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Facts leading up to the housing bubble that broke our economy; "Just the facts ma'am just the facts"
Topic Started: Dec 21 2013, 04:04 AM (1,979 Views)
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It is your choice to stay low info and laugh at the facts, makes me no difference.
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Berton
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A statement of fact without any proof. Typical answer from someone who does not want the subject to be discussed.
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Berton
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In the 1990's under the administration of Franklin Raines, a Clinton Administration appointee, Fannie Mae began to demand that the lending institutions that it dealt with prove that they were not redlining. This meant that the lending institutions would have to fulfill a quota of minority mortgage lending. This in turn meant that the lending agencies would have to lower their standards in terms of such things as down payments and the required incomes. These subprime borrowers would be charged a higher interest rate. Having put the lending agencies into the position of granting subprime mortgages Fannie Mae then had to accept lower standards in the mortgages it purchased. That set the ball rolling. If a bank granted a mortgage to a borrower that was not likely to successfully pay off the mortgage then all the bank had to do was to sell such mortgages to Fannie Mae. The banks typically earned a loan origination fee when the mortgage was granted. The lending agencies could then make substantial profits dealing in subprime mortgages.

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Berton
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But the Clintons and many other Democrats apparently believed such economic nonsense. To remedy the alleged racism at banks, they strengthened the "anti-redlining" regulations of the Community Reinvestment Act (CRA), which had originally been passed during the Carter years, and they instituted an aggressive campaign that forced lenders to abandon their established underwriting criteria and drastically lower their standards to accommodate minorities who would not otherwise qualify for a home loan.

Key figures in the matter were Attorney General Janet Reno and her Deputy, none other than Eric Holder. They aggressively intimidated banks with threats of prosecution, lawsuits, stiff fines, and regulatory roadblocks to expansion and mergers. They paid little attention to actual lending practices and underwriting criteria, focusing instead on the end results in terms of percentages of minority loans approved. It mattered not whether the lenders were actually discriminating on the basis of race or whether minorities in general simply had worse credit histories (statistics show that they do). It was classic "affirmative action" for home loans.

Reno aggressively prosecuted several banks for "racist" lending practices, and she also encouraged private lawsuits against banks. One such lawsuit was filed against Citibank by a little-known community organizer and civil-rights lawyer named Barack Obama. Other government agencies also embarked on witch-hunts, including the Comptroller of Currency, the President's Fair Housing Council, and the Inter-agency Task Force on Fair Lending, the latter two having been set up by the Clinton administration specifically to harass banks. They even pressured some banks to open offices in dangerous neighborhoods.

With the US Attorney General and several other government agencies pressuring them to give more loans to minorities, banks and other lenders had no choice but to figure out ways to lower their underwriting standards. They drastically reduced or eliminated minimum down payments, increased limits on debt-to-income ratio, and started counting unemployment checks and food stamps as "income"! Then there were the infamous "NINJA" loans (no income, no job, no assets -- no problem). It was financial insanity run amok -- forced on lenders by the authority of the US government.

Not surprisingly, the reckless lending standards created the largest housing bubble in history. The bubble masked the underlying problem for several years. As long as housing prices were appreciating at a sufficient rate, the problem was not apparent and did not seem particularly urgent, certainly not to the general public. The unqualified buyers who got in early enough did reasonably well. As long as their property value had appreciated sufficiently they could always sell at a profit, or refinance, and not face default and foreclosure. But the unqualified buyers who got in later lost their homes and ended up much worse off than they would have been had traditional, uncoerced banking practices been permitted. It was a classic case of the unintended consequences of bad economic policy -- ultimately harming the very minorities it was intended to help.

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ngc1514
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Berton
Dec 22 2013, 12:18 PM
This meant that the lending institutions would have to fulfill a quota of minority mortgage lending. This in turn meant that the lending agencies would have to lower their standards in terms of such things as down payments and the required incomes.
The first sentence does not validate the claim in the second.

Redlining meant that banks would not lend based on the physical location of the property as well as demographics. We had a redlining situation here in Atlanta around the Grant Park area. Well qualified buyers who were interested in the gentrification of the area around the park were denied mortgages even though they had the resources available to make the down payment and monthly note. It was also based on skin color as this Wiki on redlining states:
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For example, in Atlanta in the 1980s, a Pulitzer Prize-winning series of articles by investigative-reporter Bill Dedman showed that banks would often lend to lower-income whites but not to middle- or upper-income blacks.


The unexamined assumption is that in order "to fulfill a quota of minority mortgage lending" there were no minorities members who met the normal lending policies to buy the homes. The articles by Dedman showed this to be false.
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donsm60
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Mountainrivers
Dec 22 2013, 01:48 AM
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Dec 22 2013, 01:39 AM
I assume that would be borrowers approached the bank,
or did the banks send out gangs to retrieve them off the streets?

If I borrow more than I can repay,
I believe it is my fault, not that of any
lending institution.

You still don't get it do you? Despite all the evidence that's been presented. You sound like Berton and Neut.
One thing the expert on America, Hank, doesn’t take into consideration preaching his 80yr old Canadian stupidity never going through the serious housing meltdown we had are the inflated prices people were having to pay during the bubble to live in a decent area and I watched values double in five or six years here then drop 50% in a year. Plus most of the people involved in homes here from construction to the realtor lost their income for years with no real options. If you didn't have a solid backup plan (money in the bank) young or old it wiped a lot of people out for good.

Guys like Hank should stick to policing their own country instead of always downing ours because he is clueless trying to compare the two.
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Berton
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ngc1514
Dec 22 2013, 12:51 PM
Berton
Dec 22 2013, 12:18 PM
This meant that the lending institutions would have to fulfill a quota of minority mortgage lending. This in turn meant that the lending agencies would have to lower their standards in terms of such things as down payments and the required incomes.
The first sentence does not validate the claim in the second.

Redlining meant that banks would not lend based on the physical location of the property as well as demographics. We had a redlining situation here in Atlanta around the Grant Park area. Well qualified buyers who were interested in the gentrification of the area around the park were denied mortgages even though they had the resources available to make the down payment and monthly note. It was also based on skin color as this Wiki on redlining states:
Quote:
 
For example, in Atlanta in the 1980s, a Pulitzer Prize-winning series of articles by investigative-reporter Bill Dedman showed that banks would often lend to lower-income whites but not to middle- or upper-income blacks.


The unexamined assumption is that in order "to fulfill a quota of minority mortgage lending" there were no minorities members who met the normal lending policies to buy the homes. The articles by Dedman showed this to be false.

Yes there was discrimination but that does not prove that they did not have to lower their standards. They did have to and were forced to by the government. Once they did that the housing bubble started. It may have been an unintended consequence but that is often the case when the government inserts itself in the private sector.

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Mountainrivers
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Berton
Dec 22 2013, 12:12 PM
A statement of fact without any proof. Typical answer from someone who does not want the subject to be discussed.
Did you miss the first seven pages of discussion? Yes, I expect you did.
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Berton
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More argumentum ad hominem from Mountainrivers.

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colo_crawdad
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Yes there was discrimination but that does not prove that they did not have to lower their standards.


Nor, does it prove they had to lower their standards, unless one thinks red lining is a valid standard. It only proves they had to change their standards to reduce their blatant racist policy of red lining.
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