A friend of mine found this article from the New York Times, dated during Clintons administration. in September of 1999. It looks like both administrations are to blame.
September 30, 1999
Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called sub prime 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 sub prime market." Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the sub prime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one-percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, A Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
7 comments:
I don't see how both administrations are guilty. Clearly the Clinton administration is implicated in this article, but I haven't seen any evidence that the Bush administration had anything to do with it. In fact, it was the Bush administration that warned about the problem and proposed changes, only to be blocked by the Democrats. In my opinion, 90% of the blame belongs to the Democrat party. Will this debacle hurt them? Very unlikely. Democrats can get involved in scandal after scandal and get off Scot free, but the slightest indiscretion by a conservative is proclaimed as the worst corruption ever known.
Yes, I think you are right. But it seems like all I have heard is that the Bush administration didn't push for a fix on it...so he seems to be taking the blame. If then the Democrats and Clintons administration are more at fault...I don't understand why the media isn't telling it so. I agree with you, that the media is way harder on the convservatives.
88% of news reporters (all media formats) contribute to Democrat candidates. Many of such reporters are not dispassionate journalists. They actively work, write, and report in favor of Democrats. If the media was in anyway fair, Obama would only get 30 to 35% of the vote, but he benefits from puff piece after puff piece and the liberal media mostly ignore his glaring shortcomings. It tends to be left leaning students to go into journalism and they come out of college full blown liberals. Conservative don't normally choose journalism as a career, hence the imbalance.
Like I wrote before, Republicans as well were pocketing plenty of money from Freddie and Fannie in the form of legal donations. Utah Senator Bob Bennett was fourth highest recipient. Bankers, money handlers, mortgage dudes, all those companies dealing in this arena have the reputation of being primarily Republicans because of their yearning for open unregulated markets that they can manipulate to their financial advantage. IF indeed Democrats were the political machinery behind this, voting and donating Republicans and Republican- leaning money-grubbers were the oil that greased it!
Yes. Republicans may be guilty of aiding and abetting in terms of donations, but it was Democrats running the place and their willing accomplices in Congress who blocked attempts to fix the situation. So the heavier blame goes on the Ds. The Rs were simply weak-kneed and unwilling to push the issue. If any R were guilty of anything whatsoever, the Ds would be conducting hearings and calling for a Special Prosecutor, but not a peep from the Ds whatsoever.
Also, I am not a tinfoil hatter, but I find it curious that all this blows up during the campaign. Why now? The timing is all to convenient.
So are the Republicans going to call for investigations and a special prosecutors? Frankly, I hope so. If Obama is involved in voter fraud, I hope he gets nailed. When it comes to invoking such means, the Republicans are not exactly neophytes, I seem to recall a certain Mr. K. Starr whose constant drumbeat no matter how tired seemed to please some...
I suppose you are right about Ken Starr. It seems to be the habit of these special prosecutors to keep digging until they find even the smallest of misdeeds, or even cause them to happen (the Scooter Libby case).
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