CapitalismWorks_IHB
New member
LOL. I my estimation that is what everyone is trying to do nowadays.
Obama's change?
- Thread starter irvine_home_owner_IHB
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CapitalismWorks_IHB
New member
To get back on track here is piece from RealClear on Obama's rightward lurch... Can't say that I am complaining. BTW, did anyone else catch the press conference this morning were Obama did a switcharoo on the Out of Iraq talk?
http://www.weeklystandard.com/Content/Public/Articles/000/000/015/856nzktr.asp
http://www.weeklystandard.com/Content/Public/Articles/000/000/015/856nzktr.asp
graphrix_IHB
New member
[quote author="trrenter" date=1227926406]Graph the main point is that like you said, "Either way, both sides of the political spectrum show their incompetence"
I just find that like I said the liberal machine has placed this all on Bush, then they paint Bush as incompetent. If we want to claim that Bush is incompetent than I would say anyone that shared in this would be incompetent too. Just my line of thinking.
<strong>Correct me if I am wrong but the CRA up until the Clinton administration was measured more on effort. If a bank advertised in a low income neighborhood and tried to process loans then they would get a favorable rating, even if they didn't make a loan. Then during the Clinton administration the banks started to get their grades from the amount of loans they made, if a bank didn't make enough loans they got a bad grade. Banks then had to be more aggressive with the types of loans they made popularizing little used loans such as Zero down loans and ARM loans. Putting low income people into homes the banks knew they couldn't afford when the loan reset. I know these loans are not the ones that are causing the entire meltdown.
I don't think the lenders were forced to compete with CRA, I think the CRA ushered in a new way for greedy people to make loans that may not have been made before. (Downey, Countrywide etc.)
This type of lending then spread to the rest of the industry.</strong>
I mean I guess we could go back to Regan as well and say that during his term the Garn-St. Germain Depository Institutions Act opened up the door to ARM loans.
I want to be clear I am not trying to argue whose fault this is. I am just trying to say it is clearly not all Bush's doing. Which seems to be the way many would like to portray this.</blockquote>
I have been meaning to get back to this thread for days, with a bunch of cited sources, but instead the <a href="http://www.federalreserve.gov/newsevents/speech/kroszner20081203a.htm">Fed just gave a great breakdown on why blaming the CRA is load of crap</a>. But, first I must say I agree, both parties were equally to blame for this mess. I mean, both parties seemed to love that schmuck Greenspan to keep him around.
Let me state by saying from my own experience, CRA loans were difficult to qualify for. There are only specific zip codes that qualify. The income restrictions never made sense for the value of homes here in CA., because no one could afford/qualify for the payment. CRA loans were either a 30 year fixed or fully amortized 3yr or 5yr ARM, none of this funny interest only business. I bet if you looked at the amount of CRA loans as a percentage of loans done in CA., then it would be so small it wouldn't even be worth discussing, and CA. is one of the highest foreclosure states in the nation on a per household basis.
With that being said, short term ARMs and interest only loans existed well before the early 90s. In fact, option ARMs have existed since the early 80s. They were created during those times because interest rates were higher than the historical norm, and as rates go down it is more cost efficient to be in a ARM that is adjusting down with rates than it is to be paying the costs of refinancing on the way down.
Banks/lenders/Wall St. were not competing, or ushering in new standards to compete with the CRA loans, they were competing and ushering in new standards to compete with each other. Let me give an example, that is a rough recollection of what happened... Lets say New Century starts to offer 100% stated income, with a 640 FICO, up to a $500k loan amount, because Deutsche Bank is willing to buy this garbage. Well... sh*t, Argent sees that and says, we will do 100% stated income, with a 620 FICO, and up to a $700k loan amount, oh... and our rates will be 10 BPS lower than New Century, because Merrill Lynch is willing to take on this toxic waste. You see, this is what happened month after month, each lender would beat the other lender with something, whether it was rates, lower FICOs, higher loan amounts, or being able to get an exception on the file easier.
And, this is when I saw that the bubble was going to blow up, and blow up hard... Our Impac Mortgage rep came ecstatically gallivanting into our office, because they now offered option ARMs, and as she said the best part was that we could make a 3 point rebate, or 3% of the mortgage amount in YSP. I promptly sat her purdy and ditzy a$$ down to explain why putting someone into a loan that didn't cover the interest, locking them into a 3 year prepayment penalty, when the loan will recast before the 3 years is up, gawd forbid interest rates rise and the recast happens sooner, and be forced with a payment five times higher than the minimum payment was a bad idea. She might have understood how the loan worked better than Impac ever explained it to her, but the next office she went into someone like me wasn't there. There was someone as ditzy as her, and bought the idea of the 3 point rebate. I know so, so, so many people like this, that were too dumb to even be suggesting what starbucks drink someone got, let alone handle their mortgage. Multiply this 1000s of times over, because most in the industry were this dumb, and they found just as dumb people to sell the loans to, and Wall St. was buying them hand over fist, then making them MBS pools, dicing them up into CDOs, and selling CDSs on them.
So... please explain to me how the CRA had an effect on this? Because, from my own experience, and from all of what I have read, it was the greed on Wall St. that that took a product that has been around well before Clinton, and sold it to the masses. It wasn't until 2004 when people started to buy into the ARM/interest only/option ARM loans. Before that, it was hard to explain why getting an ARM was better than a 30yr fixed because they would end up refinancing again because they didn't think they would refi ever again. Then they would call a year or two later, and ask about the interest only ARMs, but now the 30yr is at new low, I don't care... I can always refi. A year or two later, you would get a call from the same person... tell me about this 1% loan, after explaining why that loan is the death of people in a low interest rate environment, only to be told they will call you back, knowing full well they called another lender, who told them it is the messiah of loans and will make them rich. Really, where was the CRA in this?
This is what happened, people are dumb, dumb people (brokers) sell mortgages to dumb people, dumber (banks/lenders/wholesale) people sell the mortgages to the dumb people (brokers) who sell to the dumb people. And the dumbest of all, is who buys these mortgages, then makes them into one pile of dumbness, and sells them to the elite of dumbness.
I just find that like I said the liberal machine has placed this all on Bush, then they paint Bush as incompetent. If we want to claim that Bush is incompetent than I would say anyone that shared in this would be incompetent too. Just my line of thinking.
<strong>Correct me if I am wrong but the CRA up until the Clinton administration was measured more on effort. If a bank advertised in a low income neighborhood and tried to process loans then they would get a favorable rating, even if they didn't make a loan. Then during the Clinton administration the banks started to get their grades from the amount of loans they made, if a bank didn't make enough loans they got a bad grade. Banks then had to be more aggressive with the types of loans they made popularizing little used loans such as Zero down loans and ARM loans. Putting low income people into homes the banks knew they couldn't afford when the loan reset. I know these loans are not the ones that are causing the entire meltdown.
I don't think the lenders were forced to compete with CRA, I think the CRA ushered in a new way for greedy people to make loans that may not have been made before. (Downey, Countrywide etc.)
This type of lending then spread to the rest of the industry.</strong>
I mean I guess we could go back to Regan as well and say that during his term the Garn-St. Germain Depository Institutions Act opened up the door to ARM loans.
I want to be clear I am not trying to argue whose fault this is. I am just trying to say it is clearly not all Bush's doing. Which seems to be the way many would like to portray this.</blockquote>
I have been meaning to get back to this thread for days, with a bunch of cited sources, but instead the <a href="http://www.federalreserve.gov/newsevents/speech/kroszner20081203a.htm">Fed just gave a great breakdown on why blaming the CRA is load of crap</a>. But, first I must say I agree, both parties were equally to blame for this mess. I mean, both parties seemed to love that schmuck Greenspan to keep him around.
Let me state by saying from my own experience, CRA loans were difficult to qualify for. There are only specific zip codes that qualify. The income restrictions never made sense for the value of homes here in CA., because no one could afford/qualify for the payment. CRA loans were either a 30 year fixed or fully amortized 3yr or 5yr ARM, none of this funny interest only business. I bet if you looked at the amount of CRA loans as a percentage of loans done in CA., then it would be so small it wouldn't even be worth discussing, and CA. is one of the highest foreclosure states in the nation on a per household basis.
With that being said, short term ARMs and interest only loans existed well before the early 90s. In fact, option ARMs have existed since the early 80s. They were created during those times because interest rates were higher than the historical norm, and as rates go down it is more cost efficient to be in a ARM that is adjusting down with rates than it is to be paying the costs of refinancing on the way down.
Banks/lenders/Wall St. were not competing, or ushering in new standards to compete with the CRA loans, they were competing and ushering in new standards to compete with each other. Let me give an example, that is a rough recollection of what happened... Lets say New Century starts to offer 100% stated income, with a 640 FICO, up to a $500k loan amount, because Deutsche Bank is willing to buy this garbage. Well... sh*t, Argent sees that and says, we will do 100% stated income, with a 620 FICO, and up to a $700k loan amount, oh... and our rates will be 10 BPS lower than New Century, because Merrill Lynch is willing to take on this toxic waste. You see, this is what happened month after month, each lender would beat the other lender with something, whether it was rates, lower FICOs, higher loan amounts, or being able to get an exception on the file easier.
And, this is when I saw that the bubble was going to blow up, and blow up hard... Our Impac Mortgage rep came ecstatically gallivanting into our office, because they now offered option ARMs, and as she said the best part was that we could make a 3 point rebate, or 3% of the mortgage amount in YSP. I promptly sat her purdy and ditzy a$$ down to explain why putting someone into a loan that didn't cover the interest, locking them into a 3 year prepayment penalty, when the loan will recast before the 3 years is up, gawd forbid interest rates rise and the recast happens sooner, and be forced with a payment five times higher than the minimum payment was a bad idea. She might have understood how the loan worked better than Impac ever explained it to her, but the next office she went into someone like me wasn't there. There was someone as ditzy as her, and bought the idea of the 3 point rebate. I know so, so, so many people like this, that were too dumb to even be suggesting what starbucks drink someone got, let alone handle their mortgage. Multiply this 1000s of times over, because most in the industry were this dumb, and they found just as dumb people to sell the loans to, and Wall St. was buying them hand over fist, then making them MBS pools, dicing them up into CDOs, and selling CDSs on them.
So... please explain to me how the CRA had an effect on this? Because, from my own experience, and from all of what I have read, it was the greed on Wall St. that that took a product that has been around well before Clinton, and sold it to the masses. It wasn't until 2004 when people started to buy into the ARM/interest only/option ARM loans. Before that, it was hard to explain why getting an ARM was better than a 30yr fixed because they would end up refinancing again because they didn't think they would refi ever again. Then they would call a year or two later, and ask about the interest only ARMs, but now the 30yr is at new low, I don't care... I can always refi. A year or two later, you would get a call from the same person... tell me about this 1% loan, after explaining why that loan is the death of people in a low interest rate environment, only to be told they will call you back, knowing full well they called another lender, who told them it is the messiah of loans and will make them rich. Really, where was the CRA in this?
This is what happened, people are dumb, dumb people (brokers) sell mortgages to dumb people, dumber (banks/lenders/wholesale) people sell the mortgages to the dumb people (brokers) who sell to the dumb people. And the dumbest of all, is who buys these mortgages, then makes them into one pile of dumbness, and sells them to the elite of dumbness.
No_Such_Reality_IHB
New member
[quote author="graphrix" date=1228411616]...The income restrictions never made sense for the value of homes here in CA., because no one could afford/qualify for the payment. ...</blockquote>
Everybody can point fingers all they want, but the cold reality is the above statement. The problem wasn't CRA or any other program. The problem was very simply that people never could really afford the homes they bought. FHA, VA, CRA, or plain old mortgages, the above is true.
They got products that temporarily allowed them to take possession and everybody chased what they thought was easy money. That's the root of the problem, end of discussion. Simple I think I can get something for nothing all the way from Joe Six Pack to CalPers.
[quote author="graphrix" date=1228411616]... people are dumb, dumb people (brokers) sell mortgages to dumb people, dumber (banks/lenders/wholesale) people sell the mortgages to the dumb people (brokers) who sell to the dumb people. And the dumbest of all, is who buys these mortgages, then makes them into one pile of dumbness, and sells them to the elite of dumbness.</blockquote>
Buy now or be priced out forever!
Everybody can point fingers all they want, but the cold reality is the above statement. The problem wasn't CRA or any other program. The problem was very simply that people never could really afford the homes they bought. FHA, VA, CRA, or plain old mortgages, the above is true.
They got products that temporarily allowed them to take possession and everybody chased what they thought was easy money. That's the root of the problem, end of discussion. Simple I think I can get something for nothing all the way from Joe Six Pack to CalPers.
[quote author="graphrix" date=1228411616]... people are dumb, dumb people (brokers) sell mortgages to dumb people, dumber (banks/lenders/wholesale) people sell the mortgages to the dumb people (brokers) who sell to the dumb people. And the dumbest of all, is who buys these mortgages, then makes them into one pile of dumbness, and sells them to the elite of dumbness.</blockquote>
Buy now or be priced out forever!
trrenter_IHB
New member
Graph,
I want to make it clear that I don?t believe that the CRA and the GSE?s are fully responsible for the mess we are in. I do believe that both have some part in the mess we are in today.
The fact that the Fed and the liberal media has announced that the CRA had nothing to do with this melt down and has absolved them of all responsibility does not surprise me in the least bit.
I liked your example about how the banks started competing to write stupid loans. I believe that Greed is one of the leading factors in this mess.
I have been in sales for a long time and when writing a compensation plan one needs to make sure they only give incentives for sales that are good for the company, otherwise greed will steer them into making sales even if they hurt the company. An aggressive sales person will look over the compensation plan and find the path of least resistance to make the most money. Like the ditzy girl in your example. The easier it is to qualify people for the loans the more loans a salesperson can make the more money they make! I think once underwriting standards were lowered that opened up the loophole for the sales people. Who of course took advantage of them.
Once the salespeople saw how easy it was they sold these loans then eventually opened up their own company taught the employees how to make these loans and so on and so on and so on.
Using lower standards meant the salespeople could make more money. When did banks start lowering their standards and using ARM?s to cram people into homes they probably couldn?t afford and why? I know Arm?s had been around for quite some time before the CRA but they were not used as an instrument to get under qualified buyers into a home they couldn?t afford upon the rate adjustment.
<a href="http://www.federalreserve.gov/newsevents/speech/Bernanke20070330a.htm">Fed Speech</a> discussing CRA and their impact.
<blockquote><strong>?It appears that, at least in some instances, the CRA has served as a catalyst, inducing banks to enter underserved markets that they might otherwise have ignored.?</strong>
<strong>?At its most successful, the CRA may have had a multiplier effect, supplementing its direct impact by stimulating new market-based, profit-driven economic activity in lower-income neighborhoods</blockquote>
The multiplier effect? Like all of the independent mortagage companies that started to write these toxic loans that werent? part of the CRA.</strong>.?
<a href="http://mises.org/story/2963">Article on CRA and effects.</a>
<blockquote>Gordon cites Fed bureaucrat Janet Yellen as the source of a "killer statistic" that absolves the government of all guilt: "Independent mortgage companies" which are not covered by the CRA made many more "high-priced loans" to borrowers with bad credit than did CRA-regulated banks, she says. Well, so what? Even if Yellen is correct, that does not mean that CRA-regulated loans have not caused tens of billions of dollars in defaults.
Moreover, Yellen and Gordon don't seem to understand what an "independent mortgage company" is. Many of these companies are like the one in which my next-door neighbor is employed: they are middlemen who arrange mortgage loans for borrowers ? including "subprime" borrowers ? with banks, including CRA-regulated banks. Some killer statistic.
In his April 26 New York Post article on the CRA entitled "The Real Scandal," Professor Liebowitz explains how the government's Fannie Mae Foundation singled out one bank in particular as the role model for all other banks in America in terms of its commitment to CRA lending: Countrywide, the nation's largest mortgage lender, had committed to $600 billion in low-income or "subprime" loans as of 2003. Today, Countrywide is essentially bankrupted and has been merged with Bank of America.</blockquote>
<a href="http://www.econbrowser.com/archives/2008/01/mortgage_securi.html">Secritization of loans</a>
<blockquote>Today, it is quite uncommon for the bank that originally made the loan to you to be the institution that actually receives your interest payments. Instead, those payments are likely going into a pool from which<strong> mortgage-backed securities were created by the government sponsored enterprises Fannie Mae or Freddie Mac</strong>, or, particularly in the last few years, arranged by large private institutions such as Countrywide Financial or Wells Fargo (the light blue "asset-backed securities issuers" in the graph below).</blockquote>
Again I agree that GREED caused this problem?..I don?t think in and of itself that the CRA or the GSE's were the only problem but I do believe they were at least a PART of the problem.
To me it looks as though they may have opened up the barn door and then Greed took over.
I just think there is too much evidence that points to the fact they had some part to not give them <strong>some portion</strong> of the blame for this.
I want to make it clear that I don?t believe that the CRA and the GSE?s are fully responsible for the mess we are in. I do believe that both have some part in the mess we are in today.
The fact that the Fed and the liberal media has announced that the CRA had nothing to do with this melt down and has absolved them of all responsibility does not surprise me in the least bit.
I liked your example about how the banks started competing to write stupid loans. I believe that Greed is one of the leading factors in this mess.
I have been in sales for a long time and when writing a compensation plan one needs to make sure they only give incentives for sales that are good for the company, otherwise greed will steer them into making sales even if they hurt the company. An aggressive sales person will look over the compensation plan and find the path of least resistance to make the most money. Like the ditzy girl in your example. The easier it is to qualify people for the loans the more loans a salesperson can make the more money they make! I think once underwriting standards were lowered that opened up the loophole for the sales people. Who of course took advantage of them.
Once the salespeople saw how easy it was they sold these loans then eventually opened up their own company taught the employees how to make these loans and so on and so on and so on.
Using lower standards meant the salespeople could make more money. When did banks start lowering their standards and using ARM?s to cram people into homes they probably couldn?t afford and why? I know Arm?s had been around for quite some time before the CRA but they were not used as an instrument to get under qualified buyers into a home they couldn?t afford upon the rate adjustment.
<a href="http://www.federalreserve.gov/newsevents/speech/Bernanke20070330a.htm">Fed Speech</a> discussing CRA and their impact.
<blockquote><strong>?It appears that, at least in some instances, the CRA has served as a catalyst, inducing banks to enter underserved markets that they might otherwise have ignored.?</strong>
<strong>?At its most successful, the CRA may have had a multiplier effect, supplementing its direct impact by stimulating new market-based, profit-driven economic activity in lower-income neighborhoods</blockquote>
The multiplier effect? Like all of the independent mortagage companies that started to write these toxic loans that werent? part of the CRA.</strong>.?
<a href="http://mises.org/story/2963">Article on CRA and effects.</a>
<blockquote>Gordon cites Fed bureaucrat Janet Yellen as the source of a "killer statistic" that absolves the government of all guilt: "Independent mortgage companies" which are not covered by the CRA made many more "high-priced loans" to borrowers with bad credit than did CRA-regulated banks, she says. Well, so what? Even if Yellen is correct, that does not mean that CRA-regulated loans have not caused tens of billions of dollars in defaults.
Moreover, Yellen and Gordon don't seem to understand what an "independent mortgage company" is. Many of these companies are like the one in which my next-door neighbor is employed: they are middlemen who arrange mortgage loans for borrowers ? including "subprime" borrowers ? with banks, including CRA-regulated banks. Some killer statistic.
In his April 26 New York Post article on the CRA entitled "The Real Scandal," Professor Liebowitz explains how the government's Fannie Mae Foundation singled out one bank in particular as the role model for all other banks in America in terms of its commitment to CRA lending: Countrywide, the nation's largest mortgage lender, had committed to $600 billion in low-income or "subprime" loans as of 2003. Today, Countrywide is essentially bankrupted and has been merged with Bank of America.</blockquote>
<a href="http://www.econbrowser.com/archives/2008/01/mortgage_securi.html">Secritization of loans</a>
<blockquote>Today, it is quite uncommon for the bank that originally made the loan to you to be the institution that actually receives your interest payments. Instead, those payments are likely going into a pool from which<strong> mortgage-backed securities were created by the government sponsored enterprises Fannie Mae or Freddie Mac</strong>, or, particularly in the last few years, arranged by large private institutions such as Countrywide Financial or Wells Fargo (the light blue "asset-backed securities issuers" in the graph below).</blockquote>
Again I agree that GREED caused this problem?..I don?t think in and of itself that the CRA or the GSE's were the only problem but I do believe they were at least a PART of the problem.
To me it looks as though they may have opened up the barn door and then Greed took over.
I just think there is too much evidence that points to the fact they had some part to not give them <strong>some portion</strong> of the blame for this.
trrenter_IHB
New member
[quote author="awgee" date=1239181660]Well, it is a good thing the American people voted for <a href="http://www.salon.com/opinion/greenwald/2009/04/04/summers/index.html">change</a>.</blockquote>
This is Bush's fault!
This is Bush's fault!