For Those Who Forget, How We Got Into This Mortgage Mess
Here we go:

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. Real Estate Examiner
Now don’t panic, this insane merry go round is not going to happen again in the near term. This is a reprint of an article written in September, 1999, back in the final days of the Clinton Administration.
But we have to remember how the government intentionally forced banks to lower their lending standards and creating the mess we are digging ourselves out of.



Pingback by Sumner County Real Estate and Auction News! » Well Put. on 4 February 2009:
[...] I thought this was well put. [...]
Comment by Jill on 4 February 2009:
Wow! Hopefully we’ve learned our lesson.
Comment by Tom Frey on 26 February 2009:
I attended several sessions sponsored by Fannie Mae where it was stated that Congress required upwards of 50% of their production to be “Community” mortgages. These were essentially mortgages for folks who wouldn’t normally qualify for a home loan given normal qualifying standards. And up to 100% of the purchase price…Now, these people had to qualify with income, assets (minimal as they were), employment, and credit.
My concern over the years was that the loan was good for that brief moment in time. They were marginal borrowers. So, if a minor problem occured in the future, they could default on the loan more easily than those who would qualify through the more traditional guidelines.
My contention has been that many of the “alternative” types of mortgages were created to pick up where Fannie and Freddie left off. Remember, Fannie and Freddie were treading were they shouldn’t have been. So, these borrowers were even more vulnerable to economic changes.
Comment by Austin REALTOR Sam Chapman on 10 April 2009:
It started with the Community Reinvestment Act. That picked up steam under Clinton. The Bush administration tried to put more restrictions on it, but there was too much pressure to get loc income people into homes. That and greed got us into this mess.