How we got here.

This is an email I received today from a local bank that I use as a real estate contact this is a copy and paste, note the date at the top.

Published: September 30, 1999

In a move that could help increase home ownership rates among minorities
and low-income consumers, the Fannie Mae Corporation is easing the
credit requirements on loans that it will purchase from banks and other
lenders.

The action, which will begin as a pilot program involving 24 banks in 15
markets -- including the New York metropolitan region -- will encourage
those banks to extend home mortgages to individuals whose credit is
generally not good enough to qualify for conventional loans. Fannie Mae
officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been
under increasing pressure from the Clinton Administration to expand
mortgage loans among low and moderate income people and felt pressure
from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been
pressing Fannie Mae to help them make more loans to so-called subprime
borrowers. These borrowers whose incomes, credit ratings and savings are
not good enough to qualify for conventional loans, can only get loans
from finance companies that charge much higher interest rates --
anywhere from three to four percentage points higher than conventional
loans.

''Fannie Mae has expanded home ownership for millions of families in the
1990's by reducing down payment requirements,'' said Franklin D. Raines,
Fannie Mae's chairman and chief executive officer. ''Yet there remain
too many borrowers whose credit is just a notch below what our
underwriting has required who have been relegated to paying
significantly higher mortgage rates in the so-called subprime market.'',

Demographic information on these borrowers is sketchy. But at least one,
study indicates that 18 percent of the loans in the subprime market went
to black borrowers, compared to 5 per cent of loans in the conventional
loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae
is taking on significantly more risk, which may not pose any
difficulties during flush economic times. But the government-subsidized
corporation may run into trouble in an economic downturn, prompting a
government rescue similar to that of the savings and loan industry in
the 1980's.

''From the perspective of many people, including me, this is another
thrift industry growing up around us,'' said Peter Wallison a resident
fellow at the American Enterprise Institute. ''If they fail, the
government will have to step up and bail them out the way it stepped up
and bailed out the thrift industry.''

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, Fannie Mae is hoping to spur banks to make more
loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to
all potential borrowers who can qualify for a mortgage. But they add
that the move is intended in part to increase the number of minority and
low income home owners who tend to have worse credit ratings than
non-Hispanic whites.

Home ownership has, in fact, exploded among minorities during the
economic boom of the 1990's. The number of mortgages extended to
Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according
to Harvard University's Joint Center for Housing Studies. During that
same period the number of African Americans who got mortgages to buy a
home increased by 71.9 per cent and the number of Asian Americans by
46.3 per cent.

In contrast, the number of non-Hispanic whites who received loans for
homes increased by 31.2 per cent.

Despite these gains, home ownership rates for minorities continue to lag
behind non-Hispanic whites, in part because blacks and Hispanics in
particular tend to have on average worse credit ratings.

In July, the Department of Housing and Urban Development proposed that
by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio
be made up of loans to low and moderate-income borrowers. Last year, 44
percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is
investigating allegations of racial discrimination in the automated,
underwriting systems used by Fannie Mae and Freddie Mac to determine the
credit-worthiness of credit applicants.

Yep the story is coming out. The Dem plan of everyone being equal does not work unless of course the Gubment is waiting to bail them out and then *poof* there you have it. The Dems get the gubment to own us even more which was their plan in the first place. That way they can decide how we live because we are not smart enough to do it ourselves.

They will still blame Bush for all this when it actually started with Carter and Clinton and this Congress shot down the Repubs attempt to get a handle on this bubble before it burst.

Don't worry though Barry has told both parties to work together and get it done...whew that was easy why didn't someone else come up with that brainstorm? Man this is one great man, he makes these command decisions off the cuff and they are spot on! No wonder people love him....him smart, him need to lead us dumb dumbs. :)

DJD, you must have forgotten the great "trickle - down" theory to economics that the Reagan administration developed, that still is the basis of Republican economic plans. Reagan himself later said that this was a failure, and would always be a failure, as greed of the upper 5% - they don't let it trickle, they keep it all for themselves.

Thank goodness McCain has solved all the american people's problems. I just watched a speech and he was patting himself on the back for spear heading the plan to resolve our economic woes. He even was talking down to Obama for not actively participating in the development of this plan. According to him in this speech, it is successful plans as this that demonstrates his ability to guide the american people to getting back on their feet.

Wait an minute..... I guess he spoke too soon. That plan was shot down, because it was severely flawed. I guess his ego got in the way of some common sense. He was intending on using this to add a little, yet very needed spark to his slowing campaign. His superiority complex is begining to interfere with his ability to communicate to his fellow senators and congress.

But back to the issue, it is a shame that the housing issue which helped a ton of responsible Americans such as myself afford their first home, also, was a key component in the decline of our economy. I also hate that it has put the loan situation in such a bind, that our younger generation is going to have a tough time getting thier first home. The lending just got out of control.

COL,
I think the problem wasn't due to responsible americans but irresponsible americans and I'm not so sure they were all americans! I bet there is some illegal immigrant stench in this woodpile.

The greed of the people running these companies (democrats) and their short sighted business plans caused this problem. A successful private company without Gubment intervention would not conduct business this way. These guys did this to the tune of how the Democrats conduct their ideals and it doesn't work. All they did is take good money from responsible people like you and I and gave our good money to these subprime nonqualifing people with little to no way of paying it back. I believe we already established the problem on that one....irresponsible.

It might be a stretch but it sounds like they were taking money from the haves and giving it to the have nots? The basic Democrat economic plan. What do you think too thin? :)

I think the proposed bailout plan stinks and so do the Dems because they could pass this without any interference from the GOP. They have the majority why is it not passing? I think they want the GOP to help pass it so they don't go out on a limb by themselves. Remember misery loves company and as far as misery goes look it up you will see a pic of Nancy P. hagd

I just don't understand how all of this lending was allowed. Thankfully, I took advantage of it. I got my first house in 2001 using a Fannie Mae loan. I had no down payment, and could barely afford the closing costs. The only thing making me feel comfortable about the situation, is being a competent special ed teacher means I have one of the most secure jobs in America. I did do the smart thing, and build up some quick equity and savings and refinanced in a year to a better loan, lower rates, and no PMI. I stuck with an ARM knowing I would be moving within 5 years (luckily I did just before the market slowed to a snails pace). I also took out a line of credit when I refinanced. Yet another problem for our economy- the extreme ease of a line of credit. The good thing is I bought a boat with my line of credit, paid some debts. Then sold the house and still made, paid off the line of credit, and made a 20% proffit after that, which I used to buy a house with my wife down here by Ky lake. I did all of this, except the final purchase on a single income, a teachers income at that. So to make a long story short - Did I intentionally make the right moves - no. I was extremely lucky in the decisions I made, I didn't have a clue what I was doing. So I can see first hand, how this whole mortgage situation was entirely out of control. Everything I did could have gone wrong, thankfully it didn't. But it was way too easy - and I can see how a great deal of people dug a hole to deep to climb out of.

Far as I can tell Nancy Pelosi's ONLY job is to publicly blame Republicans for every ill. Can anybody tell us about anything else she's done?

This whole mess vividly illustrates the FACT that the government is not competent. Politics of color clearly influenced basic common sense as it always seems to do.

I'm not a financial whiz, but it seems if you're looking to loan someone money and see that they don't have the income to pay it back, you don't make the loan. If they have a history of not paying debts and bad credit, once again no loan. Doesn't matter what COLOR the applicant is, a company cannot stay solvent and loan them money if they can't (or won't) pay it back. Seems pretty straightforward to me.

A load of politicians in Washington knew this was coming but didn't have the balls to do anything about it because they were afraid of the very powerful Congressional Black Caucus. A few, including John McCain tried, but that bill sits stuck in the Dem controlled Banking Committee. Did I mention the guy (Dodd) chairing the Banking Committee got more campaign contributions from Fannie and Freddie than any other politician? Obama got the second most.

Meanwhile those who ran the er...'companies' who triggered this mess got obscenely rich and moved on. Raines of course to Obama advisor, Mudd to his mansion.

Now the government wants us to finance more gutless ineptitude and stupidity.

Barack Obama wants you to vote him in so he give the federal government even more power. How anyone claiming to be in their right mind could vote for more government is beyond comprehension.

[QUOTE=Col Forbin;340708]I just don't understand how all of this lending was allowed. Thankfully, I took advantage of it. I got my first house in 2001 using a Fannie Mae loan. I had no down payment, and could barely afford the closing costs. The only thing making me feel comfortable about the situation, is being a competent special ed teacher means I have one of the most secure jobs in America. I did do the smart thing, and build up some quick equity and savings and refinanced in a year to a better loan, lower rates, and no PMI. I stuck with an ARM knowing I would be moving within 5 years (luckily I did just before the market slowed to a snails pace). I also took out a line of credit when I refinanced. Yet another problem for our economy- the extreme ease of a line of credit. The good thing is I bought a boat with my line of credit, paid some debts. Then sold the house and still made, paid off the line of credit, and made a 20% proffit after that, which I used to buy a house with my wife down here by Ky lake. I did all of this, except the final purchase on a single income, a teachers income at that. So to make a long story short - Did I intentionally make the right moves - no. I was extremely lucky in the decisions I made, I didn't have a clue what I was doing. So I can see first hand, how this whole mortgage situation was entirely out of control. Everything I did could have gone wrong, thankfully it didn't. But it was way too easy - and I can see how a great deal of people dug a hole to deep to climb out of.[/QUOTE]

You definitely made the right moves Col. You are an example of what can go right with the macs. Unfortunately many others who used the macs don't have your determination and work ethic.

[QUOTE=Col Forbin;340708]I just don't understand how all of this lending was allowed. Thankfully, I took advantage of it. I got my first house in 2001 using a Fannie Mae loan. I had no down payment, and could barely afford the closing costs. The only thing making me feel comfortable about the situation, is being a competent special ed teacher means I have one of the most secure jobs in America. I did do the smart thing, and build up some quick equity and savings and refinanced in a year to a better loan, lower rates, and no PMI. I stuck with an ARM knowing I would be moving within 5 years (luckily I did just before the market slowed to a snails pace). I also took out a line of credit when I refinanced. Yet another problem for our economy- the extreme ease of a line of credit. The good thing is I bought a boat with my line of credit, paid some debts. Then sold the house and still made, paid off the line of credit, and made a 20% proffit after that, which I used to buy a house with my wife down here by Ky lake. I did all of this, except the final purchase on a single income, a teachers income at that. So to make a long story short - Did I intentionally make the right moves - no. I was extremely lucky in the decisions I made, I didn't have a clue what I was doing. So I can see first hand, how this whole mortgage situation was entirely out of control. Everything I did could have gone wrong, thankfully it didn't. But it was way too easy - and I can see how a great deal of people dug a hole to deep to climb out of.[/QUOTE]

Col,
I knew you had it in you to be a Conservative! The moves you made were based on you being responsible for your actions so give yourself some credit(no pun intended)....your coming around buddy.:)

How we got here? The answer is plan and simple, nothing but pure GREED. Greed from both parties, corparate greed just plan ole simple GREED. Greed makes companys do thing that hurt the consumer, they lie, and cover up details and make false claims to get the consumer to use or purchse thier product, whether it be a car, boat or mortage, it is Greed that destroys people, read your bible Greed is a sin. One persons greed can effect others and that is wrong and is a crime, but not enforced. These major banks and lending instutions are to blame for thier own problems, due to they lied and falsified info to approve loans so that their CEO's could make millions, and now the gov wants to bail them out, tough. What about all the citizens that this has affected, lets not bail them out as they are just VICTIMS of these crimes. Yes this is a crime as deception for profit is a crime. These CEO's stole millions of dollars from the people and are in the process of stealing more, and should be punished instead of being rewarded. Blame it on Clinton, who just wanted for everyone to have a shot of the American Dream, you all know that dream, have a good job, own a home and 2.5 children, but the plan was flawed somewhat, but we pay for the poor's hsing anyway, HUD, etc. Blame it on the Dem's blame the republicians, when there is blame from one side it is just throwing the focus from the real problem, the more blame there is the more time there is not to address the real problem and come up with a solution, phsyc 101.The real issue here that has not even been touched upon, the cost of this WAR, 10 billion a mth is being spent to fight Bush's war. That is a lot of money is that not also putting use in the hole? We are now in a ression and almost a depression. I am so glad our leaders have OUR best intrests in mind and are working as a whole to get things done, {pun intended}.