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I've heard that charge numerous times from the Conservatives I know -- that these government-supported agencies were the ones at fault for the "bad" Mortgages of last decade, and as a result responsible for the ultimate collapse of the Mortgage-Backed-Securities market. This they claim, this govt-charity for the poor, led directly to the Great Recession of the last decade -- not the recklessness of Wall Street derivative inventors and their hedge-fund speculators.

If that Fox-Falsism were indeed true -- wouldn't it be Freddie and Fannie who were the ones paying the Wall Street Bankers, and not the other way around?


BofA to pay $9.5 billion to settle Fannie Mae, Freddie Mac claims
Mortgage-finance giants Fannie Mae and Freddie Mac had demanded compensation from Bank of America for losses on securities backed by faulty loans issued during the housing boom.

by E. Scott Reckard and Walter Hamilton, latimes.com -- March 26, 2014

[...]
The government-sponsored mortgage finance giants had demanded compensation from the Charlotte, N.C., bank for losses on securities backed by faulty loans issued during the housing boom.
[...]

Previous FHFA [Federal Housing Finance Agency] settlements included agreements with JPMorgan Chase & Co. ($5.1 billion), Deutsche Bank ($1.9 billion), Morgan Stanley ($1.25 billion), Union Bank of Switzerland ($885 million), Credit Suisse Holdings ($885 million) and Wells Fargo & Co., which reached a $335-million settlement with FHFA without having been sued.

But even those massive figures don't compare to the cumulative damage Wall Street firms inflicted on homeowners and borrowers during the crisis, said Dennis Kelleher, chief executive of Better Markets Inc., a liberal nonprofit focused on financial reform.
[...]



$9,500,000,000
  5,100,000,000
  1,900,000,000
     885,000,000
     885,000,000
     335,000,000

$18,605,000,000  

PAID as DAMAGES (so far) to these "government-sponsored mortgage finance giants" (Freddie and Fannie)  -- paid by the Big Banks -- and not v.v.

Imagine that Fox-Facts-Faxers!



Here's a bit more on the Bank of America settlement and a bit more on who that acronym is (FHFA), and who they are representing ...


Bank of America to Pay $9.5 Billion to Resolve FHFA Claims

by John Kell, wsj.com -- March 26, 2014

[...]
The Federal Housing Finance Agency [FHFA], which controls the government-backed mortgage giants, sued Bank of America and 17 other financial institutions in 2011 seeking unspecified damages on about $200 billion of mortgage-backed securities.

Under the terms of the settlement, Bank of America will make about $6.3 billion in cash payments to Fannie Mae and Freddie Mac. In additional, the bank agreed to purchase some residential mortgage-backed securities [MBS] at fair market value, worth about $3.2 billion.
[...]


If Freddie and Fannie were really at fault, wouldn't they be the ones buying back the junk-MBS-paper from the BofA -- and not the other way around?

Un-Inquiring Fox-watchers don't really want to know.



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Comment Preferences

  •  You should wrote for the U.S. Attorney's office (12+ / 0-)

    jamess. You do such fine detailed analysis.

    Once again you've nailed these cheese criminals and framed their crimes for all to see.

    "Seriously, Folks, WTH?" - ("What the Heck? "h/t Joan McCarter, Seriously, Florida. WTF?)

    by HoundDog on Wed Mar 26, 2014 at 07:46:11 PM PDT

  •  Fannie & Freddie..... (8+ / 0-)

    did not cause the housing crisis, they were victims.

    Had more mortgages been spread out amongst more lending institutions, the damage may not have been contained.

    •  thanks FromRedtoBlue (3+ / 0-)
      Recommended by:
      oldpotsmuggler, worldlotus, rubyr

      I've thought that too,

      even from back before when the bubble burst.


      Sooner or later were going to have to: Trade in those Carbon Footprints ...

      by jamess on Wed Mar 26, 2014 at 08:15:49 PM PDT

      [ Parent ]

    •  Fannie and Freddies' problem was their capital (3+ / 0-)
      Recommended by:
      jamess, camlbacker, Limelite

      They had too little money saved for bad times.  They were very highly leveraged, even more than the Wall Street Banks.

      The FCIC report is pretty clear about this.

      http://fcic-static.law.stanford.edu/...

      The book All the Devils are Here is very good on this shredding the myth that Fannie and Freddie caused it.

      •  Given the amount of sour loans (2+ / 0-)
        Recommended by:
        jamess, oldpotsmuggler

        that the GSE's had on their books at the time, no rational amount of reserve capital would have prevented them from having problems and needing to be rescued to the tune of $200B.  Even if they had excess reserves, their bailout would have still likely been over well over $100B.

        The GSE's came to the mortgage-backed security investment frenzy late to the party.  If Fannie would not underwrite a 0%-down loan, why would they start buying them in bulk bonds?  Of all the investors out there, these folks should have known better.  Sure, they took on a bit more risk by purchasing some of those toxic assets, but that inadvertently helped to contain some of the damage.

        Had more of those sour loans that the GSE's had on their books been in the hands of 'ordinary' financial institutions, the problems we all experienced might have been far worse.

        The mortgage concentration and what ever mortgage-backed bonds they had at the GSE's mitigated the severity of an already severe financial dislocation.

        The cause of the housing crisis was a confluence of events by unscrupulous lenders who did not have to follow regulations to provide the 'conforming' loans that the GSE's and big Banks are required to process.  

    •  Hate to break it to you, but the damage was not (2+ / 0-)

      and can not be contained. All that's been done is to cover it up, pretend that it never happened it it was nobody's fault anyway, and to pass the bill on to the taxpayers.

      Assuming The United States of America still exists as as sovereign nation, your great-grandchildren will still be paying off the banksters.

      "Those who can make you believe absurdities can make you commit atrocities." - Voltaire

      by Greyhound on Thu Mar 27, 2014 at 05:53:18 AM PDT

      [ Parent ]

  •  No effing way! (5+ / 0-)

    Doesn't that mean that Fox So Called News has been lying about the cause of the great recession since 2008? [snark]

    Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

    by RMForbes on Wed Mar 26, 2014 at 08:02:46 PM PDT

  •  Fannie and Freddie cost renters (1+ / 0-)
    Recommended by:
    Sparhawk

    There are no free lunches.  

    How does it help renters to have higher housing prices?  And easier loans obviously will raise the price of housing because than folks can bid higher for houses.

    So essentially Fannie and Freddie takes from the poorest neighborhoods where fewer people own.  And those that do own in the poorer neighborhoods have houses with smaller price tags than the wealthy neighborhoods.

    So Fannie and Freddie essentially steal from the poor neighborhoods and give to the wealthier neighborhoods.

    And the government bailed out Fannie and Freddie by trashing the dollar.  We have high unemployment and wages not rising but still we have inflation.  We can blame in a large part Fannie and Freddie for inflation.

    Fannie and Freddie are no friends of the poor.  They may help some members of the middle class get ahead of other members of the middle class, but really encouraging folks to take on obscene amounts of debt can backfire like in the crisis and it is not good social policy.

    Fannie and Freddie are really friends of some of the too big banks and other assorted wealthy folks.  This is why the GOP has never killed Fannie and Freddie despite their many chances to do so.  

    Both parties are bought and paid for.

  •  Countrywide Financial was the largest perpetrator (1+ / 0-)
    Recommended by:
    jamess

    of Subprimes and as a private entity not subject to the CRA before being acquired by BofA.

    http://www.businessinsider.com/...

    I want 1 less Tiny Coffin, Why Don't You? Support The President's Gun Violence Plan.

    by JML9999 on Wed Mar 26, 2014 at 08:34:57 PM PDT

    •  Actually, no. Angelo Mozillo had both Countrywide (1+ / 0-)
      Recommended by:
      Just Bob

      and Indymac, but they were far eclipsed by both WAMU, and Lehman Borthers. But shortly before the end the greed had speread so broadly that the financial markets came to look like a school of sharks responding to blood on the water and every major financial player on the world scene divided in trying to get their share.

      And, after the inevitable crash came, the "Too Big Too Fails" all stood before the federal government with their hands out for relief, and ranked in line from the top to the bottom, I'm not sure that Countrywide even ranked in the top ten (though B of A, Merril Lynch, Countrywide certainly did).

      There can be no protection locally if we're content to ignore the fact that there are no controls globally.

      by oldpotsmuggler on Wed Mar 26, 2014 at 09:03:04 PM PDT

      [ Parent ]

      •  would you have a link to those metrics (1+ / 0-)
        Recommended by:
        Limelite

        http://en.wikipedia.org/...

        Mortgage Banking, which originates, purchases, securitizes, and services mortgages. In 2008, Bank of America purchased the failing Countrywide Financial for $4.1 billion. In 2006 Countrywide financed 20% of all mortgages in the United States, at a value of about 3.5% of United States GDP, a proportion greater than any other single mortgage lender.
        http://en.wikipedia.org/...
        In April 2008, the holding company, responding to losses and difficulties sustained as a result of the 2007–2008 subprime mortgage crisis, announced that 3,000 people companywide would lose their jobs, and the company stated its intent to close its approximately 186 remaining stand-alone, home-loan offices, including 23 in Washington State and a loan-processing center in Bellevue, Washington. It stopped buying loans from outside mortgage brokers — known in the trade as "wholesale lending." WaMu also announced a $7 billion infusion of new capital by new outside investors led by TPG Capital. TPG agreed to pump $2 billion into the Washington Mutual holding company; other investors, including some of WaMu's current institutional holders, agreed to buy an additional $5 billion in newly issued stock. This angered many investors, as TPG's investment would dilute the holdings of existing shareholders, and as WaMu executives excluded mortgage losses from computing bonuses.[26]

        I want 1 less Tiny Coffin, Why Don't You? Support The President's Gun Violence Plan.

        by JML9999 on Wed Mar 26, 2014 at 09:24:50 PM PDT

        [ Parent ]

        •  I'm sorry, I don't get the point. The numbers in (2+ / 0-)
          Recommended by:
          JML9999, Just Bob

          your quotes are miniscule. The place I was at ran up these kinds of numbers monthly, and we barely hit the radar screen.

          Countrywide was a player in mortgages, but not really in subprime. In the end, they had also moved into the "Pay Option" stuff but were not even close to dominant. Tons of other people would take files that they wouldn't even think about touching, and, at the end, particularly the large Eurpoean banks.

          I understand and agree with your larger point, I just dispute your accuracy.

          There can be no protection locally if we're content to ignore the fact that there are no controls globally.

          by oldpotsmuggler on Wed Mar 26, 2014 at 09:42:23 PM PDT

          [ Parent ]

          •  Lehman originated mortgages? (0+ / 0-)

            The winger fairy tale is that the Community Reinvestment Act caused the financial meltdown.

            I was not aware the Lehman actually originated  mortgages.

            I want 1 less Tiny Coffin, Why Don't You? Support The President's Gun Violence Plan.

            by JML9999 on Wed Mar 26, 2014 at 10:02:08 PM PDT

            [ Parent ]

            •  Lehman Brothers wasn't a mortgage originator. It (3+ / 0-)
              Recommended by:
              Limelite, JML9999, oldpotsmuggler

              was a Wall Street investment bank that underwrote mortgage backed securities.

              An originator works with the borrower to make all the arrangements for the loan. However, when the transaction closes, the typical originator doesn't have the assets to pay the seller (taking into consideration the number of transactions closing at any given time and the number of sellers who exit closing with cash.)

              So where does the actual financing come from? The underwriters purchase mortgages from originators and pool them together into mortgage back securities that are sold to the worldwide investing public. In other words, the financing is provided by investors who buy mortgage backed securities as they're issued.

              For decades, Freddie and Fannie had little competition in the MBS underwriting business. As Government Sponsored Enterprises, the MBSs they issued were sold to the public with a guarantee against loss that was never tested. The underwriting business changed quickly when the housing bubble began to inflate. Private Wall Street firms like BearStearns and Lehman issued MBSs with little regard for the quality of the mortgages and no guarantee.

              The viability of the MBS depends on the homeowners ability to make regular and continual payments toward their obligation. When homeowners miss a number of consecutive payments, the MBS value is jeopardized. That's what happened in late 2006- early 2007.

              The introduction of exotic mortgage types and plain old fraudulent business practices by the originators, and the willingness of private underwriters to buy them anyway and package them into MBS contributed to a level of risk that never existed in our lifetimes. Insurance companies like AIG wrote credit default swaps that were supposed to mitigate the risk of private MBS by acting as a kind of stand-in for the federal government guarantee backing Freddie and Fannie. AIG insured more MBS than its claims paying ability. It insured a value greater than the entire worth of the company. When it couldn't keep up with claims to cover MBS that went worthless, firms that were crumbling just collapsed.

              The private business corporations ran to the government for a bailout. That would be the same government which was not the solution to the problem, and  the same government which IS the problem, as Reagan said in 1981.

              Was there any humility once Republican Religion was exposed for the con job that it is? Was there any gratefulness for the bailout? No. The meltdown was in September '08. By Christmas, revisionists had conjured up a tale that placed all the blame for the meltdown on the public sector. The SEC, The Fed, Freddie and Fannie (even though technically not public,) the Community Reinvestment Act, Barney Frank, etc.  The way they told it, you'd never know there were any business corporations on Wall Street at all.

              There is no existence without doubt.

              by Mark Lippman on Wed Mar 26, 2014 at 11:15:03 PM PDT

              [ Parent ]

              •  That's Exactly How I Remember the History (4+ / 0-)

                of the Crash of '08 (often Repubrevised to the Crash of '09, making it Obama's fault).

                I, as a modest private retail investor (NOT trader), was glued to CNBC, Bloomberg, and MSNBC as the days went by.  I distinctly recall the march of the Wall Street Robber Barons down the street, on foot, to attend a closed door meeting with Paulson and later with Obama who as President elect said, " No, Republicans.  The bail-out will be loans, not gifts.  You will pay back with interest.  Until then, we will (partially) "own" your asses, which we will hand back to you when we decide to sell back our stake in them.  Oh, and there will be some changes made to how you get to do business in the future. So capitalize up 'cause in the Democratic future it's going to take some of your skin to play the game."  

                Every Republican began screaming "Socialism!", even "Communism!", and sometimes, "Dictatorial Tyranny!", and frequently, "Government take-over!"  Why?  Just because their greed-driven speculative feeding frenzy was over and both Peter and Paul were going to have to be paid.

                Oh -- and the dollar didn't collapse, either.  Sadly, wing-nuts, no.

                Readers & Book Lovers Pull up a chair! You're never too old to be a Meta Groupie

                by Limelite on Thu Mar 27, 2014 at 02:36:22 AM PDT

                [ Parent ]

                •  Good times. Something else that doesn't get (0+ / 0-)

                  mentioned is that some of the toxic assets the government bought turned out to be decent investments that closed some of the budget deficit gap last year. The Republicans screeching about the budget should know that the larger deficits of Fiscal Years 2009-2012 would subside by themselves over time.

                  There is no existence without doubt.

                  by Mark Lippman on Thu Mar 27, 2014 at 11:13:47 AM PDT

                  [ Parent ]

                  •  Right You Are (0+ / 0-)

                    The gov't's bail-out of the auto industry certainly turned a profit as did the re-sale of shares in AIG once it made itself a little smaller.

                    Any more holdings the USA wishes to divest itself of should be made between now and Obama's last days in office -- to maximize profits, of course.

                    Readers & Book Lovers Pull up a chair! You're never too old to be a Meta Groupie

                    by Limelite on Fri Mar 28, 2014 at 01:34:12 PM PDT

                    [ Parent ]

              •  Aurora Loan Services. (2+ / 0-)
                Recommended by:
                JML9999, Mark Lippman

                Wholly-owned subsidiary of Lehman, major originator of single family mortgages (also, they owned several subprime originators such as BNC).

  •  The Rupublicans and the big banks started to try (5+ / 0-)

    to bring down Fannie and Freddy in 2004 (or before). I think that the outfit was called FM Watch, and was headed by J.C. Watts (ex R Congressman from Oklahoma). They just plain couldn't compete, and were pissed about the lost business. And then they made a little headway when the interest rate markets went crazy. And then they took over everything in just a couple of years with their "Sub Prime Products" ("Liars Loans", "Neg Am Option Loans", etc.) Then they crashed the world economy. Then they blamed it all on Fannie and Freddie, and shifted all of their losses to us, through the federal government.

    I did some very detailed pieces on this at the time, but I had no audience.

    You could not be more accurate. Good luck.

    There can be no protection locally if we're content to ignore the fact that there are no controls globally.

    by oldpotsmuggler on Wed Mar 26, 2014 at 08:50:50 PM PDT

    •  Fannie and Freddie were integral parts of the (2+ / 0-)

      housing market.

      It is absurd to absolve them from blame even though there many other bad actors.

    •  thanks oldpotsmuggler (1+ / 0-)
      Recommended by:
      worldlotus

      for that info, which I did not know.

      Sorry I missed those posts of yours earlier, they some right on point.

      But then again I didn't signup until 2007, with the Bubble-inflation well in progress.


      Sooner or later were going to have to: Trade in those Carbon Footprints ...

      by jamess on Wed Mar 26, 2014 at 09:02:30 PM PDT

      [ Parent ]

      •  went looking for evidence (3+ / 0-)
        Recommended by:
        Just Bob, Limelite, rubyr

        of the Wall Street Express to the Loan Officers,

        and found this damning info instead:


        Whistleblower: Countrywide 'Hustle' approved mortgages in 13 minutes

        by Ryan Smith, mpamag.com -- Oct 01, 2013

        [...]
        According to a Bloomberg report, former Countrywide official Edward O’Donnell testified Friday that Countrywide had sold mortgages to Fannie Mae and Freddie Mac “that clearly didn’t qualify as investment grade.”

        The Justice Department claims that Countrywide pushed the loans through a program called “High Speed Swim Lane” or “Hustle” – a program which streamlined the underwriting process by ignoring quality standards and paying employees based on the number of loans they processed.

        "Hustle was not about quality," government attorney Pierre Armand told the court Tuesday. "It was about speed. It was about volume. It was about profits."

        According to Reuters, the DOJ estimates that Fannie and Freddie saw a $131.2 million net loss and an $848.2 million gross loss on the Countrywide loans. The government contends that Countrywide sold the loans to Fannie and Freddie knowing that many borrowers wouldn’t be able to repay them.
        [...]


        Sooner or later were going to have to: Trade in those Carbon Footprints ...

        by jamess on Wed Mar 26, 2014 at 09:12:39 PM PDT

        [ Parent ]

        •  Dude, I was at a nowhere shop, and we were closing (2+ / 0-)
          Recommended by:
          jamess, nuclear winter solstice

          a couple of billion a month. Check out the total mortgage lending volume for that time period. The numbers you put here were not even rounding errors.

          No one is disputing that the crash didn't happen (or, actually, that two bubbles burst at the same time, housing bubble and mortgage bubble).

          But I can guarantee you that this story has Republican/big money fingerprints all over it that I've never seen adequately reported.

          Obviously Countrywide, Fannie, and Freddie were all in the mix, but all have been scapegoated by Citi, B of A, Wells, Royal Bank of Scotland, Deutsche bank, etc.

          There can be no protection locally if we're content to ignore the fact that there are no controls globally.

          by oldpotsmuggler on Wed Mar 26, 2014 at 09:57:57 PM PDT

          [ Parent ]

          •  and even the average teevee viewer could recognize (0+ / 0-)

            a warm fuzzy PR grab when Royal Bank of Scotland, who would otherwise not talk to a peon with an occasionally negative bank balance like me, wants me to see how nice they are in a soothing commercial...But Deutsche bank- well I'm still waiting to see who claims the profits on this. I have said from the beginning that I think that must be either demonstrably true, or false, but can't be both. But I also am not qualified to judge. Who can tell me if it is or isn't?

            We are all pupils in the eyes of God.

            by nuclear winter solstice on Thu Mar 27, 2014 at 06:27:45 AM PDT

            [ Parent ]

      •  At that time I was writing on a site called The (2+ / 0-)
        Recommended by:
        jamess, Just Bob

        Democratic Daily, and was using my own name.

        There can be no protection locally if we're content to ignore the fact that there are no controls globally.

        by oldpotsmuggler on Wed Mar 26, 2014 at 09:47:57 PM PDT

        [ Parent ]

  •  From the book written in 2002 (0+ / 0-)

    called "THE COMING CRASH IN THE HOUSING MARKET" by John Talbott.

    Fannie was levered 116 times its equity and Freddie was levered 71 times its equity.

    "The government guarantee allows the FMs to be much more aggressive financially, and not pay a financial cost for their irresponsible actions in terms of higher borrowing costs. ... ...

  •  Another goodie from the above very prescient book (0+ / 0-)

    "I am at a loss when I try to compare the FMs to anything I have seen previously.  Given their lack of regulation, the enormous utillization derivatives in their business and the general complexity of their financial statements, they share characteristics of other troubled companies of late.  I challenge anybody to read their annual reports and tell me within $3 billion how much real cash flow either of them makes each year."

  •  It's a combination of bad actors. (3+ / 0-)
    Recommended by:
    jamess, doc2, oldpotsmuggler

    Yes, Fannie and Freddie were a part of the combination of things that caused the housing market/mortgage issues.  So were big institutions like Countrywide, who essentially lent to or refinanced people who clearly were not credit-worthy  in the more traditional sense for the amount of borrowing they were doing.  So were the big institutions using mortgage-backed securities to try to get rich.  So were people who borrowed money for houses they clearly could not afford (yes, I hold people responsible for their own finances).

    Without any of those groups of bad actors, the problem would not have happened, or at least it would have been far less problematic.  It was sort of a perfect storm of greed by all those groups.  

    •  Stands to reason you would feel this way (2+ / 0-)
      Recommended by:
      jamess, wishingwell

      without taking into account that there were people selling these properties to these people and telling them that they COULD afford it:

      So were people who borrowed money for houses they clearly could not afford (yes, I hold people responsible for their own finances).

      "Southern nights, have you ever felt a southern night?" Allen Toussaint Remember the Gulf of Mexico.

      by rubyr on Thu Mar 27, 2014 at 06:32:19 AM PDT

      [ Parent ]

      •  That's just an incorrect statement. (0+ / 0-)
        without taking into account that there were people selling these properties to these people and telling them that they COULD afford it:
        I completely "took into account" that there were very bad actors involved in lending.  I said so.  And I completely agree that people selling mortgages sometimes were bad actors, telling people that they could afford things that, if more traditional methods were used to determine that, the lender would never have determined that the people could afford what they were borrowing.  As I said, they were bad actors and deserve blame.

        But I ALSO think that I have a personal responsibility to decide what I think I can afford.  What I can "afford" is, in the end, my decision and nobody else's.  Somebody else can decide I can "afford" to pay 50% of my net monthly income to a mortgage.  Am I obligated simply to take their word for that?  Or do I also have an obligation to look at my own finances, look at what other monthly expenses I have, and say to myself, "You know what? Even though somebody else thinks I can afford that, I don't want to - or think I can -- cut back on other things so as to make that payment each month.  Maybe I can "afford" it if I stop paying for cable tv and internet and my cell phone, give up my car and take public transportation, but I don't want to do that, so I'm not going to borrow as much as they think I can "afford."

        The bottom line is that when I enter a contract, which is what a mortgage is, I have an obligation to understand what I am contracting myself to do.  If I don't understand it, I have no business entering the contract until I DO understand it.  There are laws in place that require lenders to disclose things to lenders in certain ways.  If the banks violated those disclosure laws, then the banks are totally at fault.  If, however, the borrowers were made aware of all the things the law requires them to be made aware of, and simply took the lender's word for it that they could "afford" the loan without independently looking at that themselves, then the borrower shares some of the blame.  Nobody should be borrowing hundreds of thousands of dollars if they don't even take the time to know what their own monthly expenses are and whether they can make a payment of $x a month.

        I completely understand and recognize and agree that some very bad lenders told borrowers they could afford things that the borrowers probably could not afford.  But I also think any borrower has an independent responsibility for his own finances.  A borrower who simply took the bank's word for it without looking at his own financial situation for himself did the wrong thing.  That doesn't excuse the lender.  It simply says that BOTH were wrong.  

        •  Well, coffeetalk, as we all know, you know (1+ / 0-)
          Recommended by:
          wishingwell

          EVERYTHING and others know nothing, so it would be a big waste of time to defend myself. Carry on with your conservative crap.

          "Southern nights, have you ever felt a southern night?" Allen Toussaint Remember the Gulf of Mexico.

          by rubyr on Thu Mar 27, 2014 at 08:24:57 AM PDT

          [ Parent ]

        •  Just putting myself into the mind of the (0+ / 0-)

          people who suddenly had a chance to own a home because a corrupt lender was willing to do business.

          "I could work more hours, or get a second job, or we could take in one or two roomers, or, maybe I will win the lottery."

          The desire to own a home can be a very strong desire.

          United Citizens beat Citizens United

          by ThirtyFiveUp on Thu Mar 27, 2014 at 09:25:41 AM PDT

          [ Parent ]

          •  Sure, it's very tempting to (0+ / 0-)

            borrow more than you can afford to live in a bigger or nicer house that you can afford.  But that doesn't mean that you bear no responsibility if you do that.  

            In the end, somebody is trying to sell you something.  The decision to buy is yours, and the decision whether you really can afford it is yours.  And if you make a financial decision counting on things like

            "I could work more hours, or get a second job, or we could take in one or two roomers, or, maybe I will win the lottery."
            And they don't work out, whose fault is that?  The lottery's? Some employer for not giving you that second job?  

            If a lender was really "corrupt" -- i.e., if that lender violated the laws about what he needed to disclose, or if that lender was dishonest about the costs to the borrower, then the lender takes ALL of the blame.  

            But if the lender complied with the law, and was factually honest, but did a whole lot of sales talk about "sure, you can afford it, it's only 50% of your take-home pay, you can cut back other places"  or "sure, pay interest only for five years, when the balloon payment comes due in five years, who knows, you may be able to sell the house or refinance" and the borrower did not do any independent thinking of his/her own, then the borrower bears SOME responsibility.  

            No borrower has any right to think that a lender is some kind of fiduciary, looking out for the BORROWER'S best interests.  The borrower has (1) a right to have the lender comply with lending laws and not be factually dishonest; and (2) an obligation to look out for his own best interests after that.  

            •  The main reason buyers were pressured (1+ / 0-)
              Recommended by:
              nextstep

              Is because the market was rising very rapidly.  People looked at yesterday's prices and they were worried that tomorrow prices would be even more out of line.

              Fannie and Freddie are directly responsible for the housing market going way overpriced.

  •  Thanks, jamess, I am very late to see this. (2+ / 0-)
    Recommended by:
    jamess, oldpotsmuggler

    I have long thought that Fanny and Freddie were made scapegoats by the Repugs. Great research and thinking!!

    "Southern nights, have you ever felt a southern night?" Allen Toussaint Remember the Gulf of Mexico.

    by rubyr on Thu Mar 27, 2014 at 06:33:35 AM PDT

  •  Yes, a few days after the 2008 economic cluster F, (1+ / 0-)
    Recommended by:
    oldpotsmuggler

    a woman who I previously liked and thought was intelligent, said it was the fault of poor people who got home loans that they could not possibly afford.  

    She also, a few months later had a crush on Sarah Palin.

    Proves that I am not as smart as I pretend to be.

    United Citizens beat Citizens United

    by ThirtyFiveUp on Thu Mar 27, 2014 at 09:06:20 AM PDT

  •  Mortgage crisis was inevitable after the following (0+ / 0-)

    changes, changes mainline government policy:

    1) Mortgage industry was pressured by the Federal government (HUD, banking regulators, Congress and Treasury) to make mortgages available to those "who traditionally were not able to get mortgages."  By definition this means people less likely to be able to afford mortgages.  The mortgage industry followed suit.  HUD and Fannie even gave Countrywide awards in lending to "non-traditional" homeowners.  As Fannie and Freddie were given quotas on lending to more less qualified borrowers.  This was a policy to lend to those who could not afford the mortgage by traditional standards.  

    2) Mortgage industry lent outside the traditional rule of no more than 80% debt on a home or 90% with mortgage insurance.  This was part of lending to customers who did not meet traditional lending standard (i.e., people who could conservatively afford the mortgage), this expanded to traditional mortgage customers also going to 5% down, 3% down and 0% down loans.  This type of low equity lending even took place with people refinancing their homes and taking cash out.  Not only is a home with 80% or less debt a far less risky mortgage, the financial strength of a homeowner able to put together to 20% down is far, far stronger financially than those who can barely do a 3% down mortgage.

    The two above policies made the mortgage market very fragile to any general decrease in home prices.

    The decline in home prices occurred, driven by a Fed policy of extremely low interest rates for many years - which allowed people to borrow more for the same monthly payment.  Then when to Fed moved to more normal interest rates, home prices stopped going up, started a decline, lending pulled back and the failure of mortgages fed into further housing price declines.

    Yes, there was bad behavior in parts of the finance industry, but that is always the case.  But that was not the cause.

    Government policies made the market fragile, followed by a bubble driven by an ultra low interest rate government policy, followed by the bubble being pricked by interest rates going back to more normal rates.

    The most important way to protect the environment is not to have more than one child.

    by nextstep on Thu Mar 27, 2014 at 10:24:37 AM PDT

    •  Fannie and Freddie in their direct day to day (0+ / 0-)

      business never went below "A minus" credit. Subprime is everything below that. They also had almost no role in either construction lending nor non-owner occupied ("speculator") lending, prime causes of the "housing bubble" that burst.

      There can be no protection locally if we're content to ignore the fact that there are no controls globally.

      by oldpotsmuggler on Thu Mar 27, 2014 at 11:14:51 AM PDT

      [ Parent ]

      •  Fannie and Freddie Fraud as subprime (1+ / 0-)
        Recommended by:
        Duckmg

        mortgage securitizer.  They were fraudulent in vastly underreporting the non prime lending they did.  Most of the former senior management has been charged with fraud by Pres Obama's SEC.  They were by far the largest securitizer and subprime mortgages.

        Whenever I have seen comments similar to yours and traced the sources, those comments on Fannie and Freddie innocence are based on fraudulent reporting by them.

        See this from the SEC website SEC CHARGES FORMER FANNIE MAE AND FREDDIE MAC EXECUTIVES WITH SECURITIES FRAUD   Chart for  Alt-A Exposure: Misleading Statements  Chart for  Subprime Exposure: Misleading Statements Companies Agree to Cooperate in SEC Actions

        This is by far the biggest (measured by assets involved) set of charges of fraud from the mortgage crisis brought by the federal government.

        The most important way to protect the environment is not to have more than one child.

        by nextstep on Thu Mar 27, 2014 at 12:18:55 PM PDT

        [ Parent ]

        •  In the Fannie and Freddie "Seller-Servicer Guides" (0+ / 0-)

          that were in force during that time period there are no provisions for selling to Fannie or Freddie the kinds of loans that you talk about.

          What you're doing is passing along right wing propaganda.

          I'm sorry.

          There can be no protection locally if we're content to ignore the fact that there are no controls globally.

          by oldpotsmuggler on Thu Mar 27, 2014 at 07:31:32 PM PDT

          [ Parent ]

          •  Pres Obama's SEC made those charges (0+ / 0-)

            as shown specifically in the link to sec.gov provided above.

            It is ridiculous to think that Obama's SEC is issuing right wing propaganda.

            I am not familiar with whatever guide you are referring to.  Thinking that Fannie and Freddie  could not have committed fraud because the would have conflicted with the guides is one of the most ridiculous defenses I have ever seen on any topic.

            The most important way to protect the environment is not to have more than one child.

            by nextstep on Fri Mar 28, 2014 at 12:17:58 AM PDT

            [ Parent ]

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