patrick.net

Entitlemented says

So Mr. Gramm really wanted to exclude banks that had the worst rate of loans going bad, because of the worry that Bankers had that the many more loans would go bad. To alleviate this concern, as the acticle says, the financial lobbyists were ready to roll these loans into different securities so the banks themselve would not hold the risk. This brilliant move that removed the bank bad loan risks, rolled it into a CDO security, allowed community banks to make more creative loans, now known as NINJA and other loans.

That's the best piece of fiction since Mcbeth. What does Gramm Leach have to do with CDO's? CDO's were around 15 years before the bill passed. Where does it say anywhere in the article financial lobbyists were ready to roll loans into securities? Are we reading the same article? Please show the part of Gramm Leach that deals with securitization of debt? There isn't any.

It's worth pointing out that it's been proven many times the the CRA had nothing to do with the housing bubble and crash. I guess you didn't get the memo.

indigenous says

But keep in mind that off-shoring creates jobs as the pie gets bigger it is not a zero sum game. The other benefit of off shoring is that people can buy goods at lower cost which in effect raises their standard of living.

not when there's a trade deficit going along with the offshoring

http://www.census.gov/foreign-trade/top/dst/current/deficit.html

Plus if all the money consumers save buying cheaper imports just ends up in higher housing costs -- and it has -- this dogma that free trade is unalloyed good is just more bullshit selling us down the river (sending us up the river, really)

Please see that the Freddie and Fannie were mandated to have > 40% of their loans be CRA loans.

http://en.wikipedia.org/wiki/Causes_of_the_United_States_housing_bubble#Risky_mortgage_products_and_lax_lending_standards

Further correlation is that many of the refi's and homes made newly rich owners not need CRA on the Refi because of the increased home valuation. Its been establish that many people used homes as ATMS, and at low incomes and high.

The Housing and Community Development Act of 1992 established an affordable housing loan purchase mandate for Fannie Mae and Freddie Mac, and that mandate was to be regulated by HUD. Initially, the 1992 legislation required that 30 percent or more of Fannie’s and Freddie’s loan purchases be related to affordable housing. However, HUD was given the power to set future requirements. In 1995 HUD mandated that 40 percent of Fannie and Freddie’s loan purchases would have to support affordable housing. In 1996, HUD directed Freddie and Fannie to provide at least 42% of their mortgage financing to borrowers with income below the median in their area. This target was increased to 50% in 2000 and 52% in 2005. Under the Bush Administration HUD continued to pressure Fannie and Freddie to increase affordable housing purchases – to as high as 56 percent by the year 2008.[22] To satisfy these mandates, Fannie and Freddie eventually announced low-income and minority loan commitments totaling $5 trillion.[23] Critics argue that, to meet these commitments, Fannie and Freddie promoted a loosening of lending standards - industry-wide.[24]

Regarding the Community Reinvestment Act (CRA), Economist Stan Liebowitz wrote in the New York Post that a strengthening of the CRA in the 1990s encouraged a loosening of lending standards throughout the banking industry. He also charged the Federal Reserve with ignoring the negative impact of the CRA.[25] American Enterprise Institute Scholar Edward Pinto noted that, in 2008, Bank of America reported that its CRA portfolio, which constituted only 7 percent of its owned residential mortgages, was responsible for 29 percent of its losses.[26] A Cleveland Plain Dealer investigation found that "The City of Cleveland has aggravated its vexing foreclosure problems and has lost millions in tax dollars by helping people buy homes they could not afford." The newspaper added that these problem mortgages "typically came from local banks fulfilling federal requirements to lend money in poorer neighborhoods."[27][28]

Others argue that "pretty much all the evidence on the housing crisis shows" that Fannie Mae, Freddie Mac, the (CRA) and their affordability goals were not a major reason for the bubble and crash.[18][20][29]

Note I put the others argue. You must argue that less and less people were using CRA as the year went by, (this is the opposite of what happened)

You must argue that the various type of "innovate" loans decreased from the inception of the CRA rules change to 2007 (this is the opposite of what actually happened)

You must argue that the private mortgage firms did not want the loose standards that were being done with Freddie and Fannie (this is opposite, as the goal was to sell more and more bad loans without regard to risk)

You must argue that since people of lower salaries recieved innovative loans, that other middle class must not get the same type of loans (this is the opposite of what happened, do you expect to give easy loans to people with low salaries and then deny it to people who are more qualified)

You must argue that MERS was created in order to insure due diligence with regards to loan qualification, and maintains home title standards (this is opposite of what happened, Countrywide was huge proponent of MERS so that they could refinance Loans more speedily, subverting good faith in title/lending and the home buying process)

CRA is hole in the dam that caused it to burst. That Freddie and Fannie upped the percentage of CRA affordable loans to > 50% means that the cause of this portion of the bad loans is deterministic, you cannot argue this its a documented fact. Its a documented fact that the banks did not hold many of the CRA or non CRA loans that these were in the "Tranches" at different rating levels which were not fully disclosed.

Entitlemented says

CRA is hole in the dam that caused it to burst.

Vast majority of loans that went bad were NOT subprime, were not of the type that would have originated due to any CRA requirement. Almost all of them, were originated by mortgage companies or other thrifts that were not subject to Federal requirements in this regime. It is a FICTION (useful lie) of the GOP & finance apologists, to envision bankers with a gun to their head FORCED to make bad loans. Because in their narrative, the Federales MUST always be the ultimate bad guy and everyone else a dupe. No, Angelo Mozillo and friends WANTED to make bad loans to pump up their bonus and to hell with consequences.

I can't believe there are still folks making the argument that the CRA even contributed to the bubble much less was a major cause.

Congrats to Entitlemented for going down with the ship.

Fucking republicans still trying to rewrite history.

Gold I see is at $1,487/oz.

Seems like nobody is buying Stockman's doom & gloom.

I sold my Gold Buffalo coins back in 2011. Made some money. I just wanted the cash.

I don't really understand Gold and why it's worth so much.

Read more: http://www.businessinsider.com/three-ways-the-cra-pushed-countrywide-to-lower-lending-standards-2009-6#ixzz2QIA41Q8N

More concretely, there are three very specific ways in which the CRA nudged Countrywide and other mortgage companies to adopt lax lending standards.

1. The Creation Of Artificial Demand For Low-Income Mortgages. Banks that were regulated by the CRA often found it difficult to meet their obligations under the CRA directly. Long standing lending practices by local loan officers were a big problem. But as banks expanded their deposit bases and other businesses, they often found that they were at risk of regulators discovering they had fallen behind in making CRA loans.

One way of addressing this problem was buying the loans in the secondary market. Mortgage companies like Countrywide began to serve this entirely artificial demand for CRA loans. Countrywide marketed its loans directly to banks as a way for them to meet CRA obligations. "The result of these efforts is an enormous pipeline of mortgages to low- and moderate-income buyers. With this pipeline, Countrywide Securities Corporation (CSC) can potentially help you meet your Community Reinvestment Act (CRA) goals by offering both whole loan and mortgage-backed securities that are eligible for CRA credit,” a Countrywide advertisement on its website read.

2. The Threat Of Regulation Is Often As Good As Regulation. It is highly misleading to claim that just because mortgage companies were not technically under the CRA that they were not required by regulators to meet similar tests. In fact, regulators threatened that if the mortgage companies didn’t step up to the plate by relaxing lending standards they would be brought under the CRA umbrella and required to do so.

Here’s how City Journal explains the dynamic:
To meet their goals, the two mortgage giants enlisted large lenders—including nonbanks, which weren’t covered by the CRA—into the effort. Freddie Mac began an “alternative qualifying” program with the Sears Mortgage Corporation that let a borrower qualify for a loan with a monthly payment as high as 50 percent of his income, at a time when most private mortgage companies wouldn’t exceed 33 percent. The program also allowed borrowers with bad credit to get mortgages if they took credit-counseling classes administered by Acorn and other nonprofits. Subsequent research would show that such classes have little impact on default rates.

Pressuring nonbank lenders to make more loans to poor minorities didn’t stop with Sears. If it didn’t happen, Clinton officials warned, they’d seek to extend CRA regulations to all mortgage makers. In Congress, Representative Maxine Waters called financial firms not covered by the CRA “among the most egregious redliners.” To rebuff the criticism, the Mortgage Bankers Association (MBA) shocked the financial world by signing a 1994 agreement with the Department of Housing and Urban Development (HUD), pledging to increase lending to minorities and join in new efforts to rewrite lending standards. The first MBA member to sign up: Countrywide Financial, the mortgage firm that would be at the core of the subprime meltdown.
3. The CRA Distorted the Mortgage Market. With banks offering mortgages with high loan to value, delayed payment schedules and other enticing features, the mortgage companies would have quickly found themselves unable to compete if they didn’t offer similar loans. The requirement to offer risky loans from banks created a situation where other lenders found they had to offer similar products if they wanted to expand their business.
Of course, Angelo Mozillo didn't need very much prompting on this score. He believed exactly what the CRA regulators believed: that these lax lending practices were the wave of the future, democratizing the glories of home ownership

Read more: http://www.businessinsider.com/three-ways-the-cra-pushed-countrywide-to-lower-lending-standards-2009-6#ixzz2QIA41Q8N

From Wikipedia, the free encyclopedia:

A mortgage-backed security (MBS) is an asset-backed security or debt obligation that represents a claim on the cash flows from mortgage loans, most commonly on residential property.
First, mortgage loans are purchased from banks, mortgage companies, and other originators. Then, these loans are assembled into pools.

This is done by government agencies, government-sponsored enterprises, and private entities, which may guarantee (securitize) them against risk of default associated with these mortgages.

Mortgage-backed securities represent claims on the principal and payments on the loans in the pool, through a process known as Securitization.

These securities are usually sold as bonds, but financial innovation has created a variety of securities that derive their ultimate value from mortgage pools.

__________

It has been said that over 55% of the GSE loans securitized were CRA loans (meeting criterian set forth for lending to lower income individuals). But given the small amount of Jumbo and the propensity for the bad loans and HELOC to recure on mostly the loans gone bad, is not the CRA segment larger? (People who did not take out multiple cash out refi's would be less likely to foreclose)

Entitlemented says

It has been said that over 55% of the GSE loans securitized were CRA loans (meeting criterian set forth for lending to lower income individuals). But given the small amount of Jumbo and the propensity for the bad loans and HELOC to recure on mostly the loans gone bad, is not the CRA segment larger? (People who did not take out multiple cash out refi's would be less likely to foreclose)

I think you're confusing CRA with subprime. They are not the same thing. In order to qualify for CRA, there were specific geographic guidelines.

The fact is that CRA loans defaulted at rates LOWER than non-CRA loans. That pretty much ends the discussion.

Its not that simple. Its the fact that it was not this simple that let this thing go on so long:

Quote: Countrywide marketed its loans directly to banks as a way for them to meet CRA obligations.

"The result of these efforts is an enormous pipeline of mortgages to low- and moderate-income buyers.

Now the question is was the help meeting CRA goals Countrywides idea or Barney Franks (google B. Frank, there is no housing/mortgage crisis)

So again, those of you who dont believe that lobbyist got the largest private bank to sell Mortgages that meet CRA goals, - Again, there is not an argument here. How can you say that private lenders had specific geographic locations, when you read Countrywide quote.

How does it matter than CDO's were around 15 years beforehand when Countrywide helped Freddie meet its CRA requirements.

Those of you who skipped over the Countrywide statement read it again, until you see.

Do you think that Countrywide was going to say "no we wont do loans that meet CRA lending criteria".

Did you folks not see that loans that Countrywide made to the Banking committee members?

If you still think that there is no relation of the mortgage crisis to the CRA, read this 3 times: With this pipeline, Countrywide Securities Corporation (CSC) can potentially help you meet your Community Reinvestment Act (CRA) goals by offering both whole loan and mortgage-backed securities that are eligible for CRA credit,” a Countrywide advertisement on its website read."

Yep, Countrywide was not subject to the CRA regulations:

http://www.secinfo.com/dsvRu.z2cf.htm

Community Reinvestment Act

The Bank (Countrywide) is subject to the Community Reinvestment Act (“CRA”) and implementing regulations. CRA regulations establish the framework and criteria by which the bank regulatory agencies assess an institution’s record of helping to meet the credit needs of its community, including low- and moderate- income neighborhoods. CRA ratings are taken into account by regulators in reviewing certain applications made by the Company and its banking subsidiaries.

Waiting for the next arguement: > Even with Countrywide subject to the CRA regulations, Countrywide was a minor player in the various subprime, NINJA, .... loans..................

The fact is as the article showing the immense lobbying pressure to repeal Glass Steagall, the pressure to meet CRA lending criteria came from Congress.

The CRA did not spout on its own, and Freddie and Fannie securitized loans that into MBS, and forced, worked with, and coached private banks to outsource the CRA regulations.

Its a multi-tiered ponzi scheme, and its easy to be fooled. The congress and President Clinton worked with ACORN and the other community groups to basically threaten the states and banks into compliance. No CRA loans no backing by GSEs.

If we would have kept 20% down, and banks keep their loans, most of this would never have happened.

Better to have spent the vanished $4-7 Trillion on educating and spending money on manufacturing than giving someone a house on NINJA terms.

tatupu70 says

The fact is that CRA loans defaulted at rates LOWER than non-CRA loans. That pretty much ends the discussion.

Or so you would think....

tatupu70 says

The fact is that CRA loans defaulted at rates LOWER than non-CRA loans. That pretty much ends the discussion.

Not for wingnuts it doesn't.

tatupu70 says

I can't believe there are still folks making the argument that the CRA even contributed to the bubble much less was a major cause.

Congrats to Entitlemented for going down with the ship.

He seems genuinely convinced that the entire housing crash was countrywide loans. His arguments would be more convincing if he could come up with a simple chart showing the percentage of CRA loans that defaulted.

Oh I forgot the THREAT of CRA caused everyone to rush out and give loans to everyone with bad credit so there is no actual evidence only supposition. I don't suppose the banks would have had any interest at all in writing any and all loans they could knowing they could turn them over to be securitized therefor getting a nice fee for turning and burning without the THREAT of CRA. Na, never happened.

Entitlemented says

CRA is hole in the dam that caused it to burst.

yea, 11 lengthy posts spouting off the same nonsense that's been disproved time and time again.

But you go girl, double-down and hold your line in the sand. I know, you're just "taking your country back".

jvolstad says

I don't really understand Gold and why it's worth so much.

Mostly perception.

Gold has industrial and jewelry applications -- actual real-world utility -- aside from its traditional monetary uses.

Supply isn't terribly limited but as of now we can't create new supply without expending a lot of labor and energy (somewhere around $1200, perhaps more)

If you don't want your cash wealth to stay in cash, you've got to buy something or let someone borrow it from you.

Gold bullion is easy to store, which means all the speculators and savers are essentially locking up current supply away from the market, making the price higher than it needs to be.

http://research.stlouisfed.org/fred2/graph/?g=hum

compares houses to gold, from 1990 (1990 = 100)

Picking up an ounce a month 1990-now would have been a good idea, LOL

http://research.stlouisfed.org/fred2/graph/?g=hun

key thing about investments is to get in early, and get out before the rush

http://research.stlouisfed.org/fred2/graph/?g=hup

compares the S&P 500 vs gold, 1990 to now (1990 = 100)

which I guess shows how the dotcom mania took investor interest away from boring gold, LOL

Request to show amount of CRA loans.

http://news.investors.com/ibd-editorials-perspective/122012-637924-faults-community-reinvestment-act-cra-mortgage-defaults.htm?p=full

Pretty sure that none of these defaulted.

Entitlemented says

Request to show amount of CRA loans.

http://news.investors.com/ibd-editorials-perspective/122012-637924-faults-community-reinvestment-act-cra-mortgage-defaults.htm?p=full

Pretty sure that none of these defaulted.

"To satisfy CRA examiners, "flexible" lending by large banks rose an average 5% and those loans defaulted about 15% more often, the 43-page study found."

So "flexible" lending for CRA rose an almost unbelievable whole 5% and defaulted 15% more often That caused the housing bubble and crash? Is this a joke? You not serious with this stuff are you? It's got to be a goof. Are we on candid camera?