Economy troubles: Told you so!

10/3/2008:

One Hoboken411 reader said it looks like they “predicted this economic crisis over 9 years ago!”

From the NY Times:

predicting-the-financial-crisis.jpg

(Published: September 30, 1999)

Fannie Mae Eases Credit To Aid Mortgage Lending

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.”

Read the rest after the jump…

(Financial Crisis, continued…)

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.

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35 Comments on "Economy troubles: Told you so!"

Reformerus_Gianticus
Member
Reformerus_Gianticus

There they went 9 years ago, that damned liberal media (NY Times) predicting econonmic truth again. Pesky progressives. 🙂

bradykp
Member
bradykp
[quote comment=”109982″][quote comment=”109979″][quote comment=”109958″]If you don’t understand why having indirect federal funding for a liberal activist group (or any activist group for that matter) that engages in political activities is a complete conflict of interest then you really have no clue. It isn’t about Republican vs. Democrat. It is about not having taxpayer funds used directly or INDIRECTLY for partisan purposes. ACORN is as non-partisan as I am. If you weren’t so blinded by your own partisan viewpoints, then you would see that.[/quote] did i say anything that would indicate i don’t understand it? i just think it’s funny that all the conservatives are listing all the democrats that get the blame. you’ve been somewhat good about spreading the blame around yourself, it was more directed at the others. why are my viewpoints partisan? i’ve never disagreed with someone or placed blame on someone because of my political affiliation, which i’m not sure you even know what it is. thank you very much.[/quote] I am not blaoming ACORN for anything but being partisan. I blame Democrats for giving ACORN access to funding that will indirectly aid them in their partisan activities. If you can point out a case of a blatantly partisan Republican group that gets its funding in a similar manner, I would blast that as a misappropriation of tax dollars too. Republicans only point out the Democrats that are to blame b/c it is these specific Democrats that claim they are blameless and it is “Bush’s fault”. In… Read more »
truth1
Member
truth1

Cut the budget at least 10% across the board. Mayor Bloomberg has the ticket, Mayor Roberts missed the ride. In addition to making many tough decisions work out, Mayor Bloomberg has the ability to appoint department heads with the ability to do the job. Mayor Robert’s is absent here as well. I bet that the State Fiscal Control Officer will do just that :!:By the way, heard that Judy Tripoli, FCO, is moving to the office that was occupied by previous Business Administrators, George Crimmins and Ed Chuis, who ran tight ships under the Cappiello, Vezzetti, Pasculli and Russo Administrations. Other pertinent news is that public safety director B. Bergen is being relocated on the same floor. Quiz..try to guess what it is adjacent to?….hint…French Connection 2, Gene Hackman. :mrgreen:

matt_72
Member
[quote comment=”109979″][quote comment=”109958″]If you don’t understand why having indirect federal funding for a liberal activist group (or any activist group for that matter) that engages in political activities is a complete conflict of interest then you really have no clue. It isn’t about Republican vs. Democrat. It is about not having taxpayer funds used directly or INDIRECTLY for partisan purposes. ACORN is as non-partisan as I am. If you weren’t so blinded by your own partisan viewpoints, then you would see that.[/quote] did i say anything that would indicate i don’t understand it? i just think it’s funny that all the conservatives are listing all the democrats that get the blame. you’ve been somewhat good about spreading the blame around yourself, it was more directed at the others. why are my viewpoints partisan? i’ve never disagreed with someone or placed blame on someone because of my political affiliation, which i’m not sure you even know what it is. thank you very much.[/quote] I am not blaoming ACORN for anything but being partisan. I blame Democrats for giving ACORN access to funding that will indirectly aid them in their partisan activities. If you can point out a case of a blatantly partisan Republican group that gets its funding in a similar manner, I would blast that as a misappropriation of tax dollars too. Republicans only point out the Democrats that are to blame b/c it is these specific Democrats that claim they are blameless and it is “Bush’s fault”. In pointing… Read more »
bradykp
Member
bradykp

[quote comment=”109958″]If you don’t understand why having indirect federal funding for a liberal activist group (or any activist group for that matter) that engages in political activities is a complete conflict of interest then you really have no clue.

It isn’t about Republican vs. Democrat. It is about not having taxpayer funds used directly or INDIRECTLY for partisan purposes. ACORN is as non-partisan as I am. If you weren’t so blinded by your own partisan viewpoints, then you would see that.[/quote]

did i say anything that would indicate i don’t understand it? i just think it’s funny that all the conservatives are listing all the democrats that get the blame. you’ve been somewhat good about spreading the blame around yourself, it was more directed at the others.

why are my viewpoints partisan? i’ve never disagreed with someone or placed blame on someone because of my political affiliation, which i’m not sure you even know what it is. thank you very much.

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