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Social Activism leads to mortgage mess


?While many pundits are pointing to corporate greed and a lack of government regulation as the cause for the American mortgage and financial crisis, some analysts are saying it wasn't too little government intervention that cased the mortgage meltdown, but too much, in the form of activists compelling the government to pressure Freddie Mac and Fannie Mae into unsound ? though politically correct ? lending practices.?

"In an attempt to increase homeownership, particularly by minorities and the less affluent, an attack on underwriting standards was undertaken by virtually every branch of the government since the early 1990s," Liebowitz writes. "The decline in mortgage underwriting standards was universally praised as 'innovation' in mortgage lending by regulators, academic specialists, (government-sponsored enterprises) and housing activists."
He continues, "Although a seemingly noble goal, the tool chosen to achieve this goal was one that endangered the entire mortgage enterprise."

"As homeownership rates increased there as self-congratulation all around," Liebowitz writes. "The community of regulators, academic specialists, and housing activists all reveled in the increase in homeownership."

"After the warm fuzzy glow of 'flexible underwriting standards' has worn off," Liebowitz wrote, "we may discover that they are nothing more than standards that led to bad loans. ? It will be ironic and unfortunate if minority applicants wind up paying a very heavy price for a misguided policy based on a badly mangled idea."
And though some have speculated that lenders in the '90s dove into sub-prime mortgages in an effort to gouge new markets, the president and chief operating officer of Freddie Mac in 1999, David Glenn, confessed his company was pushed by a federal agenda.

"The mortgage industry intends to pursue minorities with greater intensity as federal regulators turn up the heat to increase home ownership," Glenn said in his remarks at the annual convention of the Mortgage Banker Association of America.

"The federal government in the meantime has increased pressure on lenders to seek out minorities, as well as low-income groups and borrowers with poor credit histories," Glenn said. "Fannie Mae recently reached an agreement with the U.S. Department of Housing and Urban Development to commit half its business to low- and moderate-income borrowers. That means half the mortgages bought by Fannie Mae would be from those income brackets."

?Wall Street Journal quoted Congressman Barney Frank, D-Mass., in 2003 as criticizing Greg Mankiw "because he is worried about the tiny little matter of safety and soundness rather than 'concern about housing.'"

Frank, Chair of the House Financial Services Committee, rejected a Bush administration and Congressional Republican plan for regulating the mortgage industry in 2003, saying, "These two entities ? Fannie Mae and Freddie Mac ? are not facing any kind of financial crisis." According to a New York Times article, Frank added, "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."?
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Pure bunk

In reply to: Social Activism leads to mortgage mess

Here is an article that completely disqualifies the motivation to make a profit by loaning money. The fact that the bulk of these loans carried unreasonable terms that were guaranteed to result in a high default rate immediately negates the premiss that the motivations of the "maes" was any sort of social activism.

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Article seems valid to me...

In reply to: Pure bunk

The disaster was predicted several times. They clearly were bending over backwards to make homes available to low income families...whether they could afford the mortgages or not.

Kinda explains why all that campaign money and lobbying money went to whom it went to, doesn't it?

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This is clearly right on the mark, and begins to explain

In reply to: Social Activism leads to mortgage mess

what happened in terms that make sense. How, in the face of everything that we know about lending, was such a high volume of bad loans made? So many bad loans that our entire economy was threatened. It would require the encouragement and complicity of government to make this happen. That kind of government comes from the liberal ranks which means Congress. After all, you can simply dictate what it is that you want to happen in the real world. Right? Isn't that what we have learned?

Add to that some loan organizations that sought to make a killing, and leave the tax payer with the bill. That kind of operation smells of organized crime. They got their money, and got out.

Add to that the employees at the big Wall Street firms who are the product of American education. They think they are a lot brighter than they really are, and they buy into this fiasco. They didn't need to be careful and prudent. They had tons of technology to make them bullet proof, and the confidence that they could do whatever they wanted. Oops.

Now, we wait to see if someone can figure out how to wind this down, and if anyone has the will to fix the problem. Jessie Jackson and Obama are already telling us that we need to forgive the consumer debts. Wonderful! Reward the speculators, and kick off huge inflation. Let's pray for some adult guidance.

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You said something...

In reply to: This is clearly right on the mark, and begins to explain

You said something that had a bearing on the situation, "They got their money, and got out.". Sell something with a loan, then quickly "unload the paper" by selling it, and take your profit. Problems down the road, what do you care, you got yours and it's the problem of somebody else down the line.

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I've been reading a lot about the mob recently.

In reply to: You said something...

Then I read about the people running Countrywide. I certainly would not be surprised if this were a mob connected operation.

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