# New Fannie Mae home loan-What a deal



## poppy (Feb 21, 2008)

Low credit score? No big deal, Fannie Mae will let you buy a home with a score as low as 620 (subprime territory). Not enough income to qualify? No problem, Fannie Mae will let you include the income of other people to reach the magic number even though they are not borrowers. But, they do not want you to call this subprime lending and insist it is called "alternative lending". They'll even lend you the money with 3% down. This should work out well.

http://news.investors.com/ibd-edito...ore-to-high-risk-immigrants.htm#ixzz3wyptgqJh


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## RichNC (Aug 22, 2014)

The USDA, rural home loans program has been doing that for years and years.


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## po boy (Jul 12, 2010)

poppy said:


> Low credit score? No big deal, Fannie Mae will let you buy a home with a score as low as 620 (subprime territory). Not enough income to qualify? No problem, Fannie Mae will let you include the income of other people to reach the magic number even though they are not borrowers. But, they do not want you to call this subprime lending and insist it is called "alternative lending". They'll even lend you the money with 3% down. This should work out well.
> 
> http://news.investors.com/ibd-edito...ore-to-high-risk-immigrants.htm#ixzz3wyptgqJh


I blame W.


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## po boy (Jul 12, 2010)

RichNC said:


> The USDA, rural home loans program has been doing that for years and years.


USDA follows FHA guidelines in some ways, however they use income from other family members in the residence to *disqualify* borrowers.


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## greg273 (Aug 5, 2003)

po boy said:


> I blame W.


 When Dubya did it, it was a 'great idea', remember?? Until it wasn't. Remember Dubya wanted an 'ownership society'... what he didn't tell us was it would be the banks owning the houses people couldn't afford.


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## 7thswan (Nov 18, 2008)

greg273 said:


> When Dubya did it, it was a 'great idea', remember?? Until it wasn't. Remember Dubya wanted an 'ownership society'... what he didn't tell us was it would be the banks owning the houses people couldn't afford.


Dubya didnt do it. it was clinton the perv. like 199? something. not going ruin my mellow by looking it up...community revinstment act. The banks took the fall, maybe an agreement ,who knows..... But once Blarney frank and cris dodd were reinstalled, don't tell me it isn't all planned to roll over and over to the idiot voters if those sucmbags aren't in prison............. if i felt like it i /you could actually look up the hearings on you tube.


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## arabian knight (Dec 19, 2005)

7thswan said:


> Dubya didnt do it. it was clinton the perv. like 199? something. not going ruin my mellow by looking it up...community revinstment act. The banks took the fall, maybe an agreement ,who knows..... But once Blarney frank and cris dodd were reinstalled, don't tell me it isn't all planned to roll over and over to the idiot voters if those sucmbags aren't in prison............. if i felt like it i /you could actually look up the hearings on you tube.


Ya they not only keep forgetting Clinton started it But Bush tried on several occasions to STOP IT and get regulations back on~! But there left would have nothing to do with THAT IDEA. Hmmmmm Wonder Why? Could it be their beloved Clinton was the one at fault here and not the Bush administration. LOL


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## plowjockey (Aug 18, 2008)

Whether we are able to admit it or not, for _better_ and _worse_, mortgage debt is what made America great. It all started with the GI bill.

A "no money down" mortgage works just fine, provided the home is not too expensive (overpriced) and there are decent jobs to pay the payments.

Donald Trump says this is doable.


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## plowjockey (Aug 18, 2008)

I love the irony, of blaming poor blacks who could no longer make payments on dumpy little urban houses.

It's all their fault.

Certainly the leveraging of "funny money" on endless unneeded expensive condo projects and flipping grossly inflated "McMansions", had nothing to do with the crash.


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## poppy (Feb 21, 2008)

plowjockey said:


> Whether we are able to admit it or not, for _better_ and _worse_, mortgage debt is what made America great. It all started with the GI bill.
> 
> A "no money down" mortgage works just fine, provided the home is not too expensive (overpriced) and there are decent jobs to pay the payments.
> 
> Donald Trump says this is doable.


You're leaving out the part where the buyers need to prove they have the financial history to justify lending to them. This is what caused the subprime mortgage crisis that tanked the economy. Should we do it again expecting a different outcome?


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## MO_cows (Aug 14, 2010)

plowjockey said:


> I love the irony, of blaming poor blacks who could no longer make payments on dumpy little urban houses.
> 
> It's all their fault.
> 
> Certainly the leveraging of "funny money" on endless unneeded expensive condo projects and flipping grossly inflated "McMansions", had nothing to do with the crash.


Who said anything about poor blacks? I know several people who lost a house, more who came darn close, all were white and none of them bought McMansions. Loss of income during the recession was the main cause, one was a divorce where the higher earner abandoned the house to the lower earner. 

I'm not so hung up on the 600's credit score since people who don't use much credit can have that low a score but still be financially responsible. But counting income from people who aren't on the note does seem like a foreclosure looking for a place to happen.


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## mreynolds (Jan 1, 2015)

poppy said:


> Low credit score? No big deal, Fannie Mae will let you buy a home with a score as low as 620 (subprime territory). Not enough income to qualify? No problem, Fannie Mae will let you include the income of other people to reach the magic number even though they are not borrowers. But, they do not want you to call this subprime lending and insist it is called "alternative lending". They'll even lend you the money with 3% down. This should work out well.
> 
> http://news.investors.com/ibd-edito...ore-to-high-risk-immigrants.htm#ixzz3wyptgqJh


Yep, the Fed is out of tricks so now we allow the sub prime....I mean _alternate lending _back into the picture. Do we get to blame Obama this time or will we finally blame who is really at fault? 

No I didn't think so either........


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## mreynolds (Jan 1, 2015)

greg273 said:


> When Dubya did it, it was a 'great idea', remember?? Until it wasn't. Remember Dubya wanted an 'ownership society'... what he didn't tell us was it would be the banks owning the houses people couldn't afford.


To be fair, it was started in the Clinton era. It just continued in the Bush era. But even if it didn't, since we know it doesn't work, why do it again just because Bush did it?

Yeah, like that is a good reason to.


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## mreynolds (Jan 1, 2015)

plowjockey said:


> Whether we are able to admit it or not, for _better_ and _worse_, mortgage debt is what made America great. It all started with the GI bill.
> 
> A "no money down" mortgage works just fine, provided the home is not too expensive (overpriced) and there are decent jobs to pay the payments.
> 
> Donald Trump says this is doable.


Responsible mortgage debt made America great. 

There fixed that for ya.

Believe me, I am the last one to want to stall construction starts. My family depends on them. But sub prime has never been the way to go.


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## City Bound (Jan 24, 2009)

It is a big complicated mess with many layers. there are always winners and losers.

sounds to me like they are trying to kick start the economy. I doubt it will work. It might make a small boom if it kicks off but then reality will come crashing back in.

if the cycles are repeating then we just came out of an economy much like the 70's and now we are heading into an economy like the 80's. if trump wins his influence on the economy will be a lot like the influence of Regan on the 80's.


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## Declan (Jan 18, 2015)

My state has a program similar to income-contingent student loans. Your payments are based on your income and anything not paid back after I think 25 years, it gets written off. The money goes quick though so yo may have to stand in a long line to get qualified.


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## poppy (Feb 21, 2008)

Declan said:


> My state has a program similar to income-contingent student loans. Your payments are based on your income and anything not paid back after I think 25 years, it gets written off. The money goes quick though so yo may have to stand in a long line to get qualified.


But what would happen to the program if your payment was based on your and your uncle Joe's income, even though uncle Joe is not a borrower on the loan and has no intention (or ability) to pay a dime on your house payment?


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## Declan (Jan 18, 2015)

poppy said:


> But what would happen to the program if your payment was based on your and your uncle Joe's income, even though uncle Joe is not a borrower on the loan and has no intention (or ability) to pay a dime on your house payment?


Then your payment would be more than it otherwise would be. The program I mentioned is specifically for low-income borrowers. You cannot make $250K a year and buy a lake house with it. It has to be in a rural area and cannot have more than 5 acres, but other than that, you just have to be working poorish. I know 1 person on it whose monthly payment doesn't completely cover her interest payment because she makes in the low 20's and has two kids.


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## Nevada (Sep 9, 2004)

mreynolds said:


> Yep, the Fed is out of tricks so now we allow the sub prime....


When was subprime not allowed? If offering subprime loans was ever against the law or banking regulations then I'm not aware of it.


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## po boy (Jul 12, 2010)

greg273 said:


> When Dubya did it, it was a 'great idea', remember?? Until it wasn't. Remember Dubya wanted an 'ownership society'... what he didn't tell us was it would be the banks owning the houses people couldn't afford.


Well, nothing wrong with wanting people to own homes. Guess he should have wanted folks to rent.

W tried to stop the wild lending several times.


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## po boy (Jul 12, 2010)

plowjockey said:


> I love the irony, of *blaming poor blacks* who could no longer make payments on dumpy little urban houses.
> 
> It's all their fault.
> 
> Certainly the leveraging of "funny money" on endless unneeded expensive condo projects and flipping grossly inflated "McMansions", had nothing to do with the crash.


In this thread??


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## Farmerga (May 6, 2010)

plowjockey said:


> Whether we are able to admit it or not, for _better_ and _worse_, mortgage debt is what made America great. It all started with the GI bill.
> 
> A "no money down" mortgage works just fine, provided the home is not too expensive (overpriced) and there are decent jobs to pay the payments.
> 
> Donald Trump says this is doable.


 
And water makes life possible, but, too much of it, in the wrong places, can be catastrophic.


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## FarmerKat (Jul 3, 2014)

This thread made me remember a house I sold a few years ago to a buyer with a USDA loan. I lived in a county designated as "rural" and while there are still true rural areas in the county, a big part of it is suburban filled with cookie-cutter bedroom communities. I was shocked when I saw the deal the buyer got on her USDA loan. Let me give you some background ....

I was by myself then and with the hours I worked, I did not have much time or energy to spend on house maintenance. I bought a small home in a really nice community. It was a country club with a golf course and the development had several "neighborhoods". Houses ranged from the small homes under $200K in my neighborhood to million dollar homes. My house was about 1,300 sq ft. The neighborhood had mandatory yard maintenance (i.e. you had to pay the HOA to maintain the yard, you were not allowed to do it yourself) - that was $50/month. HOA fees were $150/month and property taxes on my small house on 1/8 of an acre were over $4,000/year. That's a good amount of money to pay every month above and beyond the P&I on a mortgage.

The buyer not only qualified for a USDA loan with no money down, the USDA also paid her $200 a month as long as her income stayed under a certain amount. She had to report to the USDA each year her income. I mean seriously???? USDA pays someone to buy a house in a cookie-cutter neighborhood with high HOA fees?

I have nothing against the buyer personally - I was glad she bought the house and I did not have to pay for it anymore. And since race was brought up in prior post I will add that the buyer was a white woman. I was honestly surprised (or perhaps I should say shocked) when I saw the details of her financing at closing. 


On a separate note ... I think part of the blame for the crash of the mortgage market falls on the borrowers as well. I have applied for a mortgage several times in my life. Every time I applied for a mortgage, the bank or mortgage company would qualify me for about 3x of what I could actually afford. I stuck to my guns on *my* price range but I know many people (people with decent income) who took the banks up on their offer. Many ended up losing their homes. (I also know others who did not and have homes that are either paid off or have a small mortgage payment.) I thought the banks started being more reasonable after the crash but it seems like they are again pushing loans that the borrower cannot afford. Ugh.


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## Declan (Jan 18, 2015)

To me there are no hard and fast rules about what went wrong and one singular cause. What I do think that get underestimated as a role in all this is non-mortgage credit was also too easy to get, especially on cars and credit cards. People were spending like mad on new cars and clothes and all the stuff you swipe and walk out the door with. They would get in over their heads and then they would strip out all their equity in a refi of their house to pay it off and start the whole cycle again.

The car things is underestimated I think even in health insurance. We had a neighbor who always lamented they could not afford health insurance. They were 2 people with a teenage kid who had 4 new cars.Yeah they could afford health insurance--they just preferred having new cars and trucks. They had as much money sunk into what was sitting in their driveway as they did their house.


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## Nevada (Sep 9, 2004)

Declan said:


> To me there are no hard and fast rules about what went wrong and one singular cause.


Nonsense. If derivative securities had been regulated properly the 2008 mortgage crisis would never have happened. If you don't understand anything else about the mortgage crisis, that's the one thing you need to understand.


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## TripleD (Feb 12, 2011)

Nevada said:


> Nonsense. If derivative securities had been regulated properly the 2008 mortgage crisis would never have happened. If you don't understand anything else about the mortgage crisis, that's the one thing you need to understand.


The greedy banks loaned too much money to people who couldn't afford to pay it back

The greedy banks loaned too much money on houses that weren't worth the loan value.

The greedy banks loaned to people who didn't read the fine print.

The one thing I do know is over 25 were bought back from those greedy banks for about 30 cents on the dollar compared what they loaned out originally .............


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## Nevada (Sep 9, 2004)

TripleD said:


> The greedy banks loaned too much money to people who couldn't afford to pay it back
> 
> The greedy banks loaned too much money on houses that weren't worth the loan value.
> 
> ...


* Banks loaned money to people who couldn't afford to pay it back to create derivative security product.
* Banks loaned more money that houses were worth to create derivative security product.
* Mortgage brokers encouraged people to sign mortgage agreements without understanding the fine print to create derivative security product.

Derivative securities were the primary motivator for the entire mess. Banks didn't care if the loans were any good because they intended to sell the loans to someone else.


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## MO_cows (Aug 14, 2010)

Declan said:


> To me there are no hard and fast rules about what went wrong and one singular cause. What I do think that get underestimated as a role in all this is non-mortgage credit was also too easy to get, especially on cars and credit cards. People were spending like mad on new cars and clothes and all the stuff you swipe and walk out the door with. They would get in over their heads and then they would strip out all their equity in a refi of their house to pay it off and start the whole cycle again.
> 
> The car things is underestimated I think even in health insurance. We had a neighbor who always lamented they could not afford health insurance. They were 2 people with a teenage kid who had 4 new cars.Yeah they could afford health insurance--they just preferred having new cars and trucks. They had as much money sunk into what was sitting in their driveway as they did their house.


There were a lot of contributing factors, there is plenty of blame to go around, but the main cause for so many bad mortgages was that the banks could bundle them up as "securities" and sell them off. And there was very little regulation over this. Since the bank writing the loan wasn't going to carry the note themselves, they got sloppier and sloppier about the mortgages they approved. They would have them sold before the first payment even came due after all, and they were off the hook for the risk. The "feeding frenzy" for this drove up real estate prices to inflated levels, and a bubble was built. It was about 20 years in the making. When I saw houses just about doubling in value in less than a decade, I knew something wasn't on the up and up but I didn't know exactly what until the aftermath. 

As far as people who "can't afford" health care but they can afford everything else, I hear ya! I'll probably never have a newer car again, at least until I am old enough for Medicare, because of the cost of health insurance and the deductibles. I can't afford a big car payment and health care both, so I'll choose my health.


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## My2butterflies (Jan 17, 2015)

This is also why people need to really know what they can afford before making such a commitment. Don't get a $300,000 house when you can only comfortably afford payments on $100,000. Just because the bank will loan you the $300,000 doesn't mean you should do it. People need to smarten up and not set themselves up for failure.


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## mmoetc (Oct 9, 2012)

TripleD said:


> The greedy banks loaned too much money to people who couldn't afford to pay it back
> 
> The greedy banks loaned too much money on houses that weren't worth the loan value.
> 
> ...


How many of those were bought from the original loan holders? No one forced Countrywide and the other subprime lenders to work with crooked appraisers to inflate home values to increase the mortgage amount or to have their in house brokers play fast and loose with income documentation to "qualify" shaky lenders. Local banks around here wrote very few bad loans because they followed the rules. My bank still owns my mortgage. It wasn't bundled and sold off to hide poor lending practices. The bottom line is that many bad mortgages were written but no government policy required it.


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## Farmerga (May 6, 2010)

You forgot a couple of steps:

The Federal government "encouraged"(aka, arm twisted) banks to loan to the "less fortunate". 

The banks were forced to off load these foolish deals lest they are left holding the bag when the house of cards collapsed. 




Nevada said:


> * Banks loaned money to people who couldn't afford to pay it back to create derivative security product.
> * Banks loaned more money that houses were worth to create derivative security product.
> * Mortgage brokers encouraged people to sign mortgage agreements without understanding the fine print to create derivative security product.
> 
> Derivative securities were the primary motivator for the entire mess.


 The Federal government was the REAL primary motivator for the entire mess.


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## City Bound (Jan 24, 2009)

TripleD said:


> The one thing I do know is over 25 were bought back from those greedy banks for about 30 cents on the dollar compared what they loaned out originally .............


 That is a called fleecing. The world banks flood the market with easy money then they pull back the flow so that the economy shrinks. When the economy shrinks some people and businesses cant afford payments so the bank takes the assets. The banks generate the money to loan you from thin air. They loan money to countries also and do the same thing.

They treat humanity like livestock.


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## TripleD (Feb 12, 2011)

City Bound said:


> That is a called fleecing. The world banks flood the market with easy money then they pull back the flow so that the economy shrinks. When the economy shrinks some people and businesses cant afford payments so the bank takes the assets. The banks generate the money to loan you from thin air. They loan money to countries also and do the same thing.
> 
> They treat humanity like livestock.


I don't feel like I fleeced the banks at all ???


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## TripleD (Feb 12, 2011)

mmoetc said:


> How many of those were bought from the original loan holders? No one forced Countrywide and the other subprime lenders to work with crooked appraisers to inflate home values to increase the mortgage amount or to have their in house brokers play fast and loose with income documentation to "qualify" shaky lenders. Local banks around here wrote very few bad loans because they followed the rules. My bank still owns my mortgage. It wasn't bundled and sold off to hide poor lending practices. The bottom line is that many bad mortgages were written but no government policy required it.


I cant say on that . Some I bought were from BB&T , Wells Fargo, Fannie Mae and Freddie Mac. One was a USDA.


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## Nevada (Sep 9, 2004)

Farmerga said:


> You forgot a couple of steps:
> 
> The Federal government "encouraged"(aka, arm twisted) banks to loan to the "less fortunate".
> 
> ...


Only 6% of the failed subprime loans were underwritten by Freddie or Fannie. That means that 94% of the problem was with conventional bank loans. The problem was with not regulating derivative securities, and they still aren't regulated today.


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## Farmerga (May 6, 2010)

Nevada said:


> Only 6% of the failed subprime loans were underwritten by Freddie or Fannie. That means that 94% of the problem was with conventional bank loans. The problem was with not regulating derivative securities, and they still aren't regulated today.


 
Not what I said. Private banks were strong armed by the Federal Government to make loans to those with, shall we say, less than stellar credit histories. This started under Carter and was enhanced under Clinton, with the Republican presidents doing little to stop it. 
As bankers are generally smarter than regulators, and other government bureaucrats, they, of course, found a legal way to clear their books of these shaky loans. Then, as is true with all government inflated bubbles, it popped and much suffering ensued.


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## mmoetc (Oct 9, 2012)

Farmerga said:


> You forgot a couple of steps:
> 
> The Federal government "encouraged"(aka, arm twisted) banks to loan to the "less fortunate".
> 
> ...


But they didn't encourage them to use deceptive practices to sell mortgages at inflated prices. It would have been an interesting defense in those multi billion dollar cases the lenders lost. Many banks followed the same rules and wrote very few bad loans. A few broke the rules and wrote billions. It wasn't the government that allowed greed to drive their actions.


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## Farmerga (May 6, 2010)

mmoetc said:


> But they didn't encourage them to use deceptive practices to sell mortgages at inflated prices. It would have been an interesting defense in those multi billion dollar cases the lenders lost. Many banks followed the same rules and wrote very few bad loans. A few broke the rules and wrote billions. It wasn't the government that allowed greed to drive their actions.


 The government opened the door, gave quotas on the number loans to the underprivileged should be given. Generally interfered with the markets, then when it all blew up, swooped in and saved the banks. 

Sure Some of the banks were dirty, but, the lawlessness was a direct result of interference, in the market, by the Federal Government.


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## Nevada (Sep 9, 2004)

Farmerga said:


> As bankers are generally smarter than regulators, and other government bureaucrats, they, of course, found a legal way to clear their books of these shaky loans.


The problem wasn't that they sold the shaky loans. The problem was that the shaky loans were marketed as AAA rated. That was fraud by any standard, but banking regulators claim it was OK because they don't regulate those securities.

My personal opinion is that laws against fraud have always been on the books, so it should have been prosecuted.


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## MO_cows (Aug 14, 2010)

Nevada said:


> Only 6% of the failed subprime loans were underwritten by Freddie or Fannie. That means that 94% of the problem was with conventional bank loans. The problem was with not regulating derivative securities, and they still aren't regulated today.


Something wrong with your stats there. No way were 94% of the failed mortgages "conventional" loans.


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## Nevada (Sep 9, 2004)

MO_cows said:


> Something wrong with your stats there. No way were 94% of the failed mortgages "conventional" loans.


I'm only talking about subprime loans. "Conventional," meaning that the loans were underwritten by a private bank.


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## TripleD (Feb 12, 2011)

Nevada said:


> I'm only talking about subprime loans. "Conventional," meaning that the loans were underwritten by a private bank.


Why did they go broke at only a 6% failure rate ?


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## Nevada (Sep 9, 2004)

Farmerga said:


> The government opened the door, gave quotas on the number loans to the underprivileged should be given.


What legislation did that?


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## Nevada (Sep 9, 2004)

TripleD said:


> Why did they go broke at only a 6% failure rate ?


Not a 6% failure rate. I said that 6% of failed subprime loans were underwritten by Freddie & Fannie. I have no idea what the Freddie & Fannie mortgage failure rate was.


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## Shine (Feb 19, 2011)

Some of the stuff involved with the process that took us down in 2008 and this new process that should be considered is:

Are they being allowed to bundle them as securities and stamp AAA on them and sell them as exotic CDS?
Will they continue to use the M.E.R.S. system that still breaks the Chain of Custody and invalidates the deed?


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## Nevada (Sep 9, 2004)

Shine said:


> Are they being allowed to bundle them as securities and stamp AAA on them and sell them as exotic CDS?


Nobody was prosecuted last time. There are no new regulations on derivative securities, so I see no reason to believe anything has changed. 



Shine said:


> Will they continue to use the M.E.R.S. system that still breaks the Chain of Custody and invalidates the deed?


In truth, the only way to track a complicated chain of ownership is with software. It's not that they don't want to stop doing it with software, it's that they can't stop. Real estate law is going to have to catch up with technology.


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## HDRider (Jul 21, 2011)

From 2003 to 2006, the period in which the housing bubble inflated most dramatically, the share of loans backed by Fannie and Freddie fell from more than half to around a third, according to Inside Mortgage Finance, an industry newsletter. 

Crisis-era loans packaged into securities by Fannie and Freddie have experienced realized loss rates of around 3%, compared with 23% for those packaged into securities by Wall Street, according to Mark Zandi, chief economist at Moody&#8217;s Analytics.

&#8220;Commercial banks could have done all of those things in the 1960s or earlier, even before the Fed and the OCC [Office of the Comptroller of the Currency] and court decisions began to loosen the strictures of Glass-Steagall,&#8221; said Lawrence J. White, an expert on financial regulation at New York University&#8217;s Stern School of Business.

However, James G. Rickards, a former general counsel of the hedge fund Long-Term Capital Management and a fierce critic of the 1999 law, says there was an important cultural shift after Glass-Steagall was repealed. Previously, he said, such shadow-bank loans required permission from the Federal Reserve under an application known as 4(c)(8). &#8220;The presumption was it was illegal unless the Fed said you can do it,&#8221; he said. &#8220;After Glass-Steagall, we didn&#8217;t have to ask permission, and it enabled the banks to do what they wanted.&#8221;

The 500-page report of the Financial Crisis Inquiry Commission (FCIC) &#8212; the official government-funded investigation of the crisis &#8212; said that Lehman relied primarily on non-bank sources of funding, such as money market funds: &#8220;Solvency and liquidity were essential and related. If money market funds, hedge funds, and investment banks believed Lehman&#8217;s assets were worth less than Lehman&#8217;s valuations, they would withdraw funds, demand more collateral, and curtail lending. That could force Lehman to sell its assets at resale prices, wiping out capital and liquidity virtually overnight.&#8221;

As for AIG, which required a $180 billion federal bailout, the commission said its &#8220;enormous sales of credit default swaps were made without putting up initial collateral, setting aside capital reserves, or hedging its exposure &#8212; a profound failure in corporate governance, particularly its risk-management practices.&#8221;

Much of its business was conducted in London, and it was under the oversight of a relatively weak regulator, the Office of Thrift Supervision.

Gunnels also noted reporting that J.P. Morgan Chase, a commercial bank, was the clearing bank for Lehman Brothers and advanced it billions of dollars in credit before it collapsed. (J.P. Morgan Clearing was the remains of Bear Stearns, which the bank acquired in 2008 under the government&#8217;s urging to forestall the crisis. J.P. Morgan demanded additional collateral security for clearing activities, putting pressure on Lehman.)

A 2015 report by two Yale University professors who are experts on shadow banking concluded that the &#8220;run on repo&#8221; was not because of traditional commercial banks but that it &#8220;predominantly driven by the flight of foreign financial institutions, domestic and offshore hedge funds, and other unregulated cash pools.&#8221;

One key player in the crisis was Citicorp, a megabank that was the original impetus for changing the law Glass-Steagall.

https://www.washingtonpost.com/news...w-banks/?postshare=9411452525114460&tid=ss_tw


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## Farmerga (May 6, 2010)

Nevada said:


> What legislation did that?


 
https://en.wikipedia.org/wiki/Community_Reinvestment_Act

Pay particular attention to "Legislative Changes of 1994".


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## City Bound (Jan 24, 2009)

Farmerga said:


> Not what I said. Private banks were strong armed by the Federal Government to make loans to those with, shall we say, less than stellar credit histories. This started under Carter and was enhanced under Clinton, with the Republican presidents doing little to stop it.
> As bankers are generally smarter than regulators, and other government bureaucrats, they, of course, found a legal way to clear their books of these shaky loans. Then, as is true with all government inflated bubbles, it popped and much suffering ensued.


I remember some stink about this. Barney Frank was pushing banks to give mortgages to low income people. He used the race card and wage inequality as an undertone and he threatened the banks with a government inquiry into their books and their business practices if they did not comply. 

The banks were into criminal activity like laundering money for the Mexican drug cartel as well as other shady doings so they complied rather then be exposed. Then they sold off the risky loans to other suckers who would take them to free themselves of the financial risk.


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## greg273 (Aug 5, 2003)

Farmerga said:


> https://en.wikipedia.org/wiki/Community_Reinvestment_Act
> 
> Pay particular attention to "Legislative Changes of 1994".


 Which are not nearly as important as the changes brought on in 1999. Essentially turning banks into casinos. Well it didn't take long to implode. And hogwash on Bush 'trying to warn everyone'. He was pushing the 'ownership society' thing as hard as anyone else, at the behest of those same banks. 
There was never enough money in all those defaulted loans to cause the financial crisis, that only occurred when the original debts had been bundled and sold numerous times, and money lent against those bad loans as if they were 'good' loans. 
It was a complicated situation, but it sure as heck wasn't a bunch of po' folk that caused it.


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## JeffreyD (Dec 27, 2006)

greg273 said:


> Which are not nearly as important as the changes brought on in 1999. Essentially turning banks into casinos. Well it didn't take long to implode. And hogwash on Bush 'trying to warn everyone'. He was pushing the 'ownership society' thing as hard as anyone else, at the behest of those same banks.
> There was never enough money in all those defaulted loans to cause the financial crisis, that only occurred when the original debts had been bundled and sold numerous times, and money lent against those bad loans as if they were 'good' loans.
> It was a complicated situation, but it sure as heck wasn't a bunch of po' folk that caused it.


How are those rose colored glasses working out for ya? The po' folks didnât cause the problem, they took advantage of it, and when the bill came due......

Remember that the Bush had to deal with an incompetent democratically controlled congress. They were the cause. And law suits.


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## Nevada (Sep 9, 2004)

JeffreyD said:


> How are those rose colored glasses working out for ya? The po' folks didnât cause the problem, they took advantage of it, and when the bill came due......
> 
> Remember that the Bush had to deal with an incompetent democratically controlled congress. They were the cause. And law suits.


Regardless of which loans were made or who accepted them, the essential ingredient in the scam was fraud. The only thing that made the derivative securities worth anything was fraudulent ratings that purported those securities as AAA quality. At the very least, that kind of fraud needs to be stopped.

It's beyond me why fraud like that remains legal.


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## MO_cows (Aug 14, 2010)

Well to really play the blame game, you have to go back a loooooong time. Some deregulation was done under Reagan that started these banks on the path to "too big to fail". The subsequent administrations and Congresses all played a role with the actions they took, plus the overall circumstances of the times. 

It's just a scary thought that Martha Stewart went to prison for a measly $20k stock trade but these "wheeler dealer" banks and other companies who crashed the world economy due to greedy recklessness got bailouts and bonuses. Pretty much answers the question, "whose side are they on". Remember that next time you get the chance to vote out an incumbent!


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## Nevada (Sep 9, 2004)

MO_cows said:


> Well to really play the blame game, you have to go back a loooooong time. Some deregulation was done under Reagan that started these banks on the path to "too big to fail". The subsequent administrations and Congresses all played a role with the actions they took, plus the overall circumstances of the times.
> 
> It's just a scary thought that Martha Stewart went to prison for a measly $20k stock trade but these "wheeler dealer" banks and other companies who crashed the world economy due to greedy recklessness got bailouts and bonuses. Pretty much answers the question, "whose side are they on". Remember that next time you get the chance to vote out an incumbent!


I'd like to know where banks got the idea that they could get away with fraud. Moreover, they all seemed to have gotten the same idea at the same time. How were they so confident that they wouldn't be prosecuted? There's something about all this that they aren't telling us.


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## Declan (Jan 18, 2015)

Nevada said:


> Nonsense. If derivative securities had been regulated properly the 2008 mortgage crisis would never have happened. If you don't understand anything else about the mortgage crisis, that's the one thing you need to understand.


You are wrong, but I am sure that won't stop you from blaming mythical commercial paper. You could afford to pay your mortgage or you could not. The derivatives would not have been toxic had the mortgages bundled into them been good mortgages. It was people not being able to continuously refinance to strip out equity to cover their growing pile of debt that cost them their homes. Their mortgage payments would not have changed one single cent based on what happened to the paper once they signed it.


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## Nevada (Sep 9, 2004)

Declan said:


> The derivatives would not have been toxic had the mortgages bundled into them been good mortgages.


Why do you suppose all those bad loans got bundled into securities?


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## greg273 (Aug 5, 2003)

JeffreyD said:


> Remember that the Bush had to deal with an* incompetent democratically controlled congress*. They were the cause. And law suits.


 Nice try, but thats not the cause there Jeffery. I realize as a conservative you'd rather wish away the Bush years and the colossal damage they did to our nation, but no, you're not going to get away with trying to rewrite history on this. The GOP controlled the House and Senate from 1995-2007, excepting one two-year stretch where the Dems had a SLIM majority in the Senate. May as well own up to it and stop pretending. Greedy bankers and complicit politicians, most of them Republican, caused the mess. Repeal of Glass-Stegal was one of the main triggers for the crisis. And who moved to repeal that? 3 GOP congressmen. Imagine that.


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## Shine (Feb 19, 2011)

Declan said:


> You are wrong, but I am sure that won't stop you from blaming mythical commercial paper. You could afford to pay your mortgage or you could not. The derivatives would not have been toxic had the mortgages bundled into them been good mortgages. It was people not being able to continuously refinance to strip out equity to cover their growing pile of debt that cost them their homes. Their mortgage payments would not have changed one single cent based on what happened to the paper once they signed it.


Wow, I didn't know that this was what happened across the board... <sarc off>


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## mmoetc (Oct 9, 2012)

Farmerga said:


> https://en.wikipedia.org/wiki/Community_Reinvestment_Act
> 
> Pay particular attention to "Legislative Changes of 1994".


Read it twice. Saw no mention of lending quotas.


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## mmoetc (Oct 9, 2012)

Farmerga said:


> The government opened the door, gave quotas on the number loans to the underprivileged should be given. Generally interfered with the markets, then when it all blew up, swooped in and saved the banks.
> 
> Sure Some of the banks were dirty, but, the lawlessness was a direct result of interference, in the market, by the Federal Government.


Let's say there were quotas( there weren't but it's largely irrelevant). What about the quotas would have made any bank feel the need to work with crooked appraisers to inflate property values so they could write larger loans? What about quotas for poor people would have forced lending institutions to keep pumping money into things like the south Florida condo boom? People who easily qualified for one loan were able to leverage the speculative value of increasing prices for that piece of property into the next loan on the next property which also increased in value letting them borrow against it for the next loan. Of course the lending institutions didn't care that there was no fundemental basis for this price growth or that many of the condos would never be built because they had already sold these loans to the big boys who were colluding with the bond ratings agency to hide the risk involved and sell them to unsuspecting investors.

Quotas didn't cause any of this. Good old fashioned greed did. Some of the greed was from people who believed real estate could only go up. They learned differently. But most of it was from people who broke laws, lied and misled borrowers and investors and divested themselves of what they knew to be bad loans as quickly as possible while pocketing the profits. No government agency twisted their arms to make them do this. They did it all on their own and we're still paying for it.


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## Nevada (Sep 9, 2004)

mmoetc said:


> Let's say there were quotas( there weren't but it's largely irrelevant). What about the quotas would have made any bank feel the need to work with crooked appraisers to inflate property values so they could write larger loans? What about quotas for poor people would have forced lending institutions to keep pumping money into things like the south Florida condo boom? People who easily qualified for one loan were able to leverage the speculative value of increasing prices for that piece of property into the next loan on the next property which also increased in value letting them borrow against it for the next loan. Of course the lending institutions didn't care that there was no fundemental basis for this price growth or that many of the condos would never be built because they had already sold these loans to the big boys who were colluding with the bond ratings agency to hide the risk involved and sell them to unsuspecting investors.
> 
> Quotas didn't cause any of this. Good old fashioned greed did. Some of the greed was from people who believed real estate could only go up. They learned differently. But most of it was from people who broke laws, lied and misled borrowers and investors and divested themselves of what they knew to be bad loans as quickly as possible while pocketing the profits. No government agency twisted their arms to make them do this. They did it all on their own and we're still paying for it.


Conservatives are either being obtuse for political gain, or they really don't understand. Of the two, being obtuse is much better. But what if they really don't understand? They can't fix or prevent things they don't understand.

One thing we know for sure is that the conditions that allowed the 2008 mortgage crisis are still there. Nobody has fixed it. Derivative securities are still unregulated, banks that were too big to fail are even bigger, and the toxic assets are still on banks' books.

Even if conservatives believed that the repeal of Glass-Steagall & The Community Reinvestment Act caused the mortgage crisis, you have to wonder why republicans in congress haven't proposed legislation to fix them. Something's not right about that.


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## Shine (Feb 19, 2011)

It would appear as if the pending outcome is planned for.

Let's entertain that thought.

For the majority of people, their purchasing power has declined in the last 30 years as wages do not keep pace with inflation.

Add in layoffs and then those that were laid of, probably a good percentage rejoining the work force with a smaller piece of the pie, some not joining the workforce at all.

Those that have, especially the banking sector finding that they have free money to play with thanks to the government, when they were supposed to provide loans to businesses, then betting the funds on currency swaps and the like, boosting their pay yet again.

And recently the Libor rates which indeed did happen, enriched their bottom line even more - Fines?, more like taxes rather than fines.

So, as we near the end, those with the stolen wealth can divest themselves out of the fiat dollar and invest in real items that hold value no matter what happens to the economy.

The collapse happens, those that are aligned with the Georgia Guide Stones have their wish, those that changed their holdings find that the value of truly "valuable" things go off the charts and 99% of the people find that all that they have worked for in their life are now ashes in the wind... 

Viola...


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## Farmerga (May 6, 2010)

Nevada said:


> Conservatives are either being obtuse for political gain, or they really don't understand. Of the two, being obtuse is much better. But what if they really don't understand? They can't fix or prevent things they don't understand.
> 
> One thing we know for sure is that the conditions that allowed the 2008 mortgage crisis are still there. Nobody has fixed it. Derivative securities are still unregulated, banks that were too big to fail are even bigger, and the toxic assets are still on banks' books.
> 
> Even if conservatives believed that the repeal of Glass-Steagall & The Community Reinvestment Act caused the mortgage crisis, you have to wonder why republicans in congress haven't proposed legislation to fix them. Something's not right about that.


The answer is simple. The Federal government has no interest in stopping the next financial crisis. (I don't think they really have the ability to do much of anything except kick the can down the road) Think about it. When does the Federal government gain the most power? Just after a major crisis, correct? How much power did the Federal government gain after the Great Depression? WWII?, 9-11?, The Great Recession? 

The Federal government feeds and grows off of a diet of crisis. Why would they do anything real to stop it? 

BTW, Obama enjoyed 2 years of Democrat control over the WH and both branches of Congress, why didn't they do anything to regulate these securities? Like all of the power hungry monsters in D.C., they don't want to stop the next crisis.


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## mmoetc (Oct 9, 2012)

Farmerga said:


> The answer is simple. The Federal government has no interest in stopping the next financial crisis. (I don't think they really have the ability to do much of anything except kick the can down the road) Think about it. When does the Federal government gain the most power? Just after a major crisis, correct? How much power did the Federal government gain after the Great Depression? WWII?, 9-11?, The Great Recession?
> 
> The Federal government feeds and grows off of a diet of crisis. Why would they do anything real to stop it?
> 
> BTW, Obama enjoyed 2 years of Democrat control over the WH and both branches of Congress, why didn't they do anything to regulate these securities? Like all of the power hungry monsters in D.C., they don't want to stop the next crisis.


For better or worse the Democrats did pass Dodd -Frank. Of course the Repubicans have done everything in their power to change it and stand in the way of its full implementation.


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## Farmerga (May 6, 2010)

mmoetc said:


> For better or worse the Democrats did pass Dodd -Frank. Of course the Repubicans have done everything in their power to change it and stand in the way of its full implementation.


 
Dodd-Frank is, yet another, giant Federal Power grab that would do nothing to hinder the next financial collapse.


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## mmoetc (Oct 9, 2012)

Farmerga said:


> Dodd-Frank is, yet another, giant Federal Power grab that would do nothing to hinder the next financial collapse.


I did say for better or worse. But the dems, contrary to your claim, did take action and pass legislation. 

Now, about those quotas?


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## Farmerga (May 6, 2010)

mmoetc said:


> I did say for better or worse. But the dems, contrary to your claim, did take action and pass legislation.
> 
> Now, about those quotas?


Nevada said that there has yet to be any regulation on the securities of which he spoke. That is all I was speaking of, not the giant boondoggle of Dodd-Frank. Oh, Congress will pass legislation, no doubt. Most of it enhances their power and does little to fix the problem that they claim it is fixing. The ACA is a glairing example of that.

As to the quotas, as a result of the legislative action of 1994, banks would be restricted from expanding into other states if they did not provide a certain number of loans to "underserved" groups. As is usual, with such legislation, the exact number is left up to the agency charged with enforcement of the legislation. Any required number or percentage would be a quota. I do not know what that number was.


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## mmoetc (Oct 9, 2012)

Farmerga said:


> Nevada said that there has yet to be any regulation on the securities of which he spoke. That is all I was speaking of, not the giant boondoggle of Dodd-Frank. Oh, Congress will pass legislation, no doubt. Most of it enhances their power and does little to fix the problem that they claim it is fixing. The ACA is a glairing example of that.


As good an explanation as any.

Now, about those quotas?


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## Farmerga (May 6, 2010)

mmoetc said:


> As good an explanation as any.
> 
> Now, about those quotas?


 See the above post.


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## Farmerga (May 6, 2010)

Nevada said:


> I'd like to know where banks got the idea that they could get away with fraud. Moreover, they all seemed to have gotten the same idea at the same time. How were they so confident that they wouldn't be prosecuted? There's something about all this that they aren't telling us.


 Why, from the Federal Government, of course. The Federal Government, lies, steals, and commits grievous acts of fraud on a continuous basis. They know this, and have enough money to buy their own immunity.


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## mmoetc (Oct 9, 2012)

Farmerga said:


> The government opened the door, gave quotas on the number loans to the underprivileged should be given. Generally interfered with the markets, then when it all blew up, swooped in and saved the banks.
> 
> Sure Some of the banks were dirty, but, the lawlessness was a direct result of interference, in the market, by the Federal Government.


See the above post. About those quotas?

Or how about explaining how those non existant quotas forced lenders to break a variety of laws leading to multibillion dollar judgements against them? Really don't expect anything more than another antigovernment diatribe but it would be nice if you at least tried. 

Maybe you can explain how without government regulation the system would work. Or maybe you can explain what evil government regulation you might find acceptable.


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## Farmerga (May 6, 2010)

mmoetc said:


> See the above post. About those quotas?
> 
> Or how about explaining how those non existant quotas forced lenders to break a variety of laws leading to multibillion dollar judgements against them? Really don't expect anything more than another antigovernment diatribe but it would be nice if you at least tried.
> 
> Maybe you can explain how without government regulation the system would work. Or maybe you can explain what evil government regulation you might find acceptable.


 The requirement for loaning to the "underprivileged" is written into the law. The number of loans was up to the enforcement agency. That suggests quotas to me.

I never said that quotas caused anyone to break the law. If they did and received judgments against them, It would seem that the lack of regulation was not the problem.

Of course government is suppose to protect citizens from force and fraud. Where the problem lies is that the regulators are as corrupt and often more corrupt than those being regulated. 

The problem is that you expect the problem to be fixed by using a tool that is broken beyond repair, twon't work


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## MDKatie (Dec 13, 2010)

I went to the Fannie Mae HomeReady FAQ section and found some information that was (conveniently) left out of the original linked article. 



> NON-BORROWER HOUSEHOLD INCOME FLEXIBILITY
> Q11. What is the non-borrower household income flexibility for HomeReady?
> 
> This innovative new feature supports extended-family households by considering the existence of income from a non-borrower household members as a compensating factor in DU to allow for a debt-to-income (DTI) ratio greater than 45 percent, up to 50 percent. *Note: Non-borrower
> ...


So, income of non-borrowers is ONLY included when the debt-to-income ratio is too high for the borrower.


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## mmoetc (Oct 9, 2012)

Farmerga said:


> You forgot a couple of steps:
> 
> The Federal government "encouraged"(aka, arm twisted) banks to loan to the "less fortunate".
> 
> ...





Farmerga said:


> The requirement for loaning to the "underprivileged" is written into the law. The number of loans was up to the enforcement agency. That suggests quotas to me.
> 
> I never said that quotas caused anyone to break the law. If they did and received judgments against them, It would seem that the lack of regulation was not the problem.
> 
> ...


So they encouraged and arm twisted the banks to make bad loans? Which they were then forced to sell off to protect themselves. All because of quotas that only exist in the minds of those like you. And all of that caused the system to collapse. 

If the non existant quotas didn't force anyone to break the law, what did? I've already answered. Hint, it wasn't a poor person getting a loan.

If stronger government regulation and enforcement isn't the answer, what is? We've already seen what weak regulations and lax enforcement lead to. Sometimes government is the solution.


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## Farmerga (May 6, 2010)

mmoetc said:


> So they encouraged and arm twisted the banks to make bad loans? Which they were then forced to sell off to protect themselves. All because of quotas that only exist in the minds of those like you. And all of that caused the system to collapse.
> 
> If the non existant quotas didn't force anyone to break the law, what did? I've already answered. Hint, it wasn't a poor person getting a loan.
> 
> If stronger government regulation and enforcement isn't the answer, what is? We've already seen what weak regulations and lax lead to. Sometimes government is the solution.


 That among other things. Let me ask you this. If a bank is required to give out a certain number of loans (what ever that number may be) to the "underserved" community, or else, not be allowed to expand into other states, how is that not a quota of sorts? 

For sure the banks had a big role in the collapse. The Federal government also had a big role.

For starters, some government regulation is necessary. Multi thousand page bills followed by 10's of thousands of pages of regulations are not the answer. Common sense regulation with common sense, consistent enforcement would be fine. A government that is not more corrupt than the bankers would be wonderful. 

One big thing, that would help to curve some of the risky behavior can be summed up with the term "moral hazard". Do away with the concept of "too big to fail". If they break the law, or, take too many risks, their business fails. There should be no bail out from government.


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## Nevada (Sep 9, 2004)

Farmerga said:


> That among other things. Let me ask you this. If a bank is required to give out a certain number of loans (what ever that number may be) to the "underserved" community, or else, not be allowed to expand into other states, how is that not a quota of sorts?
> 
> For sure the banks had a big role in the collapse. The Federal government also had a big role.
> 
> ...


I can tell you right now that the economic indicators aren't looking good. A serious dip back into recession could turn the 2016 election on its head. Something nasty is brewing in the financial sector.

Nobody has a clue; not Obama, not the republicans, not even the Fed. When it happens it will be the same story as in 2008. It will be a complete surprise and idiots in congress will tell us that the fundamentals of the economy are sound, but they won't be able to tell you why. That's because they don't know why.

We're walking right in to a recession, and it WAS avoidable. It may be too late now, but 6 months ago we could have changed course.

[ame]https://www.youtube.com/watch?v=1LKWpjGA8Ro[/ame]


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## mmoetc (Oct 9, 2012)

Farmerga said:


> The requirement for loaning to the "underprivileged" is written into the law. The number of loans was up to the enforcement agency. That suggests quotas to me.
> 
> I never said that quotas caused anyone to break the law. If they did and received judgments against them, It would seem that the lack of regulation was not the problem.
> 
> ...


And when you can show me the regulation or legislalation that sets those numbers for loans to the "undeserving" you can properly call them quotas. You haven't. More to the point, if these non existant quotas didn't cause anyone to break the law why keep harping on them as the underlying cause of the financial crisis. The small number of loans to the "undeserving" didn't bring about the collapse . Gross fraud and greed did. 

Regulators and government agencies aren't and never will be good at anticipating problems. Often those problems and abuses aren't identified until after they've happened. Smart people will always find a way to work around any regulation. Some find legal ways. Regulations and laws then need to be redone to reflect these new realities. Some break the law to do so. They face punishment for doing so. But you can't punish someone for what they might do. I'll even point the finger of blame partially at the government for not paying enough attention to enforcement. It's easy to write a law prohibiting something. It's much more difficult in our current political climate to enforce those laws. You can post all the speed limit signs you wish but unless you pay for a cop to enforce them, what power does the sign have. It's the same with financial law. If you're not willing to pay for the best and brightest to look for abuses the best and brightest will find ways to abuse. But that would only expand government overreach, right?


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## HDRider (Jul 21, 2011)

mmoetc said:


> Let's say there were quotas( there weren't but it's largely irrelevant). What about the quotas would have made any bank feel the need to work with crooked appraisers to inflate property values so they could write larger loans? What about quotas for poor people would have forced lending institutions to keep pumping money into things like the south Florida condo boom? People who easily qualified for one loan were able to leverage the speculative value of increasing prices for that piece of property into the next loan on the next property which also increased in value letting them borrow against it for the next loan. Of course the lending institutions didn't care that there was no fundemental basis for this price growth or that many of the condos would never be built because they had already sold these loans to the big boys who were colluding with the bond ratings agency to hide the risk involved and sell them to unsuspecting investors.
> 
> Quotas didn't cause any of this. Good old fashioned greed did. Some of the greed was from people who believed real estate could only go up. They learned differently. But most of it was from people who broke laws, lied and misled borrowers and investors and divested themselves of what they knew to be bad loans as quickly as possible while pocketing the profits. No government agency twisted their arms to make them do this. They did it all on their own and we're still paying for it.


Irrelavant or not, there are quotas...

The Community Reinvestment Act (CRA, P.L. 95-128, 91 Stat. 1147, title VIII of the Housing and Community Development Act of 1977, 12 U.S.C. Â§ 2901 et seq.) is a United States federal law designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods

https://en.wikipedia.org/wiki/Community_Reinvestment_Act

In the 1990's under the administration of Franklin Raines, a Clinton Administration appointee, Fannie Mae began to demand that the lending institutions that it dealt with prove that they were not redlining. This meant that the lending institutions would have to fulfill a quota of minority mortgage lending. This in turn meant that the lending agencies would have to lower their standards in terms of such things as down payments and the required incomes. These subprime borrowers would be charged a higher interest rate. Having put the lending agencies into the position of granting subprime mortgages Fannie Mae then had to accept lower standards in the mortgages it purchased. That set the ball rolling. If a bank granted a mortgage to a borrower that was not likely to successfully pay off the mortgage then all the bank had to do was to sell such mortgages to Fannie Mae. The banks typically earned a loan origination fee when the mortgage was granted. The lending agencies could then make substantial profits dealing in subprime mortgages.

http://www.sjsu.edu/faculty/watkins/subprime.htm


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## mmoetc (Oct 9, 2012)

HDRider said:


> Irrelavant or not, there are quotas...
> 
> The Community Reinvestment Act (CRA, P.L. 95-128, 91 Stat. 1147, title VIII of the Housing and Community Development Act of 1977, 12 U.S.C. Â§ 2901 et seq.) is a United States federal law designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods
> 
> ...


I don't take wiki as proof. It is written by those like you and me. Show me the law or regulation that shows that X out of 100 loans must be written for the "undeserving". It doesn't seem that if such a quota exists, or ever did, such a number would be hard to find. Every website and expert that has cited quotas as fact for the last 10 years should be able to produce the evidence. All I'm asking for is that number. 

I live in one of the poorest, most rural counties in my state. During the years leading up to the financial collapse and for a couple years after I sat down for a short conversation almost every weekday with the branch manager and chief loan officer of our local community owned bank when I went in to make my business deposit. He was surrounded by the "undeserving". He continued to make loans on homes, farms and businesses but never, as far as I know, loaned to someone who wasn't qualified. The bank services all it's own loans. It never has sold loans on the secondary market. It has an interest in making good loans. Audited yearly. Never cited because it didn't meet some non existant quota. Flash forward to after the financial crisis. Our local paper made a lot of money printing notices of forclosures and sales. Guess which bank almost never appeared in those notices? The local, community owned bank which used proper lending procedures and serviced its loans. The creditors listed in most proceedings were the big banks and holding companies and corporate entitities which bought those bad loans. I know property values around here pretty good. Even at its height most of those loans were written for recreational land and homes way over their value. I wonder who appraised them. My banker friend had two appraisers he trusted. They weren't the busiest in the area. Wonder why? Greed from the top drove the crisis. Not loans to the "undeserving". Greed will drive the next one. It's driven every one.


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## mmoetc (Oct 9, 2012)

Tell me how loans to the "undeserving" led to this. 
http://abcnews.go.com/Nightline/Business/story?id=2882620&page=1


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## Farmerga (May 6, 2010)

mmoetc said:


> I don't take wiki as proof. It is written by those like you and me. Show me the law or regulation that shows that X out of 100 loans must be written for the "undeserving". It doesn't seem that if such a quota exists, or ever did, such a number would be hard to find. Every website and expert that has cited quotas as fact for the last 10 years should be able to produce the evidence. All I'm asking for is that number.
> 
> I live in one of the poorest, most rural counties in my state. During the years leading up to the financial collapse and for a couple years after I sat down for a short conversation almost every weekday with the branch manager and chief loan officer of our *local community owned bank* when I went in to make my business deposit. He was surrounded by the "undeserving". He continued to make loans on homes, farms and businesses but never, as far as I know, loaned to someone who wasn't qualified. The bank services all it's own loans. It never has sold loans on the secondary market. It has an interest in making good loans. Audited yearly. Never cited because it didn't meet some non existant quota. Flash forward to after the financial crisis. Our local paper made a lot of money printing notices of forclosures and sales. Guess which bank almost never appeared in those notices? The local, community owned bank which used proper lending procedures and serviced its loans. The creditors listed in most proceedings were the big banks and holding companies and corporate entitities which bought those bad loans. I know property values around here pretty good. Even at its height most of those loans were written for recreational land and homes way over their value. I wonder who appraised them. My banker friend had two appraisers he trusted. They weren't the busiest in the area. Wonder why? Greed from the top drove the crisis. Not loans to the "undeserving". Greed will drive the next one. It's driven every one.


 The regulation, to serve the "underprivileged" was for banks that were interested in expansion beyond the boarders of a particular state. (to, at least, give the appearance of abiding by the Constitution). The number of such loans were taken into consideration when determining if a bank could expand. Your community bank doesn't seem to fit that definition and, therefore was immune from that particular regulation.


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## po boy (Jul 12, 2010)

Ignore


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## po boy (Jul 12, 2010)

mmoetc said:


> I don't take wiki as proof. It is written by those like you and me. Show me the law or regulation that shows that X out of 100 loans must be written for the "undeserving". It doesn't seem that if such a quota exists, or ever did, such a number would be hard to find. Every website and expert that has cited quotas as fact for the last 10 years should be able to produce the evidence. All I'm asking for is that number.
> 
> I live in one of the poorest, most rural counties in my state. During the years leading up to the financial collapse and for a couple years after I sat down for a short conversation almost every weekday with the branch manager and chief loan officer of our local community owned bank when I went in to make my business deposit. He was surrounded by the "undeserving". He continued to make loans on homes, farms and businesses but never, as far as I know, loaned to someone who wasn't qualified. The bank services all it's own loans. It never has sold loans on the secondary market. It has an interest in making good loans. Audited yearly. Never cited because it didn't meet some non existant quota. Flash forward to after the financial crisis. Our local paper made a lot of money printing notices of forclosures and sales. Guess which bank almost never appeared in those notices? The local, community owned bank which used proper lending procedures and serviced its loans. The creditors listed in most proceedings were the big banks and holding companies and corporate entitities which bought those bad loans. I know property values around here pretty good. Even at its height most of those loans were written for recreational land and homes way over their value. I wonder who appraised them. My banker friend had two appraisers he trusted. They weren't the busiest in the area. Wonder why? Greed from the top drove the crisis. Not loans to the "undeserving". Greed will drive the next one. It's driven every one.


If the community bank did not sell loans to the secondary market, they did not fall under the CRA requirement.

There were a ton of suits filed against major banks claiming they were redlining or declining loans based on race.


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## mmoetc (Oct 9, 2012)

Farmerga said:


> The regulation, to serve the "underprivileged" was for banks that were interested in expansion beyond the boarders of a particular state. (to, at least, give the appearance of abiding by the Constitution). The number of such loans were taken into consideration when determining if a bank could expand. Your community bank doesn't seem to fit that definition and, therefore was immune from that particular regulation.


Nope. It had to service it's community. The banks that were expanding were choosing to expand their community. They were required to service that larger community equally. They weren't allowed to use one set of criteria to write loans in one part of that community and another set in a different neighborhood. They couldn't buy the local community bank and them redline that community from further loans. These banks found a way to offload their risk to others who fraudulently packaged them for sale to others. Why would you care who you loaned to if you had no risk? 

My simple, probably unworkable, solution is that all lenders must service their own loans. There should be no secondary loan market to manipulate. Or, remove the financial incentive from the ratings agencies who grade such securities to inflate their worth.


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## mmoetc (Oct 9, 2012)

po boy said:


> If the community bank did not sell loans to the secondary market, they did not fall under the CRA requirement.
> 
> There were a ton of suits filed against major banks claiming they were redlining or declining loans based on race.


And those would be legitimate claims, no? The idea was that race or zipcode shouldn't be the reason a loan was refused. Sounds like a good idea to me.


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## mmoetc (Oct 9, 2012)

Maybe you can explain how these undeserving loans caused the Vegas housing bust?http://www.seattletimes.com/business/real-estate/las-vegas-housing-boom-going-bust/

Or was it people who could afford the loan one day because they had a nice casino job became unemployed and undeserving the next. Yeah, they were greedy to believe home values would continue to rise but I'll bet a shiny new dime no lender counseled them otherwise. Of course the lender had no real risk because they likely sold the loan as quickly as it was signed.


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## po boy (Jul 12, 2010)

mmoetc said:


> Nope. It had to service it's community. The banks that were expanding were choosing to expand their community. They were required to service that larger community equally. *They weren't allowed to use one set of criteria to write loans in one part of that community and another set in a different neighborhood. *They couldn't buy the local community bank and them redline that community from further loans. These banks found a way to offload their risk to others who fraudulently packaged them for sale to others. Why would you care who you loaned to if you had no risk?
> 
> My simple, probably unworkable, solution is that all lenders must service their own loans. There should be no secondary loan market to manipulate. Or, remove the financial incentive from the ratings agencies who grade such securities to inflate their worth.


I was in the business during tat time and guidelines were the same.


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## po boy (Jul 12, 2010)

mmoetc said:


> And those would be legitimate claims, no? *The idea was that race or zipcode shouldn't be the reason a loan was refused.* Sounds like a good idea to me.


That was not the case.............................


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## po boy (Jul 12, 2010)

mmoetc said:


> Maybe you can explain how these undeserving loans caused the Vegas housing bust?http://www.seattletimes.com/business/real-estate/las-vegas-housing-boom-going-bust/
> 
> Or was it people who could afford the loan one day because they had a nice casino job became unemployed and undeserving the next. Yeah, they were greedy to believe home values would continue to rise but I'll bet a shiny new dime no lender counseled them otherwise. Of course the lender had no real risk because they likely sold the loan as quickly as it was signed.


You can post all day, but your examples are the end result of the market crash.


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## mmoetc (Oct 9, 2012)

po boy said:


> I was in the business during tat time and guidelines were the same.


Then why the need for a law outlawing redlining? If the criteria was the same regardless of race or zipcode what was the problem?


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## po boy (Jul 12, 2010)

mmoetc said:


> Then why the need for a law outlawing redlining? If the criteria was the same regardless of race or zipcode what was the problem?


That' easy, not making loans to people that didn't qualify.


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## mmoetc (Oct 9, 2012)

po boy said:


> You can post all day, but your examples are the end result of the market crash.


I certainly can. I've been told that the community reinvestment act caused the banks to loan to "undeserving" people which is what caused the crash. I'm still waiting for proof of that. You were in the business. What was your quota for writing loans to the "undeserving"? My examples show how simple human greed led to the crisis. It was greedy of borrowers to believe prices would always rise. It was greed by the lenders who did nothing to assuage them of this belief and in fact feed into it by loaning them as much as they could because they could sell these loans and have no risk. It was greed by the bundlers and the ratings agencies they incentivized to give AAA ratings for bad paper. It was greed for everyone that turned a blind eye or actively colluded to inflate values. It was greed that caused it. It has been greed that has caused every boom and bust. It is greed that will cause the next one. It wasn't the small number of loans made to the "undeserving".


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## mmoetc (Oct 9, 2012)

po boy said:


> That' easy, not making loans to people that didn't qualify.


?????? Applying the same standards is the opposite of redlining a neighborhood. Redlining means that no loan can be made in an area no matter how well qualified the borrower was. If the same standards were applied to all borrowers no neighborhood or zipcode should be automatically eliminated from loan consideration.


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## Farmerga (May 6, 2010)

mmoetc said:


> Maybe you can explain how these undeserving loans caused the Vegas housing bust?http://www.seattletimes.com/business/real-estate/las-vegas-housing-boom-going-bust/
> 
> Or was it people who could afford the loan one day because they had a nice casino job became unemployed and undeserving the next. Yeah, they were greedy to believe home values would continue to rise but I'll bet a shiny new dime no lender counseled them otherwise. Of course the lender had no real risk because they likely sold the loan as quickly as it was signed.


 The lender is there to make money, not to hold the hands of greedy people who want a McMansion. The loans to the underserved or, as you say, "undeserving" and the regulations that brought it about, was a PART of the problem, not the whole cause. The housing bubble spread across all socio-economic backgrounds. The Federal government had a huge role in blowing up that bubble with the so-called "ownership society" they tried to create. The bankers REACTED to Federal regulation in a way that made the bubble pop. This is why the Federal government must not be allowed to be a major player in the economy. Sure, they can regulate commerce as long as it is interstate, or, international, but, we must force them back to a very narrow view of what that is. 

No more of the idea of if ANY of your dealings are interstate/national, all of your business is subject to Federal regulation. 

No more bailouts. If a bank gets greedy and self-destructs, let them go, no matter the ripple effects.


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## mmoetc (Oct 9, 2012)

Farmerga said:


> The lender is there to make money, not to hold the hands of greedy people who want a McMansion. The loans to the underserved or, as you say, "undeserving" and the regulations that brought it about, was a PART of the problem, not the whole cause. The housing bubble spread across all socio-economic backgrounds. The Federal government had a huge role in blowing up that bubble with the so-called "ownership society" they tried to create. The bankers REACTED to Federal regulation in a way that made the bubble pop. This is why the Federal government must not be allowed to be a major player in the economy. Sure, they can regulate commerce as long as it is interstate, or, international, but, we must force them back to a very narrow view of what that is.
> 
> No more of the idea of if ANY of your dealings are interstate/national, all of your business is subject to Federal regulation.
> 
> No more bailouts. If a bank gets greedy and self-destructs, let them go, no matter the ripple effects.


And the lender makes more money by lending more money and passing along the risk. The lender has no incentive to act wisely and loan prudently if they have no real risk of losing. Appraisers who overvalued properties so the lender could write a larger loan were rewarded with more business. Those that didn't play didn't get more business. Loan writers didn't get bonuses because they wrote good loans. They got bonuses for writing more and bigger loans even if it meant they falsified income statements, often without the borrowers knowledge. Their bosses didn't care and the investors didn't care. Everyone was making money. None of this was caused because banks were required to loan to "undeserving" people.

Greed was rampant from bottom to top. But those at the bottom didn't control the money nor did they control the risk. Less regulation isn't the answer. Not being willing to pay for the enforcement of regulations largely is. That does fall on the government. It also falls on those people who continually rant and rave about the evils of government and pay lip service to enforcing laws. As I said earlier, even the best speed limit signs are ineffective in detering speeding if there isn't a cop around to enforce them.


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## Nevada (Sep 9, 2004)

mmoetc said:


> And the lender makes more money by lending more money and passing along the risk. The lender has no incentive to act wisely and loan prudently if they have no real risk of losing. Appraisers who overvalued properties so the lender could write a larger loan were rewarded with more business.


And another thing, I don't understand why it's legal for appraisers & mortgage lenders to conspire to defraud investors. Law enforcement says that these securities are unregulated so there's nothing they can do, but I call BS on that.

Fraud is fraud, regardless of whether it involves a regulated product. Fraud laws are on the books. If you misrepresent a product, ANY product, then you're breaking the law. Saying that it's ok for bankers to defraud investors because derivative securities are not regulated is very weak sauce.

But we let banks and law enforcement get away with it (yes, of course law enforcement is in on it, since they let them go). If you've ever wondered if bankers really have a different set of rules for themselves, here's your answer.

I guess that makes it legal for banks to commit fraud, and there's not much we can do about it.


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