Does Anyone feel like Bailing

Originally Posted by classicman

Uh ok - I was asking why that particular aspect.
Jeebus, why so touchy?

Why is it so hard to have a constructive discussion on current events without the same old finger pointing, inane statements (eg....Aside from regulating everything to the point of nothing getting done?) and baseless allegations?

[TheMercenary]

Lenders get most of the blame in the subprime lending crisis... Partners In Crime were homebuyers. Anyone who thinks that the homebuyer was nothing but a victim is feeding you more propaganda and fending off the responsibility of the role of Congressional pressure to ease lending for those who couldn't afford the loans in the first place. The bottom line is they need to tighten up lending practices in the future and not release the money to unqualified borrowers in the future. Get an apartment.

http://www.investopedia.com/articles...e.asp?viewed=1

[classicman]

Originally Posted by Redux

Why is it so hard to have a constructive discussion on current events?

It isn't, usually.

[TheMercenary]

In 2004, as regulators warned that subprime lenders were saddling borrowers with mortgages they could not afford, the U.S. Department of Housing and Urban Development helped fuel more of that risky lending.

Eager to put more low-income and minority families into their own homes, the agency required that two government-chartered mortgage finance firms purchase far more "affordable" loans made to these borrowers. HUD stuck with an outdated policy that allowed Freddie Mac and Fannie Mae to count billions of dollars they invested in subprime loans as a public good that would foster affordable housing.

Housing experts and some congressional leaders now view those decisions as mistakes that contributed to an escalation of subprime lending that is roiling the U.S. economy.

The agency neglected to examine whether borrowers could make the payments on the loans that Freddie and Fannie classified as affordable. From 2004 to 2006, the two purchased $434 billion in securities backed by subprime loans, creating a market for more such lending. Subprime loans are targeted toward borrowers with poor credit, and they generally carry higher interest rates than conventional loans.

Today, 3 million to 4 million families are expected to lose their homes to foreclosure because they cannot afford their high-interest subprime loans. Lower-income and minority home buyers -- those who were supposed to benefit from HUD's actions -- are falling into default at a rate at least three times that of other borrowers.

"For HUD to be indifferent as to whether these loans were hurting people or helping them is really an abject failure to regulate," said Michael Barr, a University of Michigan law professor who is advising Congress. "It was just irresponsible."

Congress is expected to vote before its Fourth of July recess on legislation that would strip HUD of its regulatory authority over Fannie and Freddie and give it to a stronger regulator.

Fannie and Freddie finance about 40 percent of all U.S. mortgages, with $5.3 trillion in outstanding debt. Owned by private shareholders but chartered by Congress, they are exempt from state and local taxes and receive an estimated $6.5 billion-a-year federal subsidy because they can borrow money more cheaply than other investors. In return, they are expected to serve "public purposes," including helping to make home buying more affordable.

In 2000, as HUD revisited its affordable-housing goals, the housing market had shifted. With escalating home prices, subprime loans were more popular. Consumer advocates warned that lenders were trapping borrowers with low "teaser" interest rates and ignoring borrowers' qualifications.

HUD restricted Freddie and Fannie, saying it would not credit them for loans they purchased that had abusively high costs or that were granted without regard to the borrower's ability to repay. Freddie and Fannie adopted policies not to buy some high-cost loans.

That year, Freddie bought $18.6 billion in subprime loans; Fannie did not disclose its number.

In 2001, HUD researchers warned of high foreclosure rates among subprime loans.

"Given the very high concentration of these loans in low-income and African American neighborhoods, the growth in subprime lending and resulting very high levels of foreclosure is a real cause for concern," an agency report said.

But by 2004, when HUD next revised the goals, Freddie and Fannie's purchases of subprime-backed securities had risen tenfold. Foreclosure rates also were rising.

That year, President Bush's HUD ratcheted up the main affordable-housing goal over the next four years, from 50 percent to 56 percent. John C. Weicher, then an assistant HUD secretary, said the institutions lagged behind even the private market and "must do more."

For Wall Street, high profits could be made from securities backed by subprime loans. Fannie and Freddie targeted the least-risky loans. Still, their purchases provided more cash for a larger subprime market.

"That was a huge, huge mistake," said Patricia McCoy, who teaches securities law at the University of Connecticut. "That just pumped more capital into a very unregulated market that has turned out to be a disaster."

In 2003, the two bought $81 billion in subprime securities. In 2004, they purchased $175 billion -- 44 percent of the market. In 2005, they bought $169 billion, or 33 percent. In 2006, they cut back to $90 billion, or 20 percent. Generally, Freddie purchased more than Fannie and relied more heavily on the securities to meet goals.

"They chose not to put the brakes on this dangerous lending when they could have,"

http://www.washingtonpost.com/wp-dyn...060902626.html

[classicman]

Lower-income and minority home buyers -- those who were supposed to benefit from HUD's actions --
are falling into default at a rate at least three times that of other borrowers.

I wonder what these figures are now. This article is 18 months old.

[TheMercenary]

My guess is that since the whole thing came to a screeching halt the numbers are quite a bit different. But now that we basically own/control the two companies the dog is long gone from the yard and the damage has been done.

Crhist......the sub prime crisis coincided with the housing boom than began in 2000 and primarily as a result of shady mortgage loans originated between 2004 and 2007 and was across the board, with more in higher priced mortgages and those not offered by regulated commercial banks.

The details is in the data required in reports required by 2006 Home Mortgage Disclosure Act (HMDA).



But have it your way.

[TheMercenary]

Do you always keep your head so deep in the sand? There are plenty of experts who have looked at this issue. The problems began LONG before 2004.

Sub prime loans were certainly around before 2000......the massive failures began with those issued after 2004....and again, were more from unregulated financial institutions than commercial banks subject to federal regulation.

Failures generally occur within the first few years of a sub-prime loan....not from those paying regularly for 10-15+ years.

That according to many experts from the Federal Reserve, the MBA, the HDMA analysts, the CRS and others

And the Federal Institutions Examination Council:



CRA regulated banks started filling the void in 06 and 07 and were more highly regulated.

The failures were primarily a result of the overwhelming majority of those loans not being subject to federal regulation.

The issue again is how do you prevent it from reoccurring without such federal regulation...on both the lending institutions and the borrowers?

[TheMercenary]

The point is that the institutions, Fanny and Freddie, took on more and more of this bad debt, beginning in 2000, increasing throughout the years and finally busting.

[TheMercenary]

Originally Posted by Redux

The failures were primarily a result of the overwhelming majority of those loans not being subject to federal regulation.

The issue again is how do you prevent it from reoccurring without such federal regulation...on both the lending institutions and the borrowers?

Allow them to fail completely and start over. Stop throwing money at them, like we are about to do, again.

Originally Posted by TheMercenary

Allow them to fail completely and start over. Stop throwing money at them, like we are about to do, again.

Many of the most recent failures, since 2008, are the result of external circumstances, ie unemployment.

Throw them out on the streets?

But beyond that, how will starting over, without stronger federal regulations, particularly of non-commerical banks (ie the Countrywide type lenders not subject to strict federal regs), prevent or minimize the same thing happening again?

[TheMercenary]

By disolving them you eliminate their ways of doing business. Do as they have done with all the Bank failures and take overs in the last year. Fold the loans into reputable lending institutions. Eliminate them. Take the money and prop up the reputable institutions. They need to fail and go out of business. Period. Many more people are going to lose their homes anyway. That is not the point. Stop using emotion to deal with it. This is a business transaction.

additionally: Eliminate non-commerical banks abilities to provide low cost loans to people who never could have afforded them in the first place. The barrowers will have to assume some responsibilities for their bad choices.

[classicman]

Wait wasn't a big part of the problem the ARM mortgages? Those mortgages whose payments increase after 3-5 years? People got into these with payments they could handle and then when the rates went up they were screwed? It was ok if they kept refinancing or property values increased, but when that stopped ...