From 3 pages to 451

[ragged325]

Heeter, I'll admit that I was wrong and you were right about that.

[Vedubin01]

http://query.nytimes.com/gst/fullpag...=&pagewanted=2


The New York Times Fannie Mae Eases Credit To Aid Mortgage Lending

By STEVEN A. HOLMES

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 pressingFannie 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 systemsused by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

[Jon325i]

Good article Vedubin01 - it clearly points out that this problem we are in reaches back much farther than the much politicized "failed Bush policies." I'm not saying our current Prez is as pure and clean as the wind driven snow, what I'm saying is that folks from both sides of the political aisle are to blame. What is even more worrisome is that many of the folks responsible for leading us down this path now have a plan to rescue us. Scary.


Jon

[rwh11385]

I think once you start a social program, it is hard for someone to put a stop to it, as bad of a policy it may be. That person just seems like an evil man out to get the little poor guy. Look at min. wage... eliminate that and ignorant people would hate you.

Whether or not Bush thought it was a good thing, he may or may not have had a choice to do much about it. McCain wanted regulations on Fannie and Freddie, while Obama was too busy taking the most contributions from them to say anything.

This is why government should more or less stay out of things. They interfere with markets, then think they have to come back and fix the problem they created. It's like having a tiger to catch the mongoose who you got to catch the snake who was employed to catch a mouse. Every time they "solve" a problem, they get bigger and becomes a greater problem.

[Massive Lee]

Hmm... All that booboo started with people buying houses with money they didn't have. Now, the US government is "buying" a program with money they don't have either. Maybe somebody more brilliant than my own person can explain us where the mullah will come from. Is the government going to sell out America? Or is it going to borrow money from some bigger banks? That whole bail-out makes me very perplex as I just don't get where the money comes from.

My suspiscions are that the banks still have enough money despite the loan shit, but will still ask the government to secure non-existing assets, while the government will pay them interest for borrowing non-existing money from them and giving back non-existing funds for free. It's all about creating and securing paper trail. Anyway. What do I know?

[Vedubin01]

Your right on, Lee. A bail out is not the answer. Its only going to patch the problem till that money runs out. Then we will be back in the same place $800 billion less. I feel we should all hit rock bottom and restart, and restart if we are strong enough to do so.

[Farbin Kaiber]

From:

Survivalblog.com

Our Changing Times: The Advent of Rule 157

We are living in unprecedented times. The global economy is being asphyxiated for lack of credit, and we face the prospect of an economic depression that could be worse than the Great Depression of the1930s.

The Advent of Rule 157

One of the contributing factors in the unfolding banking debacle was the advent of Financial Accounting Standards Board (FASB) Rule 157, that went partially into effect on November 15, 2007. This was a financial accounting rule change that yanked the bankers back from the Fantasyland games that they had been playing with Collateralized Debt Obligations (CDOs), Credit Default Swaps (CDSs), Structured Investment Vehicles (SIVs), and others. Under Rule 157, banks got a strong, painful dose of reality. With Rule 157, balance sheets had to be "carried at fair value on a recurring basis in financial statements." The end result was that Level 3 assets could no longer be concealed. After some foot-dragging deferments, the banksters were finally required to mark any illiquid investments to the most recent market price ("marked to market") of a comparable security that actually traded. Pushed from what I called the "Marked to Mystery" realm into the light of day in "Marked to Market", the accounting rule change has resulted in the banks writing off more than half a trillion dollars. The eventual writeoff total is expected to be as much as $1.5 trillion. (It is difficult to predict the eventual size of the writeoffs since real estate prices are still falling. This is the classic "moving target" dilemma. The writeoffs will continue to grow with each drop in real estate prices. As the writeoffs continue, the bankers will beg for more bailouts.

The current debate about the proposed $700 Billion Troubled Asset Relief Program (TARP)--also known as the Emergency Economic Stabilization Act of 2008 (EESA)--ignores two huge Troubles to come. You'll note that those are Troubles with capital Ts, as in Trillions.

The first Trouble is that--at least as I heard about one currently drafted version--the bailout bill will "cap" the Treasuries holdings of bad debt at $700 at any given time. But there is nothing to stop Treasury officials from marking down the value of those instruments to 30 cents on the dollars and re-selling them, and then buying hundreds of billions of additional toxic debt paper. This could go on and on until the total cost of the bailout runs into multiple trillion dollars! Note that the proposed bailout bill started out as a simple three page document that gave the Treasury Department carte blanche. But the bill blossomed to 130+ pages as the congressional debate continued. This first TARP bill was voted down, and a new bill with different terms is now in the works. The terms of the new bill have not yet been announced.

The second Trouble is that while the "contentious debate" is going on, on Capitol Hill, the Federal Reserve is busy handing out cash (electronically) by the dump truck load, to "pump" liquidity back into the banking system. In just the last 10 days, they've made "emergency loans" to American banks that have exceeded $1.2 Trillion, and there is no end in sight. The end result of all of this "bailing" and "pumping" will be the inevitable monetization of mountains of public debt. There is no way to generate tax revenues to cover even a fraction of it, so, the requisite "dollars" are being created out of thin air. (Read: monetization.) This will of course dilute the value of the dollars already in circulation. So, sooner or later, mass currency inflation will be the end result. I predict that if this monetization goes on unchecked for long enough, it will result in a hyperinflationary death spiral for the US Dollar. In our modern, technologically complex, and fragile society, hyperinflation will first result in a tragedy for pensioners and anyone else living on a fixed income. Then as time goes on, it will wipe out any and all holders of paper currency dollars and then the holders of virtually all investments that at denominated in dollars. The utter destruction of the US Dollar will at some point result in mass chaos in the streets. We can expect huge protests, riots, looting, arson, and a breakdown of law and order. It will be The End of the World as We Know It. (TEOTWAWKI).

The banks are under such duress from the "unprecedented market conditions" that they are now strongly pressuring the FASB to "temporarily" suspend Rule 157, so that their Level 3 trash paper can again escape being marked to market. (Effectively, this will be official sanction to cook their books.) We'll stay tuned and see what happens.

[Vedubin01]

Thanks for the read!

[Farbin Kaiber]

I'm really surprised Mariano has not chimed in on this, similar events...

http://en.wikipedia.org/wiki/Argenti...sis_(1999-2002)

Good read, and almost a to the tee of what's going on here.

From FerFAL in Argentina: A US Crash that Will Parallel Argentina's?

Hi James,

These are hard times, indeed.
The parallels between the days before our own economy [in Argentina] collapsed and what’s going on today in America today are very hard to ignore.
Our local television seems to be getting some kind of sick kick out of all this.
They showing the comparisons, even editing politicians and economists speeches showing how similar they were to the ones the American politicians and economists are using right now. In some cases, they even said the exact same line, the only difference being the language.About the article “Letter Re: What Are the Economic Collapse Indicators to Watch For?” I’d like to make a few comments.
Some of the signs we could actually verify during our own 2001 crisis;
*Limits to withdraw amounts per day. This happened just one or two days before banks actually closed.
*Sudden inflation. A few weeks before, but careful, it only turned into hyper after banks closed.
*Rumors of default. Those had been going on for a while and that’s when we slowly started investing elsewhere and slowly moving the money out of the accounts.
*Limits to moving fund out of the country
*Limits to the transactions. At the end you could just withdraw like $250 per week, if you found an ATM with money. Otherwise you had to suffer the terrible lines at he bank.
It’s just impossible to know exactly when it will hit, when banks will say bye bye, but careful, timing is everything.
In my case, we had dropped by the French Bank and asked for $2,000 USD.
The employee talked to the manager and the manager came to us looking nervous and said they didn’t have that kind of money right now, to come back tomorrow.
“Wait a minute.. you’re telling me you don’t have 2,000 lousy dollars, in the entire bank?”
”No.”
That same day we went down town to other banks, closed the couple accounts left and one or two days later the crash hit and banks closed their doors.
Just a few days later, my wife’s father lost a 6 digit figure, their fallback life savings.
He was an elderly man, but the bank didn’t care at all of course. He died without seeing that money returned to him.
Do not expect any kind of mercy or sympathy from banks. You wont be getting any.
People needing medical treatment have died in this country before court orders came out demanding the bank to give the money to the person because of life or death situations.
Some people have died of heart attacks at the bank’s closed doors, hitting them with pans and fists.
Not trying to be dramatic here, but it did happen that way, and it’s important for people to understand how serious this is.
I know a run in the banks is something you’d like to avoid. But remember, that money is yours, and banks won't be giving it back to you if they close, you’ll loose a rather big percentage, and if the economy goes down, it will only be returned to you after months, even years.
Maybe it would be a good idea to take another look at the Wikipedia page that summarizes our 2001 economic crisis.

People should try to remain clam, but take the necessary precautions given the circumstances.
Take care James. God bless you and all the readers, grant them the peace of mind needed in these trying times. - FerFAL

[Farbin Kaiber]

[el_gringo]

Definition of poly: a Greek prefix meaning many
Definition of ticks: tick is a small, blood-sucking mite

so. politics is nothing more than alot of bloodsucking creatures?

seriously people, get a life.

[Farbin Kaiber]

Definition of poly: a Greek prefix meaning many
Definition of ticks: tick is a small, blood-sucking mite

so. politics is nothing more than alot of bloodsucking creatures?

seriously people, get a life.

It's off-topic n00b-bisch. Go rub one out, at least we're uing the intarwebz for something other than pr0n.

[whiltebeitel]

The bailout passed, 263-171.
link

[rwh11385]

damn

[Jon325i]

Three cheers to Socialism! Hip hip - hooray!! Hip hip - hooray!! Hip hip - hooray!!