Are the democrats to blame for the sub-prime failure?

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Amazing foresight!! Take a gander at this while they try to lay blame for the whole meltdown…9 years ago—this one is priceless and worth the read- right out of New York Times
September 30, 1999
Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES 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 bor rower 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.

As a Realtor it is hard to even trust that a deal will close now-a-days with the lenders going out of business and leaving buyers stuck out at closing. This has been a terrible experience for me.
Here in Houston mortgage brokers and loan officers are hurting and some are even given up. As a Realtor I have other options but rearranging my structure and client base will take me a minute to start building back up.
It would be interesting to know how others in the real estate industry are doing these days.
As the mortgage shakeout forces dozens of home lenders into bankruptcy, some are merely going into something like suspended animation — shutting down temporarily and hoping to escape intact once the crisis has run its course.
Published 12:00 am PDT Sunday, August 26, 2007
The total volume of subprime loans nationally fell less than 4 percent in 2006, even as defaults and foreclosures were starting to spike, according to data compiled by Credit Suisse. Some big lenders never really did apply the brakes: New Century’s loan volume was down a mere 1.3 percent through the end of February, or about two weeks before trading in the company’s stock was suspended.
Published 12:00 am PDT Friday, August 24, 2007
Former branch manager Heather Fern-Luzzi, foreground, and Heidi Freiberg clean up as the Roseville office of First Magnus Financial Corp. shuts down. As lenders cut back because of a credit crunch and slack housing demand, 13,000 mortgage jobs disappeared nationwide in the past week.

  1. Reply
    Burnt Bagel
    February 6, 2011 at 4:43 pm


  2. Reply
    john a
    February 6, 2011 at 5:41 pm

    It is a insult either party to blame the other since BOTH parties are at fault. Just look at the political contributions given to BOTH parties and their failure to act on anything. In 2004 Bush bragged about how many home owners he helped getting loans that never could before get loans. BOTH parties were paid by lobbysit to look the other way.

  3. Reply
    February 6, 2011 at 6:15 pm

    Yes. The democrats are to blame and criminal charges should be sought.

  4. Reply
    February 6, 2011 at 6:31 pm

    If it was such a bad idea and all those “NEW” customers were bad risks, why did all of this just start to unravel during the past few years? The problem was not brought on bu any action initiated by Clinton. That Red Herring will neither float or swim. Lenders got greedy the republicans wanted less control, jobs were lost, investors became overly speculative.

    I could go on, but I feel it would be a waste of time and energy. All too many have their minds made up as to what the cause, or causes were.

  5. Reply
    Dave C
    February 6, 2011 at 6:34 pm

    Plenty of blame to go around here…

    The banks made bad loans because they knew Fannie would buy the loans… In other words, the banks got their money.

    This article is 9 years old… After the article was written a Republican lead congress (was in place) and a Republican lead Presidency that did not address this issue…. I know people will say McCain tried to address this, but the Republican leadership did not listen to him.

    Like I said… Plenty of blame to go around.

  6. Reply
    Pobept K
    February 6, 2011 at 7:27 pm

    After all that babel about lenders and buyers that have committed to questionable loans and lending policies.
    What Is Your Real Question??

  7. Reply
    frankie b
    February 6, 2011 at 7:58 pm

    Its a simple answer. Work with well qualified buyers who can use banks like bank of America, or wachovia. Use large banks who do not allow subprime, they will be staying in business for many years. If you have first time home buyers use your states program to get a loan. There are many ways around it, but the best is make sure your clients have a credit score of 680 or above, or 20% down payment

  8. Reply
    DJ B
    February 6, 2011 at 8:37 pm

    Minnesota is experiencing some similar situations. My business has been pretty bad. My husband and I both work in the industry. We had been selling exclusively for a builder until a year ago. We saw the downturn in Sept 04 during the Parade of Homes here. We agonized over moving our licenses to a regional broker to expand our business into the existing market. But it has been like starting all over from the beginning. We have 5 listings, two have had some activity, but only low ball offers the sellers couldn’t accept. So we’ve only managed one closing this year. I also appraise real estate and when the sub prime market died, so did my appraising business. So we’re looking at our options right now too. Not many companies will hire 50+ yr. olds.

  9. Reply
    vani s
    February 6, 2011 at 8:44 pm

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