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- #141
What is it you can't comprehend? Private sector loans, not Fannie or Freddie, triggered crisis
- More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
- Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
- Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.
The "turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007.
Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.
During those same explosive three years, private investment banks not Fannie and Freddie dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data.
And at the height of the housing boom in 2005 and 2006, Republicans and their party's standard bearer, President Bush, didn't criticize any sort of lending, frequently boasting that they were presiding over the highest-ever rates of U.S. homeownership.
And maybe you just FORGOT this...
Bush's 'ownership society'
"America is a stronger country every single time a family moves into a home of their own," George W. Bush said in October 2004. To achieve his vision, Bush pushed new policies encouraging homeownership, like the "zero-down-payment initiative," which was much as it soundsa government-sponsored program that allowed people to get mortgages without a down payment. More exotic mortgages followed, including ones with no monthly payments for the first two years. Other mortgages required no documentation other than the say-so of the borrower. Absurd though these all were, they paled in comparison to the financial innovations that grew out of the mortgagesderivatives built on other derivatives, packaged and repackaged until no one could identify what they contained and how much they were, in fact, worth.
As we know by now, these instruments have brought the global financial system, improbably, to the brink of collapse.
End of the Ownership Society
Does the Constitution allow pols to support home ownership?
You have been reduced to babble.
The FACTS are the financial crisis was not caused by too much government, it was caused by not enough government regulations and oversight. It was caused by private lenders who were not subject to housing laws. It was caused by mostly rich people buying homes with no intention of residing in them. They were not interested in long term mortgages, they were only looking for a short term low or NO payment loan to buy and SELL. When the market crashed, they walked away. The housing bubble and its inevitable collapse would never have been possible without (1) hordes of speculators (2) absurdly easy financing and (3) widespread mortgage fraud.
Begin your education:
How Speculative Madness Changed the Housing Market
An article which appeared in the Wall Street Journal (WSJ) in January 2007 painted a vivid picture of the speculative fever which gripped nearly all of Florida. Naples, near Ft. Myers, had become a "hot market" by early 2003. One Naples real estate agent, who owned 13 investment properties there, told the authors that by 2004, "investors were "scouring every corner of Naples."
Another realtor, mentioned in the same WSJ article, sold his own home in the fall of 2004 to an investor for $435,000, more than double what he had paid for it five years earlier. He soon sold numerous other properties to her including a duplex for $621,000 in October 2005 which he had bought seven months earlier for only $349,000. This same investor also bought another house in July for $690,000 which had sold for $275,000 in early 2001. The next door neighbor told the authors "We were just laughing at these prices.... I grew up here and it's out of control."
During the peak of the speculative bubble in Naples from early 2004 to the fall of 2005, median prices almost doubled from $250,000 to $420,000. The authors of the WSJ article talked to numerous local real estate agents who agreed that during this period "as many as 50% of buyers may have been investors."
Does the Constitution allow pols to support home ownership?