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LoonyQT
Posts:894

10/05/2008 10:52 AM	Alert
Fannie Mae Eases Credit To Aid Mortgage Lending E-MAIL Print Single-Page Reprints Save Share Linkedin Digg Facebook Mixx Yahoo! Buzz Permalink 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.'' ... more at http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&partner=permalink&exprod=permalink

LoonyQT
Posts:894

10/05/2008 10:57 AM	Alert
note, "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." Long live democratic capitalism!!

Brian
Posts:2210

10/05/2008 11:30 AM	Alert
But why didn't Bush discontinue such wrong practice when he had the chance. Didn't he reverse much of Clinton's agenda? Answer: To create the ownership society he wanted, Bush threw even more money at the system and failed to enforce regulations. Fannie and Freddie going under is one thing will cost taxpayers about $50 billion. But all the private banks going under will cost us nearly $1.8 trillion. Had Bush succeeded in privatizing Social Security, the bubble would have inflated much more from all the money coming into the financial services industry, and the ensuing collapse would have easily wiped out the 1/3 of the social security fund. As it is, retired people who need to slowly liquidate their investments to live day to day are facing a world of trouble.

LoonyQT
Posts:894

10/05/2008 11:35 AM	Alert
well - any president replacing our current esteemed leader will be a welcome relief, huh?

ElPato
Posts:350

10/06/2008 7:32 AM	Alert
More food for thought: Peter Bernstein from summer 2008 One thing I've learned is to step back and view things from a long term perspective. If you can find things that have been true for 100+ years, they are likely to remain true tomorrow. Peter Bernstein has been around for nearly 100 years. I find his perspective very insightful, particularly this quote: "The Fed, too, is going to be less decisive and is going to feel that what it should do is less clear. One of the things that gave people a sense that they could afford to take risks was the sense that the central bankers more or less know what they are doing. But I don't think we are going to feel that way going forward." Personally, I feel the Fed is making things much worse, as is much of this intervention in the markets. Gravity is gravity, and it will assert itself. And speaking of the Fed, this scares the crap out of me.

BigTrace
Posts:194

10/06/2008 1:03 PM	Alert
Loony - Good catch (and read). I'm sure the entire country glossed over this one..

twocents
Posts:78

10/06/2008 3:33 PM	Alert
Come on Brian, you of all people won't look it up? Here's what Bush tried to do (on more than one occasion). From the NY Times: September 11, 2003 New Agency Proposed to Oversee Freddie Mac and Fannie Mae By STEPHEN LABATON The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago. Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry. The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios. The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates. ''There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises,'' Treasury Secretary John W. Snow told the House Financial Services Committee in an appearance with Housing Secretary Mel Martinez, who also backed the plan. Mr. Snow said that Congress should eliminate the power of the president to appoint directors to the companies, a sign that the administration is less concerned about the perks of patronage than it is about the potential political problems associated with any new difficulties arising at the companies. The administration's proposal, which was endorsed in large part today by Fannie Mae and Freddie Mac, would not repeal the significant government subsidies granted to the two companies. And it does not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enables them to issue debt at significantly lower rates than their competitors. Nor would it remove the companies' exemptions from taxes and antifraud provisions of federal securities laws. The proposal is the opening act in one of the biggest and most significant lobbying battles of the Congressional session. After the hearing, Representative Michael G. Oxley, chairman of the Financial Services Committee, and Senator Richard Shelby, chairman of the Senate Banking Committee, announced their intention to draft legislation based on the administration's proposal. Industry executives said Congress could complete action on legislation before leaving for recess in the fall. ''The current regulator does not have the tools, or the mandate, to adequately regulate these enterprises,'' Mr. Oxley said at the hearing. ''We have seen in recent months that mismanagement and questionable accounting practices went largely unnoticed by the Office of Federal Housing Enterprise Oversight,'' the independent agency that now regulates the companies. ''These irregularities, which have been going on for several years, should have been detected earlier by the regulator,'' he added. The Office of Federal Housing Enterprise Oversight, which is part of the Department of Housing and Urban Development, was created by Congress in 1992 after the bailout of the savings and loan industry and concerns about regulation of Fannie Mae and Freddie Mac, which buy mortgages from lenders and repackage them as securities or hold them in their own portfolios. At the time, the companies and their allies beat back efforts for tougher oversight by the Treasury Department, the Federal Deposit Insurance Corporation or the Federal Reserve. Supporters of the companies said efforts to regulate the lenders tightly under those agencies might diminish their ability to finance loans for lower-income families. This year, however, the chances of passing legislation to tighten the oversight are better than in the past. Reflecting the changing political climate, both Fannie Mae and its leading rivals applauded the administration's package. The support from Fannie Mae came after a round of discussions between it and the administration and assurances from the Treasury that it would not seek to change the company's mission. After those assurances, Franklin D. Raines, Fannie Mae's chief executive, endorsed the shift of regulatory oversight to the Treasury Department, as well as other elements of the plan. ''We welcome the administration's approach outlined today,'' Mr. Raines said. The company opposes some smaller elements of the package, like one that eliminates the authority of the president to appoint 5 of the company's 18 board members. Company executives said that the company preferred having the president select some directors. The company is also likely to lobby against the efforts that give regulators too much authority to approve its products. Freddie Mac, whose accounting is under investigation by the Securities and Exchange Commission and a United States attorney in Virginia, issued a statement calling the administration plan a ''responsible proposal.'' The stocks of Freddie Mac and Fannie Mae fell while the prices of their bonds generally rose. Shares of Freddie Mac fell $2.04, or 3.7 percent, to $53.40, while Fannie Mae was down $1.62, or 2.4 percent, to $66.74. The price of a Fannie Mae bond due in March 2013 rose to 97.337 from 96.525.Its yield fell to 4.726 percent from 4.835 percent on Tuesday. Fannie Mae, which was previously known as the Federal National Mortgage Association, and Freddie Mac, which was the Federal Home Loan Mortgage Corporation, have been criticized by rivals for exerting too much influence over their regulators. ''The regulator has not only been outmanned, it has been outlobbied,'' said Representative Richard H. Baker, the Louisiana Republican who has proposed legislation similar to the administration proposal and who leads a subcommittee that oversees the companies. ''Being underfunded does not explain how a glowing report of Freddie's operations was released only hours before the managerial upheaval that followed. This is not world-class regulatory work.'' Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing. ''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.'' Representative Melvin L. Watt, Democrat of North Carolina, agreed. ''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said. *****I believe Fannie and Freddie were the top contributors to Frank and Shelby over the past decade if not longer. Too lazy to try to find that stat.

twocents
Posts:78

10/06/2008 3:43 PM	Alert
don't have a subscription to the washington post archives, but here is what happened to that bill- blocked by Frank Buy Complete Document Buy Page Print White House, Lawmakers Disagree on New Oversight [FINAL Edition] The Washington Post - Washington, D.C. Author: Kathleen Day Date: Oct 8, 2003 Start Page: E.01 Section: FINANCIAL Text Word Count: 727 "It does not make sense to move this regulator to Treasury if Treasury does not have the tools to make it effective," said Treasury spokesman Rob Nichols. Both he and [Wayne A. Abernathy] fell short of saying Treasury would recommend that President [Bush] veto the bill in its current form. [Barney Frank] said he supports giving Treasury responsibility for making sure that Fannie and Freddie operate in a manner that doesn't pose a risk to the economy or taxpayers. But he opposes giving Treasury the right to approve or disapprove business activities. He said he worries that Treasury would sacrifice activities that are good for consumers in the name of lowering the companies' market risks. Fannie Mae and Freddie Mac continue to say they support the idea of having their regulator in Treasury, but government sources say Fannie Mae has lobbied hard to alter the bill to its liking, including keeping some oversight in HUD. And Fannie Mae is lobbying to exclude the Federal Home Loan Banks from Treasury oversight or, if they are included in this bill, to make them pay the same federal taxes that Fannie Mae and Freddie Mac pay.

twocents
Posts:78

10/06/2008 3:48 PM	Alert
Or this from the NY Times? Bill Seeks More Oversight of 2 Home Lending Agencies By REUTERS Published: July 23, 2005 WASHINGTON, July 22 (Reuters) - The chairman of the Senate Banking Committee, Richard C. Shelby, offered a bill on Friday intended to strengthen oversight of Fannie Mae and Freddie Mac that places some restrictions on the investment portfolios of the companies. The legislation from Mr. Shelby, an Alabama Republican, would create a new regulator for the government-sponsored enterprises with the authority to set risk-based capital standards and minimum capital levels, approve new business activities and unwind a company if it fails. In addition, Mr. Shelby's bill goes further than legislation in the House by directing a regulator to establish criteria that restricts the types of assets in portfolios held by Fannie Mae and Freddie Mac. The regulator must consider the safe and sound operations of the companies and the systemic risk posed by the size and type of those holdings, the bill says. Those portfolios of mortgages and mortgage-backed securities, which total some $1.5 trillion, pose a threat to the financial system because they contain huge amounts of risk and require the companies - which hold relatively little capital - to take on large hedges, according to the chairman of the Federal Reserve, Alan Greenspan, and the Bush administration. Congress is considering measures to overhaul the regulation of Fannie Mae and Freddie Mac after accounting scandals that have led or will lead to multibillion-dollar profit restatements. Investigations into Fannie Mae continue. But even as Mr. Shelby moves forward, with a vote expected in his committee next week, Washington lobbyists and Wall Street analysts said chances were slim that legislation would pass this year because time was running out on the Congressional session. Earlier this year, a House committee passed a bill to stiffen regulation of the companies, but the White House has called that legislation too weak and Mr. Greenspan said it would be better to have no legislation at all than to push forward with the House bill. Fannie Mae and Freddie Mac are shareholder-owned companies charged by Congress to support housing by ensuring liquidity in the mortgage market. To do this, they buy mortgages from originators, giving lenders money to make more loans. Fannie and Freddie then repackage the loans into securities for sale to investors. They also keep some loans and securities in their portfolios, which they say helps them fulfill their mission, especially in times of market crisis. Mr. Greenspan said this week that portfolios of mortgage-backed securities did not help Fannie and Freddie respond to market crises, but instead provided nice returns to shareholders. Mr. Shelby's bill would limit the portfolios by restricting the types of assets the companies are allowed to hold. Under the proposal, the portfolios could include mortgages bought to be repackaged and sold as securities, mortgages bought to meet affordable housing goals, cash, real estate bought through foreclosure, United States Treasuries and real estate used for business operations.

twocents
Posts:78

10/06/2008 3:52 PM	Alert
For those who argue "It was Greenspan's Fault" since he's no longer in office: NY Times: Greenspan Urges Better Regulation of Fannie Mae and Freddie Mac By STEPHEN LABATON Published: April 6, 2005 ASHINGTON, April 6 - As Congress began again to work on legislation to strengthen oversight of Fannie Mae and Freddie Mac, two of the nation's largest mortgage finance companies, Alan Greenspan, the Federal Reserve's chairman, urged lawmakers today to impose sharp limits on the $1.5 trillion holdings of the companies. Appearing before the Senate Banking Committee, Mr. Greenspan said the enormous portfolios of the companies - nearly a quarter of the home mortgage market - posed significant risks to the nation's financial system should either of the companies face extensive problems. "We at the Federal Reserve remain concerned about the growth and magnitude of the mortgage portfolios of the government-sponsored enterprises, which concentrate interest rate risk and prepayment risk at these two institutions and makes our financial system dependent on their ability to manage these risks," Mr. Greenspan said. "To fend off possible future systemic difficulties, which we assess as likely if G.S.E. expansion continues unabated, preventive actions are required sooner rather than later." Most of the assets in the portfolios are mortgage-backed securities that the companies find more profitable to hold than to sell in the secondary markets. Mr. Greenspan said those holdings did nothing to further the mission of the companies of providing market liquidity and lowering mortgage interest rates but was solely a method of increasing earnings. In previous years, lawmakers have failed to approve legislation imposing stronger oversight of the companies and changing the way they do business. The two companies have been formidable lobbying forces and been able to block attempts made by lawmakers, often with the support of rival mortgage companies, to restrict them. But some lawmakers say this year presents the best opportunity in a long time to adopt legislation as the two companies because both companies have struggled through accounting scandals. Mr. Greenspan's testimony went beyond previous statements in which he has urged tighter scrutiny of the two companies. His approach towards the companies of heavier scrutiny and regulation stands in strong contrast to his overall deregulatory approach in other areas, like hedge funds, and that distinction was noted today by a handful of senators who questioned the need to force Fannie Mae and Freddie Mac to reduce their portfolios. In several pointed lines of questioning, Senator Charles E. Schumer, Democrat of New York, criticized Mr. Greenspan's recommendation and called it both inconsistent with his other views on regulation and potentially damaging to the housing markets. Without identifying anyone in particular, he also suggested that some people who have advanced tougher regulation of the two housing finance companies are really pushing a broader agenda to eliminate the companies and their mission of providing affordable housing. "I see an analogy to Social Security," Mr. Schumer said. "Social Security has a problem and there are ideologues who want to undo it. Fannie and Freddie have problems and there are ideologues who want to undo them. But there are ways to fix the problems short of what's been proposed. When the sink is broken, you don't want to tear down the house." Mr. Greenspan did not propose a precise figure to impose on the overall size of the portfolios of the two companies, although he suggested it should be a small fraction of its current size - perhaps $100 billion to $200 billion. He said the final figure should be left to the lawmakers and any new regulatory agency that they might create. He suggested that a reduction of the portfolios could be undertaken gradually and with little impact on the markets and that it would also free the companies from having to hedge their risks through derivatives and other complicated trading techniques that he said bring significant risks of their own.

Brian
Posts:2210

10/06/2008 3:53 PM	Alert
I'm an economic libertarian and agree that big government is not the answer because government guarantees and insurance take away the level of fear necessary to make a free market work efficiently. Look at how the bulls think that housing will shoot up again. They have no fear because they believe the nanny state will put a floor to prices. We need to let the whole house of cards collapse and let fear reign for a while. For the free market to work fear and greed need to be in balance. It's not possible to let greed run unchecked while backstopping fear. If we continue down this slippery slope, we'll eventually reach a point of no return. What's ironic to me is it's the Bush administration that called for the bailout. In my view, the Republicans are not doing what's good for the country but they are trying to backstop the losses before the elections. Like I said before Fannie and Freddie at $50 billion cost is small potatoes compared to the $1.8 trillion it will cost to bailout the private banks.

twocents
Posts:78

10/06/2008 4:07 PM	Alert
It's not just the repubs, it's the dems as well. I think the dems should have stood up and said no, but they were afraid to do it in an election year. I'm a broken record on this, but I'll say it again. The biggest problem is the uncertainty in the market. The Fed and Treasury have not done their job. Letting Lehman go under (Lehman was the biggest Treasury dealer in the world if I am not mistaken) caused a credit freeze. That is what is hurting the economy right now. The thoughts out there as i see it are: -if they let Lehman go under who next? -how was AIG more significant to the economy than the primary seller of gov't debt? -what was wrong with Lehman that 'they' aren't telling us? - if it was that bad for Lehman, then what about the rest of the US economy? The bailout was stupid b/c it didn't eliminate any uncertainty or drop the hammer and give firm guidance on what will be done to stabilize the economy

tpc
Posts:498

10/06/2008 4:12 PM	Alert
[quote]We need to let the whole house of cards collapse and let fear reign for a while. For the free market to work fear and greed need to be in balance. It's not possible to let greed run unchecked while backstopping fear[/quote] Brian-you do know that the most heavily unregulated malitia in the country are some of the po' people and gang members who are armed with every conceivable weapon available. Very few NRA members (probably none). Are you prepared to become a gun slinger??????

LoonyQT
Posts:894

10/06/2008 6:11 PM	Alert
sh%# (or is that sh-eeet)- maybe my hubby's hidden gun stash may prove a decent investment, after all...

jspoto
Posts:217

10/06/2008 8:10 PM	Alert
Loony - you could not be more wrong. Blaming the expanding of fannie/freddie to allow for minorities to get loans is not the cause of the problem. I can guarantee you that Fannie/Freddie never did any subprime loans. They relaxed guidelines and allowed for stated loans for people with over 700 FICO's. Big Deal. Also the conforming loan limit for many years was under 362k in CA, recently 417k. The nightmare we are in is due to republican deregulation (for one example, please see Mr. Phil Grahm). Non bank lenders like Countrywide, Ameriquest, and EMC were soliciting clients from the phone book selling them crap that was sold to wall street brokerages (not fannie/freddie) that had a huge appetite for them because they were able to securitize them into bonds and sell them off in tranches to others all over the world. This process went around fannie/freddie and most regulatory agencies, because they were non bank lenders doing the originations.

lurknomore
Posts:270

10/07/2008 6:36 AM	Alert
jspoto--I'm afraid you are about to lose your posting rights here. To be in good standing, you need to blame stupid/dishonest buyers or the government (including its presumbly-backed agencies). Watch out--the swarm will be on you soon!!

LoonyQT
Posts:894

10/07/2008 1:15 PM	Alert
I maintain, as I always have, that fingers should point at the banks and more specifically, the head-honchos making millions/year at the banks who fully knew what they were doing. I further blame stupid Americans for buying into the bulldinky. I am on record back in 2003 stating that if we continue wiith the irrational lending standards, that our country will eventually face economic times to rival the great depression by the end of the decade.

tpc
Posts:498

10/07/2008 4:11 PM	Alert
[quote]I am on record back in 2003 stating that if we continue wiith the irrational lending standards, that our country will eventually face economic times to rival the great depression by the end of the decade.[/quote] Looney-sounds like the perfect time to be buying a house.

showboat
Posts:67

10/07/2008 4:38 PM	Alert
Nice job twocents. Here is some more to show it's not the Bush administration to blame as so many try in vain to do: The CRA, or "Community Reinvestment Act", was a law that told banks if they 're going to take deposits in certain areas, then they have to also make loans in those ares. This law was passed by the dem congress and signed into law by Jimmy Carter in 1977. In 1995, the law was changed to encourage looser lending standards in order to allow more "minority home ownership". These changes were signed into law by Bill Clinton. The subprime loan programs came into being at this time. Also, in 1995, Citibank was sued to force it to issue more loans to lower income and minority applicants. One of the lawyers on that case, Barack Hussien Obama. Several times over the last few years, at least as far back as 2003, both the Bush administration and certain repubs in both houses of congress have either issued warnings about, or introduced legislation to reign in Fannie May and Freddie Mac, but were ignored or had their bills killed in committee on party line votes. For some reason the dems thought that FM/FM were doing fine and didn't need more regulation, when just about everything else in the country did. Just for the record, the second highest recipient of "campaign contributions" from FM/FM? Yep, BHO. Come on folks, get real. Both parties have made their mistakes and probably will continue to do so, but stop blaming Bush for everything.

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