then harrassed financial institutions to comply with this law. The reason they had to harrass is that banks aren't as stupid as liberals think. They wouldn't make the loans. Only when cdo's were created and gse's began accepting these low quality loans, so banks could offload them, did the avalanche begin.

How anyone could think that congress and liberals in the Clinton admin haranguing banks to make lousy loans did not get this whole ball rolling is beyond me. But then, most things liberals <s>think</s> dream up, are beyond me. he-he

Do you not feel that its necessary to actually address my argument? Anyways, you're in over your head.

I could write a long rebuttal, especially about your 'qualify' statement. No one has ever gotten a loan they weren't 'qualified' for lol...think about it. Anyways, I will just keep it short because I'm testing something.

The CRA was aimed SPECIFICALLY at low income neighborhoods.

Now if you can't find a perfect correlation between the people who are foreclosing and their income levels then your argument holds no water. What I'm saying is that if the CRA is the cause of this, why is it that that the people foreclosing are of every income bracket? If the CRA was the problem, this correlation would be obvious. It's not.

 

[jonbig04]

BTW if you think the CRA was meant to force companies into financing houses that poor people couldn't otherwise afford, you don't know anything about the CRA.

 

[jonbig04]

Yea, for all the BS posts I read on here about Obama's socialist agenda, and the stupid liberals with no sensible arguments, I sure haven't had a proper rebuttal yet. I cruised by here and figured I better say something before all you punks convince yourselves that you know what you're talking about

 

[Cesko]

Quote from jonbig04:

I keep hearing about different causes of the subprime crisis, but none as ubiquitous as this one. Basically the idea that the subprime crisis was caused by democrats who urged companies like fannie mae to lend to low income families and minorities. These people didn't really deserve the loans, and couldn't have qualified for them in traditional circumstances. Eventually they defaulted and brought the whole real estate market down with them. Sounds ok right? Nope. What is annoying is that this is such a blatantly partisan argument that serves no purpose other than to demonize their political rivals. Anyways here's why they are wrong.

1. Fannie mae is the biggest GSE and its total subprime exposure is/was no more than $50 billion. The total subprime market in this country is $600 billion. A big chunk to be sure, but as you can see, you can hardly blame it all on Fannie Mae when they only hold about 10% of all subprime loans. I'm being generous, I believe the actual exposure is around $25 billion based on their last 10-k annual report, but hey who's counting. I mean really, the argument ends there. But just to be thorough...


2. Subprime loans that were sold to Fannie Mae are called conforming loans. As the name implies this means that the loan conforms to all fannie mae guidelines. The reason FNMA only had a 10% stake in subprime loans is because these guidelines were strict compared to what you could get away with financing in non conforming loans. As a mortgage broker, I never funded a single conforming subprime loan. I really don't know that many people who did. Why? Because it was far easier to get it done elsewhere. Any loan over 417,000 is non conforming. All the exotic ARMS and pay-option arms, no ratio, no doc, no income/no asset etc are ALL non conforming. These are the loans that are going bad now along with FNMA's holdings. Not only is FNMA responsible for only 10% of subprime loans out there, but that 10% were actually subject to underwriting guidelines that were far more strict than the other 90% (but perhaps still not strict enough).


3. Lets say for a second that FNMA didn't only hold 10% of the subprime market, and lets say that they didn't have stricter guidelines than everywhere else. If the low income and minority demographics were solely (or almost solely) responsible than there would be a direct and easily quantifiable correlation between those demographics and the people/loans that are foreclosing. Does that correlation exist? No! Who is foreclosing? Rich people, poor people, middle class people, black people, white people....there is no pattern.


That being said FNMA is despicable and I believe it epitomizes the over leveraged and under-regulated secondary mortgage market. Though it seemed like I was sticking up for FNMA, I'm really not. They are simply a small part of a much bigger problem. Also, just to blow a hole in all the partisan BS and prove that this problem is on both sides, check out this vid:

http://www.youtube.com/watch?v=kNqQ...&highlight=fannie+mae&feature=player_embedded

If you're lazy, it's a clip of President Bush in 2002 endorsing a program that "...uses tax payer's money to help a qualified low-income buyer make a down payment". And that's not taken out of context.

If you want my opinion about what caused the whole thing, see attached.

From IBD
Ostensibly intended to help deserving minority families afford homes — a noble idea — it instead led to a reckless surge in mortgage lending that has pushed our financial system to the brink of chaos.

Subprime's Mentors

Fannie and Freddie, the main vehicle for Clinton's multicultural housing policy, drove the explosion of the subprime housing market by buying up literally hundreds of billions of dollars in substandard loans — funding loans that ordinarily wouldn't have been made based on such time-honored notions as putting money down, having sufficient income, and maintaining a payment record indicating creditworthiness.

With all the old rules out the window, Fannie and Freddie gobbled up the market. Using extraordinary leverage, they eventually controlled 90% of the secondary market mortgages. Their total portfolio of loans topped $5.4 trillion — half of all U.S. mortgage lending. They borrowed $1.5 trillion from U.S. capital markets with — wink, wink — an "implicit" government guarantee of the debts.

This created the problem we are having today.

As we noted a week ago, subprime lending surged from around $35 billion in 1994 to nearly $1 trillion last year — for total growth of 2,757% as of last year.

I do not really want to argue since you are(were) mortgage broker, but is it correct to say there are discrepancies in numbers?

 

[Eight]

I remember very clearly the TV news stories [propaganda for the Clinton admin] about redlining by lenders. They interviewed black guys that said they were discriminated against because whites and orientals could go in the same bank and get a loan... they reinvigorated the Jimmy Carter legislation that enabled more subprime.. then the Republican controlled legislature ran some bank deregulation past Clinton who was asleep at the switch or thinking about Monica or something.. and the Bushies wanted to kiss every Latino ass in the nation so they continued with the insanity.. whatever.....

It's a political disaster, not an economic one... all the wars and most of the famine and economic hardship n this planet is politically derived, not natural...

The guys that run the world worship "W. god", spelled with a small g and it's an acronym for war, gold, oil, and drugs... the rest of us are just useless eaters to them, it's a wonder we have anything left at all... I'm more with the Constitution party than the co-conspiring political parties...

 

[jonbig04]

Quote from Cesko:

From IBD
Ostensibly intended to help deserving minority families afford homes � a noble idea � it instead led to a reckless surge in mortgage lending that has pushed our financial system to the brink of chaos.

Once again, if this were the case the poor neighborhoods that the CRA was designed to stimulate would be seeing the worst foreclosure rates, yes? Instead the hardest hit areas were all the major cities and suburbs that were the fastest growing: vegas, phoenix, nyc, fresno, riverside. The CRA targeted low income neighborhoods. It was started when it was discovered that black people had to make larger down payments etc. Anyways I'm not really here to promote the CRA, but after reading about it I find it strange how an act that was meant to stop the practice of redlining (a bank refusing to lend in certain areas) and was supposed to make credit more accessible to low income people (not easier to obtain, think of a poor person buying a small house etc) is being blamed for the massive proliferation of subprime loans through affluent and middle class neighborhoods.

Quote from Cesko:
Fannie and Freddie, the main vehicle for Clinton's multicultural housing policy, drove the explosion of the subprime housing market by buying up literally hundreds of billions of dollars in substandard loans � funding loans that ordinarily wouldn't have been made based on such time-honored notions as putting money down, having sufficient income, and maintaining a payment record indicating creditworthiness. [/B]

Firstly, I already mentioned FNMAs total subprime exposure and this is obviously greatly exaggerated. If you don't believe me, go check out their reports for yourself. Also the CRA didn't dictate the guidelines for which the banks used. The CRA didn't come in and say "you must lend to them with lower credit scores, and smaller down payments". It was about geographical locations and blatant discrimination. Also about the 'sub standard" loans...these loans were conforming! the 10% that FNMA does "guarantee" are subject to far stricter guidelines than the rest of the 90% out there, as I already mentioned.

Quote from Cesko:
Fannie and Freddie gobbled up the market./

Gobbled up the market? Sure, but not the subprime market, because we've already seen the total exposure amounts many times now. Notice they simply leave 'subprime' out, even though if a layman were reading this, they would automatically assume that what they are talking about, when actually they didn't say 'subprime'. Misleading.

Quote from Cesko:Using extraordinary leverage, they eventually controlled 90% of the secondary market mortgages. Their total portfolio of loans topped $5.4 trillion � half of all U.S. mortgage lending. They borrowed $1.5 trillion from U.S. capital markets with � wink, wink � an "implicit" government guarantee of the debts. This created the problem we are having today.[/B]

Aside from the last sentence, this is all true, yet it has NOTHING to do with subprime or the CRA. What does the size of their A paper and alt A portfolio have to do with what we are taking about? Nothing, but if you don't know that you automatically assume that what they are saying is that FNMA is controlling the subprime market, even though they never actually say that. They go straight from the CRA, to talking about the vast portfolio of A paper and Alt A loans that FNMA holds. Who cares?

Quote from Cesko:As we noted a week ago, subprime lending surged from around $35 billion in 1994 to nearly $1 trillion last year � for total growth of 2,757% as of last year.

[/B]

haha, wow this is more misleading than the last paragraph. They started in 1994 because that's when some major work was done by Clinton involving the CRA. What they don't tell you is that from 1994-1998 subprime originations stayed fairly flat and actually dropped in 1996. They spiked in 98, dropped in 2000 and really took of after that. In 2006 subprime's share of market was around 25% in 2002 it was around 8%. THAT is where the big jump took place. Interestingly, this is also the same pattern that credit default swaps followed...

Thanks for the link to the article. I can't believe how misleading it was, I would have been convinced to after reading that if I didn't know any better. Anyways the same points still apply.

1. FNMA only was involved in 5-10% of the subprime market (feel free to verify that for yourself), the rest is all A paper and Alt A.

2. The subprime loans that they did sell all had to be conforming (under 417,000, no exotic ARMs, NINA, no-docs etc etc) and were much more scrutinized than the other 90% of subprime loans.

3. The houses that are foreclosing have no rhyme or reason. its every demographic (not just poor people that would benefit from the CRA) every kinda of neighborhood (not the low income ones the CRA was made to stimulate) and the hardest hit areas are suburbs of large cities. Las vegas, Phoenix, Fresno etc...hardly minority hot spots. I don't think I can emphasize this point enough, if the CRA was responsible than the people foreclosing would all be (or mostly be) CRA people (poor minorities) and thats far from the case.

 

[Eight]

Well ya, once the regulation was off the loans people took the ball and ran with it... law of unintended consequences at work..

My role model is the guy that headed up Countrywide.. he took home one Billion Dollars... with a B.. and nobody is going after him for anything much because what he did was legal. He was allowed to place loans that never could be paid back, he was allowed to package them and sell them so he could lend more money, he was allowed to collect a big bonus for doing it and he was allowed to retire and abandon the mess... all legal.. how many Mob guys dream of having a Billion I wonder... hee hee, Al Capone said he could not understand why the FBI was concerned with him when the real crooks were on Wall Street.......

 

[jonbig04]

hehe yea

As far as I'm concerned the main cause is greed. Which is also the main cause of our country's success. Its a 2 edged sword. I just like busting conservative balls, especially on here.

btw, I am conservative lol