O'Reilly Blasts Barney Frank

[Yeager]

lol, what, by deregulating them? Wow, i'd cave under that pressure for sure

you better be careful with this.  the pendulem do swingeth the other way and before you know it the tax and spend liberals will pile on so damned many regulations it will strangle free enterprize again. 

The trick is to find the minimum necessary regulation.

[Sixpence]

sixpence,

this is a factually incorrect and poorly researched article. Problems with Fanny & Freddie go way back. Easily two of the most corrupt and poorly run entities in the world. This comment was down below and matches well with audited numbers I've seen elsewhere...



Fannie Mae and Freddie Mac, the country's second-biggest mortgage finance company, together owned a record $6.9 billion of foreclosed homes on March 31, compared with $8.56 billion held by all 8,500 U.S. commercial banks and savings and loans

Even if they do, that doesn't mean they were bad loans. And you don't provide a source for your information, do those foreclosed homes include what they bought from the private sector?

Here is what the article said:

"Start with the most basic fact of all: virtually none of the $1.5 trillion of cratering subprime mortgages were backed by Fannie or Freddie. That’s right — most subprime mortgages did not meet Fannie or Freddie’s strict lending standards. All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrower’s income or employment history? All made in the private sector, without any support from Fannie and Freddie.

Look at the numbers. While the credit bubble was peaking from 2003 to 2006, the amount of loans originated by Fannie and Freddie dropped from $2.7 trillion to $1 trillion. Meanwhile, in the private sector, the amount of subprime loans originated jumped to $600 billion from $335 billion and Alt-A loans hit $400 billion from $85 billion in 2003. Fannie and Freddie, which wouldn’t accept crazy floating rate loans, which required income verification and minimum down payments, were left out of the insanity"

"It’s certainly fair to criticize Fannie and Freddie over real issues that contributed to their downfall. The companies had numerous accounting problems and inadequate safeguards covering their own investment portfolios. Those weaknesses came home to roost when the real estate market cratered. Fannie and Freddie purchased billions of dollars of subprime-backed securities for their own investment portfolios and got hit just like every other investor."

That source I posted is from businessweek, if you have a source that proves that wrong, by all means share it.

[Fangio]

According to this, it wasn't fm and fm writing bad loans, they were actually writing good loans. The problem was they were buying all the bad loans from the private sector.

Now, I ask you, why would you buy loans that you wouldn't write yourself?

The article you reference is incorrect and the author does not understand how Fannie and Freddie operate.

Fannie and Freddie are prohibited by their charters from offering loans to the general public. Neither of the GSE's writes any loans directly. They never have. The GSE's set the underwriting guidelines for their programs and they make their own proprietary loan underwriting software systems  (Desktop Underwriter for Fannie and Loan Prospector for Freddy) available (and mandatory) for issueing approvals for all the loans they buy.

What happened between 2004 - 2007 is that Fannie and Freddie dramatically expanded the types of loan programs they would purchase to include all sorts of stuff that is classified as "Alt-A" and Subprime. These loans were huge contributors to housing prices rising.

Now, both of the GSE's have not only eliminated all of those products, but the underwriting criteria on all of their traditional programs has gotten CRAZY strict. Where we are now is not a return to lending as it was before this all began....  its a return to non-lending as it was heading into the Great Depression.

Barney Frank certainly deserves plenty of blame.  As does just about every other Congressman and Senator who has served since 1977.  The REAL roots of this mess trace back to the Govt. getting involved with forcing the GSE's to manipulate loan guidelines with the stated objective of increasing low income, minority and poor credit individuals home ownership opportunities. Lending should be about maximizing returns while minimizing losses....  standard good business practices. The key is in evaluating the borrowers ability to repay the loan.... not in evaluating the borrowers skin color or low income status.


NOTE:   Fannie and Freddie DID do all sorts of loans during 2004 - 2007 that would be classified as "Alt-A"....  and some as subprime  (though the GSE's did not buy loans with primary credit scores under 580 and very few loans with a score under 620).  Both of the GSE's had wildly popular "SISA" loan programs....  "Stated Income, Stated Assets".  These programs did require that the borrower have excellent credit scores...  700+ in general....  but they did not require any documentation at all relative to the borrowers income or assets. The borrower did have to prove that he/she was employed but thats about it.

As to Fannie and Freddie no longer doing crazy adjustable rate interest only type loans......   Well,   you can get an interest only adjustable rate mortgage backed by Fannie or Freddie TODAY. In fact, there is a whole range of such products on offer and for some people they represent an excellent choice.




Fang

[humble]

thank you fang...

[Dnil]

woot fang, nice to see ya back somewhere!