Noblesse Oblige

The notoriously liberal McClatchey papers are trying to cover up some of the guilt of Fannie Mae and by the secondary effect, some of their legislative supporters in Washington like Barney Frank and Christopher Dodd.

They print a few facts about the industry, but gloss over the real problems created by the loosy-goosey Government Sponsored Enterprises. Specifically these bullets from the article are somewhat factual, but leave out things:

_ More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions. [ true, but they wouldn’t do it if they didnt’ think a market was there – without Fannie and Freddie Securitizing these no sane lending instition would have dumpster dived the bad credit market the way they have the past decade.]

_ Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year. [Of course they did, see comment above]

_ Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that’s being lambasted by conservative critics. [ no, companies like Greentree, Canseco, Countrywide and others who created the chain of processing, sales, and servicing firms tried to comply with those federal guidelines because if they didn’t they couldn’t expand or compete with the big-box banks in products in some states and it was all about volume as well as secondary goals like selling contractor homes.]

Basically Fannie was worse than Freddy, Freddy had higher standards, and higher fees. By leading the way to the bottom in standards and raising their caps the highest Fannie led directly to this mess. If you had some toxic waste on the books you had to carry because no loan servicer would buy it who cared? Fannie or Freddy were securitizing it right?
This atmosphere of churn and burn and increasing volume led to a cuthroat business in refinancing and sales where overnight mortgage giants were racing each other to see who could dive the deepest in the credit barrel the fastest to cut into the big box bank’s turf.

Loan officers didn’t care, they got commission good or bad. Underwriters across the country were browbeaten until they learned to hold their nose and look the other way. In the meantime to keep up banks were sending out people with cameras to take pictures of huge sums of money laid out bill by bill on kitchen floors because there were “cultural differences” and some cultures didn’t trust banks (meanwhile on the counter there were labratory quality scales and packaging material…) Processing was outsourced to third parties with even lower standards because the onboard staff couldn’t keep up with the glut, and automated online processing raised their profit margins.The processing outfits got paid by number of loans processed, so it was rare to reject. Non-Traditional lenders were knife-fighting to gain major contractor’s business, and in some offices on the same computer that held the loan forms you would find the home office software to print up fake W-2’s. If you needed more money than your home was really worth on a refi package, there were specialty appraisers who would inflate the value to meet the needs.

Fly by nights came and went, and their loans got sold, repackaged, sold again. Massive fraud started occurring in some rescue agencies, some sponsored by ACORN. Straw buyer schemes, fractional deeds, and rescue angels who turned demonic all flourished. It all floated downstream to Fannie in the end because they blazed the path to lower standards and larger subprime loans. You only have to think about it a minute: Have you ever seen the government do anything where there wasn’t massive fraud and bilking? The GSE’s have been the loss leaders in today’s financial crisis, and it was truly congress and the GSE’s who led down that path into vallies of vultures by opening markets that shouldn’t have existed in the first place.

Do you think Obama isn’t neck deep with the community organizations who led to the lowering of standards and the raising of caps? Do you think Urban Democrats didn’t use these groups to increase their vote blocks?

In the wow, do we have an update department, Check out this confirmation of Obama’s ties to Acorn at LGF.