Tag: loan

McClatchey Tries to Cover Barney Frank’s Fannie

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

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.

Bailout Plan General Agreement Reached: Plan Being Written Now

I like it that they are metering the money with checkpoints, I like it that there are these and other limits. What I don’t like is that there will be fees on the financial services industry as part of the agreement if they don’t turn this around in five years.

The new plan puts caps on exective pay and golden parachutes, it also allows foreclosures to proceed (and this is a must – some people have walked away from their homes,) and it stops money from going to Acorn and other Democrat activist groups that led us to this crisis. So on the surface it looks good.

Over the next thirty years many of these mortgages will be paid off, producing potential profit, and those that aren’t are still backed by houses and property in the US, still one of the best countries in the world to live in. The bill will be posted for 24 hours before the vote, and you can bet that bloggers will be going over it with a fine tooth comb. I intend to read it, but won’t plan on commenting unless there is something egregiously wrong with it (beyond just the fact that we have to do this.)

Right now on paper these bundles of mortgages appear to have little value, but over time they will regain their worth. The similar period we saw in Japan took about ten years, if we build the energy sources we need and build our economy it could happen quicker than that here.
Much more on the deal at Washington Post:

  • The money would be dispersed in segments, with Paulson receiving $250 billion immediately, $100 billion upon White House certification of its necessity and the final $350 billion only after Congress has been given 15 days to object.
  • Firms participating in the bailout would be required to grant the government warrants to obtain nonvoting shares of stock, so taxpayers can benefit if the companies return to profitability.
  • Firms taking advantage of the bailout would be required to limit compensation for senior executives, with especially severe limits on “golden parachutes” at failing firms. The compensation limits will be enacted primarily, but not solely, through the tax code by reducing tax deductions for firms that pay executives more than $400,000 a year.

I like it that they are metering the money with checkpoints, I like it that there are these and other limits. What I don’t like is that there will be fees on the financial services industry as part of the agreement if they don’t turn this around in five years. Without seeing the details of how this all knits together, it’s really impossible to comment more on the plan. I await the posting of it.

Update: Also now note that President Clinton also pins this blowup directly on House and Senate Democrats.
Update: More at Big Lizards
UPDATE: The bill is posted, and it looks better than previously stated. The House Republicans have a fact page up on it. I got tied up at work today and have not yet had time to read it, but I will on the morrow. If anything pokes me in the eye I will be writing about it. Otherwise, for now I support this move.
Here’s Boehner thanking McCain for his assistance on the bill.

Obama Number Two on the Fannie Mae Contributions List

Will team Obama be chanting “We’re number 2! We’re Number 2! ?” somehow I doubt it.

** Video removed due to slow loading from Fox news
Previously:
Enough is Enough
Obama 2nd Biggest Recipient of Fannie Mae and Freddie Mac Money in Last Ten Years

Bush Threatens Veto on Bailout Bill

Capitalism is the fairest system of commerce there is. It doesn’t care what color you are, what books you read, or what views you hold. If you offer something of value at reasonable price you will profit, if you invest in businesses worthy of trust you will profit. Not always overnight, not always this year, but over time solid investments pay off.

When that system is short circuited and there is no consequence for investing in business unworthy of trust then that fair system falters. President Bush is making exactly the right choice with the threat to veto the housing bill. We trust in banks to invest money in people worthy of trust; when they don’t then taxpayers should not pay for their bad business practices. That’s pretty simple.

This bill doesn’t help anyone who had their house foreclosed on, it helps the banks who shouldn’t have made that investment.

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