The true story behind the financial crisis.

[gatorman_07732]

Originally Posted by dangolegators

What? Who said that? You got it backwards, not all high risk loans were subprime.

Indeed they were
I supplied the definition and you're still in denial. Sub-prime mortgages by definition were high risk

[dangolegators]

Originally Posted by gatorman_07732

Indeed they were
I supplied the definition and you're still in denial. Sub-prime mortgages by definition were high risk

Do you not understand English?

[gatorman_07732]

Originally Posted by dangolegators

Do you not understand English?

I do understand that your premise is incorrect at faulted badly. You seriously changed you tune after I nailed the false claim of the premise of your post. Now you are trying to tread H2O.

[corpgator]

Students loans as a whole are not a bubble. They create huge positive externalities, which far outweigh the costs.

Student loans to degree factories/for profits, on the other hand, do need to go.

[dangolegators]

Originally Posted by gatorman_07732

I do understand that your premise is incorrect at faulted badly.

You understand that my 'premise is incorrect at faulted badly'?

I guess that sort of answers my question of whether or not you know English.

[gator996]

dangolegators & row are 100% correct here

07732

No doc loans traditionally were done for people with little or no credit documentation but because of the huge downpayment required default rates were low because the borrower had a large skin in the game at inception.

Subprime loan.....Low risk

[Swampmaster]

Originally Posted by baygator1

Similar lessons are about to be learned with the federal student loan program.

big difference: student loans are not dischargeable in bankruptcy and mortgage debt is.

[G8trGr8t]

Originally Posted by Swampmaster

big difference: student loans are not dischargeable in bankruptcy and mortgage debt is.

Not yet but 0 isn't done yet

[CHFG8R]

One question: Where was Goldman Sachs, Chase, etc. in terms of lobbying for that 1992 piece of legislation that supposedly caused all of this? For or Against?

[gatorman_07732]

Originally Posted by gator996

dangolegators & row are 100% correct here

07732

No doc loans traditionally were done for people with little or no credit documentation but because of the huge downpayment required default rates were low because the borrower had a large skin in the game at inception.

Subprime loan.....Low risk

If your saying subprime was low risk your completely wrong. They were by definition high risk because they were made to people that could not ordinarily get loans somewhere else.

[viningsgator]

As someone who's in the business and watched this unfold I can attest that both Fannie & Freddie were late to the game and not the primary causes of the housing collapse. However, whenever you factor that we the taxpayer are now on the hook for up to $500,000,000,000 in present and future losses one has to ask why in the hell did they even enter the race?

[busigator96]

With new technologies, why should the cost of education be so much still? Have you heard of MOOC's?

Also, is it the students' faults the cost of education climbed much faster than the rate of inflation while they were taught they need to be additionally credentialed in order to get a better job?

Again, the banks are involved...big surprise!

[Row6]

Originally Posted by viningsgator

As someone who's in the business and watched this unfold I can attest that both Fannie & Freddie were late to the game and not the primary causes of the housing collapse. However, whenever you factor that we the taxpayer are now on the hook for up to $500,000,000,000 in present and future losses one has to ask why in the hell did they even enter the race?

According to this column, simple human greed and/or wish to personally excel by Mae and Mac's executives:

"..But the S.E.C. complaint makes almost no mention of affordable housing mandates. Instead, it charges that the executives were motivated to begin buying subprime mortgages — belatedly, contrary to the Big Lie — because they were trying to reclaim lost market share, and thus maximize their bonuses.

As Karen Petrou, a well-regarded bank analyst, puts it: “The S.E.C.’s facts paint a picture in which it wasn’t high-minded government mandates that did [Fannie and Freddie] wrong, but rather the monomaniacal focus of top management on market share.” As I wrote on Tuesday, Fannie and Freddie, rather than leading the housing industry astray, got into riskier mortgages only after the horse was out of the barn. They were becoming irrelevant in the most profitable segment of the market — subprime. And that they couldn’t abide...".

http://www.nytimes.com/2011/12/24/op...e-big-lie.html

This column by the same author further explains the tardiness and relative conservatiness of Mac and Mae in respect subprimes:

"...Fannie and Freddie got into subprime mortgages, with great trepidation, only in 2005 and 2006, and only because they were losing so much market share to Wall Street. Among other things, the Wallison-Pinto case relies on inflated data — Pinto classifies just about anything that is not a 30-year-fixed mortgage as “subprime.” The reality is that Fannie and Freddie followed the private sector off the cliff instead of the other way around...

..On Friday, the Securities and Exchange Commission waded into the Fannie/Freddie wars by filing a lawsuit against three executives from each company. The complaint charges them with making “materially false” disclosures about the size of the companies’ subprime portfolios...

The complaint is extraordinarily weak. Taking its cues from the Wallison/Pinto school of inflated data, it claims that Fannie and Freddie failed to reveal to investors the true extent of their subprime portfolios. To make this claim, however, the S.E.C. has included categories of loans, such as so-called Alt-A loans, that may have had a subprime characteristic, such as low documentation, but which were often made to borrowers with high credit scores.

There are no damning internal e-mails in the complaint, with executives contradicting their public statements, and no examples of sleazy insider stock sales. A quick look at Fannie and Freddie financial disclosure statements shows that they clearly laid out the credit characteristics of their mortgage portfolios, even if they didn’t label every non-30-year-fixed loan as subprime. More than a year ago, a federal judge presiding over a shareholder lawsuit against Fannie Mae threw out the allegations surrounding lack of disclosure. Why? Because, he said, the company’s disclosure of its subprime portfolio had been adequate...The truth is, for all their mistakes, Fannie and Freddie had some scruples about the nonprime loans they guaranteed or bought — and they have the default numbers to prove it.

For instance, according to David Min, a leading Wallison critic at the Center for American Progress, as of the second quarter of 2010, the delinquency rate on all Fannie and Freddie guaranteed loans was 5.9 percent. By contrast, the national average was 9.11 percent. The Fannie and Freddie Alt-A default rate is similarly much lower than the national default rate. The only possible explanation for this is that many of the loans being characterized by the S.E.C. and Wallison/Pinto as “subprime” are not, in fact, true subprime mortgages."

http://www.nytimes.com/2011/12/20/op...ent-truth.html

[Matthanuf06]

All of this finger pointing is just ridiculous when its obvious what happened on the surface.

The government made the rules and set the parameters. That much is obvious. They created moral hazard, interest rate manipulation, legislation, play favorites with dollars, taxes (and deductions) and even created monstrous govt backed agencies.

Clearly this wasn't a private market. Not even close.

Yet none of this wouldn't have happened if greedy main stream citizens and businesses as well as greedy Wall Street banks were not complicit. We'd like to think that we'd be smart enough to do the smart and right thing but we weren't. On all levels. But we played the game by the rules set up by the government.

If the government didn't meddle then this certainly wouldn't have happened. The GSOs wouldn't exist. Incentives wouldn't exist for both the lender and borrower. Interest rate manipulation wouldn't exist.

There would be other consequences for that, without a doubt, but not the one we faced

[gator996]

Originally Posted by gatorman_07732

If your saying subprime was low risk your completely wrong. They were by definition high risk because they were made to people that could not ordinarily get loans somewhere else.

You truly don't know what your talking about...

Simply because you don't have credit history doesn't make you high risk.

My bank had been doing no doc loans since the 1800's.

Many, many immigrants come to the USA...with cash but no credit history.


I could waste the next hour explaining the Alt-A, No Doc, sub prime world but I'm lazy...


...but seriously, you're 100% wrong here...


Poor underwriting standards, poor asset/liability modeling, loose credit review/standards, & fraud all had a hand in the mortgage crisis...


What I will say is this...For anyone who was/is in the business, the problem wasn't Fannie & Freddie leading the charge...they were followers of the private labels...in terms of market direction & origination...

[gatorman_07732]

Originally Posted by gator996

You truly don't know what your talking about...

Simply because you don't have credit history doesn't make you high risk.

My bank had been doing no doc loans since the 1800's.

Many, many immigrants come to the USA...with cash but no credit history.


I could waste the next hour explaining the Alt-A, No Doc, sub prime world but I'm lazy...


...but seriously, you're 100% wrong here...


Poor underwriting standards, poor asset/liability modeling, loose credit review/standards, & fraud all had a hand in the mortgage crisis...


What I will say is this...For anyone who was/is in the business, the problem wasn't Fannie & Freddie leading the charge...they were followers of the private labels...in terms of market direction & origination...

I think you should get into a new line og business if you don't know subprime lines were high risk. They were inherently risky.

[Row6]

Originally Posted by Matthanuf06

All of this finger pointing is just ridiculous when its obvious what happened on the surface.

The government made the rules and set the parameters. That much is obvious. They created moral hazard, interest rate manipulation, legislation, play favorites with dollars, taxes (and deductions) and even created monstrous govt backed agencies.

Clearly this wasn't a private market. Not even close.

Yet none of this wouldn't have happened if greedy main stream citizens and businesses as well as greedy Wall Street banks were not complicit. We'd like to think that we'd be smart enough to do the smart and right thing but we weren't. On all levels. But we played the game by the rules set up by the government.

If the government didn't meddle then this certainly wouldn't have happened. The GSOs wouldn't exist. Incentives wouldn't exist for both the lender and borrower. Interest rate manipulation wouldn't exist.

There would be other consequences for that, without a doubt, but not the one we faced

You really need to read something about this event than the right wing propaganda quoted in the OP. Private mortgage companies drove the subprime market, and they were not under the CRA regs or any of those that apply to banks. Wall Street then invented a seemingly foolproof money machine by bundling these mortgages and reselling them, again without any government involvement. If the government can be faulted in any of this it is for not having stricter rules in place for those who played craps on the back porch with the nations accumulated wealth in the balance.

[108]

why the need for conservatives to deflect blame from the private sector, even when multiple studies show that Clinton's initiative had very little to do with it?

what the public sector is responsible for is looking the other way while it all went down

in fact, more than just looking the other way, but preventing states from protecting its citizens from predatory lending

By Eliot Spitzer
Thursday, February 14, 2008

Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York's, enacted laws aimed at curbing such practices.

What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge? As Americans are now painfully aware, with hundreds of thousands of homeowners facing foreclosure and our markets reeling, the answer is a resounding no. Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.

Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers. In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.

But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation.

Throughout our battles with the OCC and the banks, the mantra of the banks and their defenders was that efforts to curb predatory lending would deny access to credit to the very consumers the states were trying to protect. But the curbs we sought on predatory and unfair lending would have in no way jeopardized access to the legitimate credit market for appropriately priced loans. Instead, they would have stopped the scourge of predatory lending practices that have resulted in countless thousands of consumers losing their homes and put our economy in a precarious position.

When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners, the Bush administration will not be judged favorably. The tale is still unfolding, but when the dust settles, it will be judged as a willing accomplice to the lenders who went to any lengths in their quest for profits. So willing, in fact, that it used the power of the federal government in an unprecedented assault on state legislatures, as well as on state attorneys general and anyone else on the side of consumers.

The writer is governor of New York.

[gator996]

Originally Posted by gatorman_07732

I think you should get into a new line og business if you don't know subprime lines were high risk. They were inherently risky.

Our Alt-A (subprime) portfolio had lower default rates than the conventional loan portfolio...


You think all "subprime" loans are the same thing...kinda simplistic but...whatever.

[Matthanuf06]

Originally Posted by Row6

You really need to read something about this event than the right wing propaganda quoted in the OP. Private mortgage companies drove the subprime market, and they were not under the CRA regs or any of those that apply to banks. Wall Street then invented a seemingly foolproof money machine by bundling these mortgages and reselling them, again without any government involvement. If the government can be faulted in any of this it is for not having stricter rules in place for those who played craps on the back porch with the nations accumulated wealth in the balance.

I'm in the business.

Look, you are ignoring steps 1-100 where the government set the rules and jumping to step 101 where the private market acted. If you don't see the government involvement then I don't know what to tell you. Ever hear of the Fed? Taxation and deduction? City/county incentives? I can go on and on.

I bought a house in June 2011, first time home buyer. It was a USDA loan with county/city incentives I ended up having to put $0 down and in fact with the incentives they knocked down my principal a few grand. Yeah, no involvement in the housing market.