NO, NO, NO. You are confusing several lending instruments and trying to clump them together at the end to make a point.
Here is the flow for loans to Fannie/Freddie. Banks, mortgage brokers, thrifts, credit unions, ALL lending institutions process the vast majority of their loans, Prime and SubPrime through Fannie/Freddie. Think of that flow of business as the Mississippi River of mortgage commerce. It goes on whether CRA exists or not. It flows fully and completely without CRA even being in the picture. Once loans are guaranteed by FM/FM the banks go out and make more loans, package the current loans into big bundles, sell the bundles to investors who then leverage the securities and resell them again and again. By the way, AIG is somewhere in the middle of this insuring institutions.
Now this little stream that flows into the Mississippi downstream is called CRA. It makes special loans and it makes regular loans [laws don't allow it to make "JUST" special loans. Those loans go to ONLY Depository banks [the big guys] who make the loans, usually at a extra point or two profit and have them also guaranteed by FM/FM [just like nearly every other loan they make]. As these loans are bundled up and sold to investors they merge into the system just like every other loan package in the big mortgage stream.
CRA accounts for just 8% of all loans and, as of late 2007 they had a 92% on time payment record. In other words, they were not defaulting at a rate higher than expected.
PUt as simply as possible CRA was brought into the National attention because some folks needed someone to blame for this and it seemed damned convenient to link ACORN and CRA and blacks and poor and assume that it had to be the cause. Surely those ten thousand Harvard MBAs couldn't have anything to do with it. Surely it couldn't be the unbridled Financial Sector that had been allowed to run free for several years. There had to be someone to blame and guess who was convenient.
So, even after it was proven to be completely incorrect that CRA was the culprit in the Financial Sector meltdown, the blogsphere still keeps it wound up because a good story is much more important that just admitting that they were wrong and pulling the stories from thousands of blogs. Hate makes folks stupid.
Your analogy while explanatory of a great deal does not explain the simple fact that the CRA was the mechanism that allowed FM/FM to buy these bundles with wild abandon. True that the bundles were not all CRA loans in terms of CRA regulated institutions. That does not matter because there were some CRA loans in those bundles and that is why FM/FM bought the bundles of Sub Prime loans that were CRA and non CRA mixed together.
So to say that only 8% were CRA may be correct, it is not the whole truth. The institutions wanted to get rid of these sub prime loans because they knew they would not be paid back. They charged a higher interest rate and then sold the loans to another institution for bundling. They would be bundled with a couple of CRA loans and FM/FM would then buy the whole lot!
If FM/FM were not required to have a certain percentage of these CRA loans they probably would not have bought the bundles. But that is talking about what they shoulda, woulda, coulda done.
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Your analogy while explanatory of a great deal does not explain the simple fact that the CRA was the mechanism that allowed FM/FM to buy these bundles with wild abandon.
This is a blatantly false statement. It is not a "simple fact".. CRA was NOT a mechanism that allowed FM/FM to buy anything.
FM/FM buys and repackages loans whether CRA exists or not. CRA is not a trigger. CRA had NOTHING to do with the volume of loans bought by FM/FM. It is simply not a true assumption.
Your analogy while explanatory of a great deal does not explain the simple fact that the CRA was the mechanism that allowed FM/FM to buy these bundles with wild abandon. True that the bundles were not all CRA loans in terms of CRA regulated institutions. That does not matter because there were some CRA loans in those bundles and that is why FM/FM bought the bundles of Sub Prime loans that were CRA and non CRA mixed together.
So to say that only 8% were CRA may be correct, it is not the whole truth. The institutions wanted to get rid of these sub prime loans because they knew they would not be paid back. They charged a higher interest rate and then sold the loans to another institution for bundling. They would be bundled with a couple of CRA loans and FM/FM would then buy the whole lot!
If FM/FM were not required to have a certain percentage of these CRA loans they probably would not have bought the bundles. But that is talking about what they shoulda, woulda, coulda done.
Please learn the flow of how mortgage packaging works before commenting. You have the process incorrect from start to bottom. Close but only close enough to be completely wrong.
This is a blatantly false statement. It is not a "simple fact".. CRA was NOT a mechanism that allowed FM/FM to buy anything.
FM/FM buys and repackages loans whether CRA exists or not. CRA is not a trigger. CRA had NOTHING to do with the volume of loans bought by FM/FM. It is simply not a true assumption.
No McBear you are wrong. This is a very good explanation of how it got to be such a big hairy fur ball. Please see the following:
Lenders also have opened the door wider to minorities because of new initiatives at Fannie Mae and Freddie Mac–the giant federally chartered corporations that play critical, if obscure, roles in the home finance system. Fannie Mae and Freddie Mac buy mortgages from lenders and bundle them into securities; that provides lenders the funds to lend more.
As well as going on to say:
Quote:
In 1992, Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains. It has aimed extensive advertising campaigns at minorities that explain how to buy a home and opened three dozen local offices to encourage lenders to serve these markets. Most importantly, Fannie Mae has agreed to buy more loans with very low down payments–or with mortgage payments that represent an unusually high percentage of a buyer’s income. That’s made banks willing to lend to lower-income families they once might have rejected. . .
So all together now. Why did FM/FM do this with greater urgency?
Come on now! Shake off the effects of the kool-aid! You can do it!
So all together now. Why did FM/FM do this with greater urgency?
Come on now! Shake off the effects of the kool-aid! You can do it!
That is right...the CRA.
Much like I said earlier, you have several good lending instruments that you are clumping together in the end to try and make a point. At least now I understand where you glean your information. Their example confuses ALL FM/FM loans with Depository Institution loans [the only ones in which CRA can apply] and extrapolates ALL numbers based on CRA numbers which are based on a finite subset.
The CRA analysis has been discounted as a source for the Financial Sector Meltdown for over a year by everyone, left and right. Remnants of past arguments are still in blogs [like the one you link] but all the analysis shows that CRA is NOT the culprit. No matter how hard you want to put a square peg in a round hole. It doesn't fit. Likewise, it has been proven that the earth is not flat and that the moon is not made of cheese. Evidence has a way of making that case.
Do you notice that the ONLY place you find that information is on the Rightwing Blogsphere? You don't have Senators or Congressmen clamoring to put a stop to this egregious problem, you don't have economists pointing to new trending that should leap out at us by now, just 2 year old and older data that tried to connect dots before the real reasons started coming to light.
Look at the math. If 8% of FM/FM loans from ALL sources are CRA, and 92% of those are current and NOT in arrears, THAT, in no way suggests it is a trigger for the Financial Sector meltdown, no matter what the policies were.
Much like I said earlier, you have several good lending instruments that you are clumping together in the end to try and make a point. At least now I understand where you glean your information. Their example confuses ALL FM/FM loans with Depository Institution loans [the only ones in which CRA can apply] and extrapolates ALL numbers based on CRA numbers which are based on a finite subset.
The CRA analysis has been discounted as a source for the Financial Sector Meltdown for over a year by everyone, left and right. Remnants of past arguments are still in blogs [like the one you link] but all the analysis shows that CRA is NOT the culprit. No matter how hard you want to put a square peg in a round hole. It doesn't fit. Likewise, it has been proven that the earth is not flat and that the moon is not made of cheese. Evidence has a way of making that case.
Do you notice that the ONLY place you find that information is on the Rightwing Blogsphere? You don't have Senators or Congressmen clamoring to put a stop to this egregious problem, you don't have economists pointing to new trending that should leap out at us by now, just 2 year old and older data that tried to connect dots before the real reasons started coming to light.
Look at the math. If 8% of FM/FM loans from ALL sources are CRA, and 92% of those are current and NOT in arrears, THAT, in no way suggests it is a trigger for the Financial Sector meltdown, no matter what the policies were.
Dude. Just admit it.
You keep trying to spin around the actual crux.
The folks on the left don't want to show the CRA in a bad light and the politicians on the right are so scared of being called "Racist" that they don't discuss this as it should be.
All of the stuff you have talked about has served to amplify the crisis very true. Glass-Steagall revocation, Gramm-Leach-Bliley, Sarbanes-Oxley.
However, the trigger or key is the CRA and for whatever reason you can not admit it.
Please show how what I posted in the link is erroneous?
I notice you didn't do that. You just posted something to the effect of "Well nobody else thinks that."
The folks on the left don't want to show the CRA in a bad light and the politicians on the right are so scared of being called "Racist" that they don't discuss this as it should be.
All of the stuff you have talked about has served to amplify the crisis very true. Glass-Steagall revocation, Gramm-Leach-Bliley, Sarbanes-Oxley.
However, the trigger or key is the CRA and for whatever reason you can not admit it.
Please show how what I posted in the link is erroneous?
I notice you didn't do that. You just posted something to the effect of "Well nobody else thinks that."
The trigger was not CRA. Whether you chose to believe that or not is fully up to you. You can either go back and look at previous links I have provided you or you have the full resources of the internet to make that decision. So far you have chosen only to use rightwing blogs as your sources. That should tell you something but apparently it does not.
I really don't care what you believe. You seem to lack sufficient critical thinking skills to glean information when it is linked for you.
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