Thread: Fannie Mae foreclosures

[quote name='nonsqtr' date='25 October 2009 - 02:59 AM' timestamp='1256435956' post='44015']

Are we still talking about this?



The Fannie/Freddie theory was debunked a long time ago, not even Rush and Glenn are talking about it anymore!



The problem is not the bad loans, the problem is that they were sold as AAA money when they were in fact junk! That's the problem, not the loans. Everyone does bad loans, but the risk has value, and that value is factored into the resale price.



Sorry, JOM, this is a clear case of FAILURE OF REGULATION. BushCo was either asleep at the wheel, or actively ignoring the ripoff, or both.

[/quote]



No, the problem was that the government gave the incentive to make the loans in the first place.



Obviously the failure to regulate AFTER giving this incentive is a problem, but it simply wouldn't have happened without the incentive in the first place.

[quote name='justoneman' date='24 October 2009 - 08:57 PM' timestamp='1256432236' post='44004']

Bought some sub prime mortgages on the open market? What the heck are you talking about? HUD has as its mandate to foster the loaning of money in "underserved" areas and low income borrowers. This is government sponsered activity and Fannie and Freddy are and were promoting these types of loans. Fannie Mae is responsible for backing 5.1 million of these sub prime loans.Not just some.[/quote]



So, you have some general descriptions that you can't apply to the real world to substantiate your point of view. The ONLY, ONLY, ONLY, subp-prime loans Fannie had in its portfolio are those that were originated through Wall Street investor guidelines. I dare you to provide the specifics of the origin of your "5,1 million of sub-prome loans.



The underserved areas referenced were the "redlined" areas free market lenders utilized to avoid lending to poorer (black, white and any color in between) areas back in the 80's and up to the early 90's. Once securitization started and lenders could sell loans with 0% retention, I personally didn't see any further redlining. However, there were LMI (low to moderate) programs (what you call its mandate to foster the loaning of money in underserved areas and low income borrowers) designed to support borrowers in 2 fashions:



1. Census tracts - based on low income areas

2. Income for those less then 80% of the median income in the applicable county even if not in a census tract area



The underwriting for those loans essentially offered a discount on the pricing that worked out to a rate anywhere from .125% to .375% less them market. Thus, a borrower who had a 38.5% DTI ratio and might just miss getting approved, might instead come in at 37.8% and instead just barely be approved. That was the extent of how the mandate translated to fannie loans. The applicant still needed to have the same credit, assets and employment (The politicians who reference NINJA (no income no job) have no idea of specific underwriting criteria and say such comments because one can fool some of the people all of the time and those are the ones you want to concentrate on) as any other loan applicant.



[quote name='justoneman' date='24 October 2009 - 08:57 PM' timestamp='1256432236' post='44004']From Wikipedia:



..Following their mission to meet federal Housing and Urban Development (HUD) housing goals (HUD government goals), GSE's such as Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBanks) have strived to improve home ownership of low and middle income families, underserved areas, and generally through special affordable methods such as "the ability to obtain a 30-year fixed-rate mortgage with a low down payment... and the continuous availability of mortgage credit under a wide range of economic conditions." (HUD 2002 Annual Housing Activities Report)..





http://en.wikipedia.org/wiki/Fannie_...from_late_2007

[/quote]



The above listed underwriting guidelines specifically detail the "special affordable" methods through fannie.



As for any lower down payment, please remember that Fannie ONLY writes the first 80% of any LTV. Anything above an 80% LTV must be guaranteed by private mortgage insurance. Its certainly possible Fannie may have had deals with PMI carriers to subsidize a lower mortgage insurance rate, but the risk still went to the PRIVATE market.



Lets now tie this up with wall Street. By about 2002, Wall Street ALT-A and Sub prime loans had underwriting standards that were so much easier then the better rate offered by Fannie LMI programs that I only saw 2 or 3 LMI after that point. After all why pay for PMI through Fannie and have to show pay stubs and bank statements, etc....... when Wall St. doesn't care what ones credit score is and won't make you show pay stubs - Ah! Are you getting the picture? Thats where NINJA loans were done.



As for the 5.1 million, what can i say. this is what happens when Wall Streets wacky executive compensation based on short term revenue targets rather then long term profitability hits even public/private entities such as GSE's. As the LMI programs maxed out at about $30 billion (thats about 150,000 loans when using a $200,000 average loan amount), there is no way that even misclassified LMI loans originated from Fannie standards could have been reponsible for 5.1 million subprime



Actually, I would be more interested in where your number of 5.1 million of Fannie subprime loans came from. After all, when you take the total number of homeowners in the USA that is a huge number. is that number after the TARP bailout when lenders traded bad assets for loans? Could you please specifically show the source for the claims in your original post?



just think 5.1 million times at a $200,000 average loan amount is over $1 trillion. that is 10% of the entire housing market. Essentailly, that would mean fannie owned almost every in force subprime loan originated.



If you read my other posts, you will see I am not exonerating fannie. However, your villifying Fannie whilst ignoring the major culprit of the mortgage meltdown with the looser underwriting standards and the gimmicky loans (pick a pay/option arm loans) appears to show that it is not the truth you are seeking, but instead some party before country agenda to avoid admitting that Wall Street was the cause of the meltdown and that the free market failed.



I understand you love the republican party and desperatly want to believe their policies played no part in the meltdown and can save the world. But with paid off rating agencies, etc.....there is an abundance of evidence for any true american to recognize. In this case, one is either part of the solution or part of the problem. And if you can't list specifics, then sadly you lie on "the part of the problem" side of the equation.

[quote name='nonsqtr' date='24 October 2009 - 09:59 PM' timestamp='1256435956' post='44015']

Are we still talking about this?



The Fannie/Freddie theory was debunked a long time ago, not even Rush and Glenn are talking about it anymore!



The problem is not the bad loans, the problem is that they were sold as AAA money when they were in fact junk! That's the problem, not the loans. Everyone does bad loans, but the risk has value, and that value is factored into the resale price.



Sorry, JOM, this is a clear case of FAILURE OF REGULATION. BushCo was either asleep at the wheel, or actively ignoring the ripoff, or both.

[/quote]



Actually, exclusively blaming fannie comes back every 3 to 6 months. And it appears his sort will never admit that the free market with its greed, greed, greed short term remuneration comes before long term profit can never be the cause. Guess he will always be there to make excuses for those who most profited.

[quote name='Feslin' date='24 October 2009 - 10:30 PM' timestamp='1256437825' post='44018']

No, the problem was that the government gave the incentive to make the loans in the first place.



Obviously the failure to regulate AFTER giving this incentive is a problem, but it simply wouldn't have happened without the incentive in the first place.

[/quote]



your post is so untrue that it boggles the mind. even wall street executives have backed away from that type of garbage. I would ask you to read my response to JOM listing the specifics of the "incentive", but sticking your head in the sand seems to a favorite pastime of the free market is always efficient crowd.

[quote name='justoneman' date='18 October 2009 - 10:25 AM' timestamp='1255875953' post='40390']

Here we sit almost a year after the stock market crash precipitated by banks bad loans to high risk borrowers. What has changed in the laws that created this? Nothing. We have had in place for over a decade now, lending laws in Fannie Mae that encouraged and backed loans made to people not qualified to recieve those loans. Fannie Mae is responsible for backing 5.1 million of these sub prime loans. Statistics are out that 36% of these loans are in foreclosure. that is almost 2 million foreclosures based solely on these loans made to non qualified borrowers. Statistics show that loans not made to these high risk borrowers or prime loans, are foreclosing at a measly .089%. It is obviouse what has presipitated the stock market crash. Bad loans made by Fannie Mae.



So what has been changed to stop this practice?



Nothing!!

[/quote]

Bump for International underwritter.

[quote name='justoneman' date='25 October 2009 - 10:23 AM' timestamp='1256480634' post='44388']

Bump for International underwritter.

[/quote]



Whats changed?



1. Since Wall Street underwriting guyidleines were behing 100% of the subprime laons and has stopped funding them, the subprime market is less. I say less because FHA has become the new subprime market. The FHa doesn't write the junk option ARM's that Wall Street did, but they still write the Fannie overflow.



2. Now not having to compete with wall street Fannie has tightened their underwriting requirements



However, you are correct that Obama has not yet regulated wall Street. There are bills in Congress, but obstructionist republicans like yourself refuse to accept that the free marekt failed.



As for your 5.1 million of subprime loans, I challenge you to substantiate that number and the origination tjhereof. I posted this previously, but you have not responded.



"As for the 5.1 million, what can i say. this is what happens when Wall Streets wacky executive compensation based on short term revenue targets rather then long term profitability hits even public/private entities such as GSE's. As the LMI programs maxed out at about $30 billion (thats about 150,000 loans when using a $200,000 average loan amount), there is no way that even misclassified LMI loans originated from Fannie standards could have been reponsible for 5.1 million subprime.



Actually, I would be more interested in where your number of 5.1 million of Fannie subprime loans came from. After all, when you take the total number of homeowners in the USA that is a huge number. is that number after the TARP bailout when lenders traded bad assets for loans? Could you please specifically show the source for the claims in your original post?



just think 5.1 million times at a $200,000 average loan amount is over $1 trillion. that is 10% of the entire housing market. Essentailly, that would mean fannie owned almost every in force subprime loan originated."



could you please substantiate that 5.1 million number?

[quote name='International Underwriter' date='25 October 2009 - 02:33 PM' timestamp='1256477617' post='44355']

your post is so untrue that it boggles the mind. even wall street executives have backed away from that type of garbage. I would ask you to read my response to JOM listing the specifics of the "incentive", but sticking your head in the sand seems to a favorite pastime of the free market is always efficient crowd.

[/quote]



I know the specifics. I know that these sub-prime loans wouldn't be made anywhere near the scale on which they have been if not for the incentives.



They're "sub-prime" because they're bad deals for the banks, too. Unless, of course, the government helps out in some way.

[quote name='Feslin' date='25 October 2009 - 01:50 PM' timestamp='1256493015' post='44476']

I know the specifics. I know that these sub-prime loans wouldn't be made anywhere near the scale on which they have been if not for the incentives.[/quote]



You know the specifics? Okay, then you should have no problem detailing the specifics. It shouldn't take more then a few hundreds words in a concise well documented manner. After all, having first hand knowledge, I have had no problems providing specifics.



Or you could just say "you know" and provide no substantiation to even link the referenced "incentivized" loans to even being subprime



For the record, the incentives provided were for LMI loans are those loans are NOT, NOT, NOT classified as subprime loans. After all the borrowers still had to have solid credit.



[quote name='Feslin' date='25 October 2009 - 01:50 PM' timestamp='1256493015' post='44476']They're "sub-prime" because they're bad deals for the banks, too. Unless, of course, the government helps out in some way.

[/quote]



If you want to scream at the Fed. for providing low rates that allowed Wall Street to borrow cheaply and thus offer low rates, then that please proceed with your government rant.



As for what qualifies as Subprime, that is usually based on factors such as credit score (Fannie wrote above 620, sub prime wrote below), down payment, residency (primary, secondary, investor), mortgage delinqencies, ability to verify income or assets taken individually or some combination thereof.



If you are truly interested in the truth about subprime loans that fed the 2007/2008 meltdown, then you should research Lehman Brothers and Richard Fuld as the main architects. Then you could more specifically research subprime only companies such as Argent Mortgage, New Century and look at basis of their funding.....before they went bankrupt. Even major lenders such as Wells Fargo and Chase ran subprime units totally separate from their main offices. And don't get me started about Countrywide. And then there was the worst of the worst, Option ARMs or so called "pick a pay" loans, where qualification was based on the teaser rate (usually about 1.5%) interest only payment, but actually charged a customer an above market amortizing interest rate, that resulted in a negative amortization type loan.



If you are looking for the incentives that allowed subprime to proliferate, one needs to look no further then human nature... GREED. Short term greed was put ahead of of long term fiscal profitability. The people creating the financing behind subprime loans made tens of millions of dollars...............even the top execs. at Argent, New Century, etc.....made millions upon millions. And even the rating agencies that somehow gave AAA ratings this crap made huge sums of money as Wall Street went "rating shopping". The basic truth is that the free market failed because people are greedy. And unless you are willing to learn from history, then you are sure to be an agent to repeat it!



And if you can't type a more intelligent reply then "I know the specifics" without listing any actual specifics to substantiate your claim, then you deserved to be classified as.....................well, decorum prevents me from saying what I think about your intelligence.