It really was Bush's fault Wrote:
-------------------------------------------------------
> American Dream Commitment Wrote:
> --------------------------------------------------
> -----
> > Not nearly like it did after the GSEs with
> their
> > bankroll and incentives to drive the market.
>
> Fannie Mae began operations in 1938.
Yeah? And? They didn't get into the more sketchy stuff in any big way until the late 90s when standards were reduced and they moved into more risky activities.
Actually they had some in the past. We should have learned from Freddie and the earlier S&L deal. As FHA should have learned after it had lowered standards and saw defaults increase greatly.
>
> > Standards which were reduced over time and
> which
> > didn't stop them (actually encouraged) from
> buying
> > tons of crap, especially on the securities side.
>
> > About $1.5 trillion worth.
>
> Dumb-ass loser. Standards for conforming loans
> have gone both up and down over the decades, but
> always within bands that excluded the nonsense
> crap that Wall Street welcomed in and then sold
> off until the secondary markets choked on it all.
> Daniel Mudd's desperation leap in 2006 has already
> been mentioned. Otherwise, the GSE's were
> regularly in and out of high-income securities
> markets as a part of their garden-variety
> interest-rate hedging operations. But the GSE's
> did not create that stuff. Wall Street did.
You're ignoring the greatly increased movement into Alt-A and relaxed standards which happened prior to 2006. It was well on the way by then. That was just a hail Mary in the last few minutes as it was becoming more clear that the game was over. Things were already coming apart long before that.
They may not have created it, but the GSEs bought lots of it and acted as a primary market and driver for it. They directly partnered with the Countrywides, BOA, Washington Mutuals, etc., in a concerted effort to drive more ownership (and business for them). Which necessarily had to come from less qualified borrowers through initiatives such as the "American Dream Commitment."
Mozilo understood how that worked at the time even if you don't:
Quote
NYT
Oct 16, 2005
"While he is sanguine about the stock price, Mr. Mozilo remains volatile about so much else. Particularly irksome are calls by Alan Greenspan, the Federal Reserve chairman, to shrink Fannie Mae and Freddie Mac, the quasi-government institutions that buy huge numbers of mortgages from financial institutions, notably from Countrywide.
"Fannie and Freddie are a threat to his banks," Mr. Mozilo said of Mr. Greenspan, whose agency regulates big bank holding companies. By buying his mortgages and thus freeing up his capital to solicit even more business, Fannie and Freddie are a big reason Mr. Mozilo has driven Countrywide past the Citigroups and the Wells Fargos to the top of the mortgage heap. "If it wasn't for them," he said of Fannie and Freddie, "Wells knows they'd have us."
You also seem to be forgetting that these same parties were rewarded for making more loans and, at the time, received great praise for their activities. Everyone at Fannie, politicians, institutional investors, and the housing advocates all loved guys like Mozilo while they were generating tons of money for them and "making home ownership more accessible and affordable." Lots of mutual back slapping going on. About the only people questioning Mozilo at the time was AFSCME and that was only over his compensation being too high. Anyone who doubted any of it was stiff-armed aside and written off as not being smart enough to understand the model and/or not seeing the vision. Even when it became more clear that the market was tailing off and loans were becoming a problem you had ridiculous stuff offered up as justification to continue like NAR's nonsense "permanently high plateau" as a worst-case scenario.
>
> > With the blessing and backing of HUD. History
> is
> > a funny thing... It doesn't go away. Seemed
> like
> > a great plan back in 2002:
>
> Moron, it was and still is a great plan. Like the
> little cartoon that certain dolts are incapable of
> comprehending, you are committing the grievous sin
> of being unable to distinguish between subprime
> lending and abuse of subprime credit markets. One
> of those is fine, the other one isn't. Your link
> of course confirms that subprime had been growing
> slowly through the 90's and that the GSE's were
> testing model portfolios in preparation for
> playing the same sort of role in subprime that
> they did in prime.
>
> Part of that was development of model subprime
> credit instruments that would use upfront fees on
> an otherwise fixed-rate 30-year note to balance
> out any rated excess in risk. Borrowers could
> then earn their way out of those fees through
> consistent performance. As you very probably
> don't know, prime borrowers can only be rated as a
> class, but subprime borrowers can be rated
> individually. This is a plus in that loans can be
> tailored to the situation of a particular subprime
> borrower, but it is also a minus in that more
> intensive (and hence expensive) monitoring of
> individual borrowers is needed. We'll never know
> if the GSE's would have figured out how to balance
> all that out because Wall Street (backed by their
> unscrupulous broker pals, crooked appraisers, and
> befuddled bond-raters) simply swept in and became
> the definers of standard subprime instruments.
> Their models of course included all sorts of
> high-cost, high-profit tricks and gimmicks to
> screw the borrower and any subsequent investor as
> well. Basically, Wall Street was stripping off
> all the profit, and then selling off all of the
> risk. And they did this even past the point where
> the risk component had become prohibitive. You
> don't know any of this and of course didn't read
> the report behind your link. This is because you
> are just a dumbshit.
You watch too many cartoons. Which appears to be the level at which you operate.
Look dummy, nobody denies the role of brokers and related parties at the sub-prime end and the effects on credit markets. That's not the question. You can drop that now. Everyone understands that part.
You continuing to harp (no pun intended) about sub-prime abuses doesn't negate the abuses by the GSEs. They'd been doing and continued to do the exact same thing just at an incrementally somewhat less risky step up in the scheme of things. "Testing"???? They weren't testing. They were in with both feet and had near half a trillion dollars worth of shit they were holding. lol Not counting even more marginal shit above and beyond that. Once the market began to break down that "less-risky" segment (along with their own true sub-prime crap) turned into real failures and was where most of the larger losses came from. Most of which still is out there btw, it's just been hidden off of their books and stashed away by Treasury.
>
> > But that wasn't the larger part of the problem
> at
> > a systemic level. It was the marginal buyers
> just
> > above that, the cashed-out refinancers, and
> other
> > borrowers who were only "prime" in name under
> > relaxed standards and qualification criteria
> along
> > with vehicles which promoted more risk taking
> on
> > the part of buyers.
>
> Idiot. Learn what refi's are and how they work.
> Borrowers engage in them because one can A) carry
> the same debt for a lower monthly payment, or B)
> carry more debt for the same monthly payment.
> Your rambling babble-shit here is completely
> meaningless.
None of which is to the point. They also were used in huge numbers to pull equity out of existing loans. And to restructure loans forward into a variety of more risky arrangements in order to get to those lower payments. You neglect to mention the many GSE-acceptable schemes employed to lower that monthly payment and to push that debt out into future years as a way to get to that lower payment. The only thing that mattered to pretty much everyone involved was that the (inflated) appraisal came in OK. I mean you can always just refi and sell for more than you paid, right? And since the market was booming, lots did these things. All of which made these investments much more risky from the standpoint of those holding the paper. Which then had huge effects as the market failed and was the cause for most of the losses and foreclosures beyond the initial point-source crash.
>
> > I didn't disparage anyone.
>
> Right. Let's just say that you were hardly
> complimentary toward low-income and minority
> borrowers. And among all these other things, you
> plainly know nothing useful about CRA loans or
> portfolios either. Just another low-grade
> propaganda-reading dumbfuck.
Ummm, again dumbass, you can't seem to grasp that I'm not disputing that the sub-prime abuses were the proximate cause of the crash and related escalating effects on credit markets. Nor am I blaming, beyond at a very minor level CRA-specific lending for much of that. That's the problem with ideologues like you. You can't get past your own propaganda to even understand anything beyond the approved talking points.
In fact, as anyone can see by looking at where the larger losses happened with respect to the housing market, it was not in CRA-specific sub-prime loans. It was in the GSE's playground where relaxed standards had let borrowers up from that level greatly over-extend themselves. The massive numbers of failures of loans in FL, AZ, CA, NV, etc., weren't CRA-borrowers.
>
> > Yep. And so did the GSEs right along with them.
>
>
> LOL! The GSE's were not playing that game. It was
> Wall Street and their crooked pals who were
> running into supply problems. Their fabulous
> profits and bonuses were being put at risk. But
> they didn't take that as a sign to slow down or
> stop. They just ramped up the hard-sell and went
> full-speed ahead.
>
> > They also packaged their crap right along with
> everyone
> > else. The lent their significant weight to the
> market for
> > securitizing crap.
>
> It was again Wall Street that HAD all the crap,
> and hence they who were securitizing it. The crap
> that Daniel Mudd bought late in 2006? All of it
> came from Wall Street.
And who bought huge amounts of it? And who packaged their own crap in the same way? And facilitated the packaging of other crap by buying the upper tranches permitting higher ratings and the lower tranches to be sold along with it? By your own example you concede their significant role in helping to make a market for crap. You can't sell crap unless there's someone willing to buy crap. The GSE's played a primary role in making and legitimizing that market (see Mozilo's commments above).
>
> > Uh, yeah, I know what refinancing is. You're
> > either operating at 3rd grade level or just
> > playing dumb. If you don't understand the
> effects
> > of people draining the inflated, artificial
> equity
> > out of their homes through refinancing at the
> > time, tying themselves into various loan
> > structures which assumed that prices would only
> > increase, rolling other debt into seconds based
> on
> > inflated values, etc., then you're missing the
> > primary reasons for subsequent huge losses
> across
> > the market beyond the initial crash.
>
> LOL! Which whacko financial guru wannabe website
> did you take that mass of nonsense from? Equity
> exists or doesn't exist depending on the
> relationship between the balance owed on a home
> mortgage and the current market value of the home
> involved. The "market" has no claim to that
> equity. Just the "homeowner". You are off hiking
> without a guide through the remote back-country of
> clueless-land here.
There absolutely is. What do you think happens to default rates on those loans when borrowers have pulled all of their equity out (not even considering that they may not have had much to begin with given signature and low down-payment loans) and the house isn't worth what they thought that it would be and/or they can't flip it for what they thought that they'd be able to, can't carry it under the new terms, and/or can't practically refinance again? Just as in the case of the borrowers in the OP.
>
> > There was a bubble. Very obviously so. As
> shown
> > by the fall back to earth.
>
> There was not a bubble. Markets go up and markets
> go down. That is their nature. Between mid-2000
> and mid-2003, mortgage interest rates fell sharply
> -- by about 335 basis points. This lit a fire
> under home prices exactly as it should have.
> Long-term interest rates and asset prices are
> after all inversely related in general. Then
> between mid-2004 and mid-2006, interest rates rose
> again, and sure enough, housing markets peaked in
> the Spring of 2006 and began to level off again,
> exactly what should have happened.
Yes, there obviously was a bubble as anyone with any sense understands. Again, that pesky history thing just won't go away when it's convenient to forget.
The breakdown of home sales and prices was not just a simple, normal adjustment due to higher rates. Although that obviously contributed. The market was saturated. Long ago saturated for higher-quality borrowers and credit was greatly over-extended. Especially in the primary areas for growth and also the most speculative markets: CA, AZ, NV, FL and some others.
But, whether intentional or not, you do now seem to realize that a significant breakdown in the housing market happened PRIOR TO to the sub-prime crash itself. The faltering of the market was what caused the most shaky part to fail, not the other way around as you seem to be trying to suggest. The failure of the real estate market was well underway long before that. The effects on credit markets obviously compounded that going forward.
Quote
Existing home sales drop 4.1% in July, median prices drop in most regions
Updated {b}8/24/2006[/b} 9:00 AM ET
By Noelle Knox, USA TODAY
WASHINGTON — Existing home sales posted an unexpectedly sharp drop last month to the lowest level since January 2004 and home prices fell in all regions of the country but the South, the National Association of Realtors said Wednesday.
The downward pressure on prices probably will continue through the beginning of next year because the inventory of homes for sale has surged to the highest level in 13 years. There are now 3.86 million homes for sale, a 7.3-month supply.
The weakness in the market is being driven by higher interest rates, low affordability, and speculators who are dumping investment properties back on the market because they couldn't flip them for a profit.
"I was disappointed, it was a lot lower than I anticipated," said David Lereah, NAR's chief economist. "What is clear to me is sellers are more stubborn than I expected them to be. We definitely need a correction in prices in order for buyers to come back into the market."
He said he expects home prices to come down 5% nationally, more in some markets, less in others. And a few cities in Florida and California, where home prices soared to nose-bleed heights, could have "hard landings," he said.
Total existing home sales fell 4.1% from June to a seasonally adjusted annual rate of 6.33 million — a much steeper decline than economists expected.
The median single-family home price, meaning half cost more and half cost less, was $231,200, up 1.5% from July last year, but the median condo price fell for the second month in a row and is now $225,600, down 1%.
What is most worrying, however, is how the real estate markets are suffering in Michigan, Ohio, Indiana, Massachusetts, and some parts of Pennsylvania and New York. Job losses in those area are driving home sales down and foreclosures up.
The faltering market, lack of buyers at artificially high "market" prices, job losses and foreclosures referenced all were happening BEFORE the sub-prime crash, not as a result of it and the subsequent "Great Recession."
>
> > Credit for future lending also obviously was
> > restricted following the crash.
>
> Here's something else you didn't know: Risk is
> always over-priced in bad times and under-priced
> in good times. Get used to it, though you'll
> likely never have an opportunity to put the lesson
> to any actual use beyond keeping yourself from
> looking like an even more complete idiot.
Another brilliant revelation. Did you learn that by watching cartoons too? lol
>
> > About a third of the other-than-prime market
> > wasn't a "tiny" role.
>
> Jumbos? Commercial real estate? Don't make me
> laugh. What brought about the credit crisis that
> in turn morphed into the Great Recession was worse
> and worse residential mortgage paper being cranked
> out by the profit-seeking Wall Street cabal and
> jacked into unsuspecting secondary markets when
> the issuers themselves knew full well those notes
> would ultimately fail. Fail, they did, and the
> rest is history.
>
Here, let me help you with your own talking points. What you're supposed to be doing is focusing on parsing out CRA-specific loans as not being the source of the problem while ignoring and hoping that nobody notices, as you are, all of the other non-CRA-specific Alt-A crap that they were dealing in themselves. Remember all of that crap that you now admit that they bought up in 2006 (and before)? What do you think that was? Where do you think that it came from? Remember all of the "creative" ways of expanding the number of borrowers? Once again, history remembers:
Quote
Fannie Mae, Battling Losses, to End Alt-A Mortgages (Update4)
By Jody Shenn - August 8, 2008 16:17 EDT
Aug. 8 (Bloomberg) -- Fannie Mae, the largest U.S. mortgage finance company, will stop buying and guaranteeing Alt-A mortgages because of surging losses from home loans to borrowers without proof of their finances.
Fannie won't accept new Alt-A loans after Dec. 31, according to a statement today. The mortgages, which make up about 11 percent of the $3 trillion financed by the Washington-based company, accounted for almost half of second-quarter credit losses, Chief Financial Officer Stephen Swad said today on a conference call.
The debt, generally considered between prime and subprime in terms of expected defaults, has ``driven our credit expenses,'' Chief Executive Officer Daniel Mudd said on the call. ``Alt-A foreclosures have doubled in southern California.''
> > Your attempt to completely deny any the role of
> > the GSEs is what's ridiculous here.
>
> I'm not denying that they played ANY role, you
> delusional dipstick. I'm denying that the GSEs
> played any more than a tiny role that came late
> late in the game -- after all the horses were
> already out of the barn. Do you not remember my
> saying that earlier? I am also of course pointing
> out that the actual blame for this mess falls upon
> a bunch of greedy cowboy capitalists on Wall
> Street and some super-stupid laissez-faire,
> free-market minded regulators in Washington, all
> of them the acolytes of one George W Bush. That's
> how it all went down, regardless of your
> stooge-like stammerings.
You're attempting to deny that they played any significant role. Which they obviously did in helping to artificially pump home ownership (above and beyond just CRA-specific lending). Yes, the horses were out of the barn. And a lot of them had the GSE's brands on them.