Exodus 18:21  21 "But choose men of ability from all of the people. They must have respect for God. You must be able to trust them. They must not try to get money by cheating others. Appoint them as officials.   

Democrats Housing Crisis

http://www.investors.com/NewsAndAnalysis/Article/473053/200904021932/Making-Market-Sense.aspx             The so-called FAS 157 rule, which the public took little notice of, was imposed on the banks in 2007. It forced them to take what are long-term assets and mark them down as if they were short-term ones, based on current market conditions.

It might be coincidental, but this was about the same time that banks and other financial firms began suffering problems that have since left the world economy gasping for air.

In a time when markets around the world have been battered by the fiscal crisis, mark-to-market has made things worse. It has severely damaged banks' balance sheets, forcing them to shrink capital and rein in lending.

For capital adequacy purposes, bank assets have had to be marked down to market value even if loans are being paid on time.  This is an inversion of long-standing banking practice. As economists Brian Wesbury and Bob Stein of First Advisors recently wrote, "The accounting rules force banks to take artificial hits to capital without reference to the actual performance of loans."

Bingo. From the late 1930s to 2007, the U.S. banking system was reasonably stable, with a few exceptions. One big reason for this is the absence of mark-to-market.  The change of heart from FASB on mark-to-market was largely due to Congress.   Who controlled congress???

Mark-to-market rules, while well intended, have historically been a problem. During the Depression, Nobel-winning economist Milton Friedman noted, mark-to-market rules caused many banks to fail. That's why FDR repealed them in 1938. Those rules had remained dead until two years ago, when they were reimposed as part of a frenzy of ill-considered financial reregulation.


  http://www.ftportfolios.com/Commentary/EconomicResearch/2011/5/9/bulls-versus-bears,-again                     The proof of this, for us, is that when the market understood that Barney Frank would force the end of mark-tomarket accounting on March 9, 2009 the stock market rally started. The bottom was a direct result of this change, not quantitative easing, TARP, stress tests, or any other government program.  We thought the government would change mark-to-market accounting rules in 2008. Instead, politicians over-reacted and spent trillions. The end result was the first true economic panic in a hundred years. Where Kass sees a failure of capitalism, we see a failure of government. 





http://projects.propublica.org/bailout/list/category/Bank  With the exception of bailouts of Bank of America and Citigroup, all of the Treasury Department’s investments in the nation's banks have been made through the Capital Purchase Program, described as a plan to bolster "healthy" banks.  Both Bank of America and Citigroup have required special government aid far beyond other banks. That aid has come mostly in the form of large capital investments, but also through government guarantees to limit losses from troubled assets. See our complete list of recipients.    EXAMPLE of these Investments or  LOANS:

Wells Fargo                      Wells Fargo returned its investment  or  LOAN ( NOT a bailout) on Dec. 23, 2009






Profit to Gov't






http://news.investors.com/Article/592861/201111251803/us-govt-conspires-against-banks.htm      The war against the financial sector is no accident. Rather, it was carefully planned over decades as part of a social crusade to wipe out what the left calls "financial apartheid."  Starting in earnest in the 1990s, coat-and-tie radicals gathered in Washington and conspired to use banks to "democratize" credit. They socialized the mortgage industry after declaring traditional underwriting standards "racist." Bankers were ordered to "reinvest" in unprofitable areas, and reallocate capital to people who posed credit risks.

When those risky loans went bad, radicals blamed "greedy" bankers and "predatory" lenders. Today, they want to punish bankers and lenders by forcing them to "repair the damages" that they themselves caused. And they don't care if it drives many of them out of business.

"What I think will change, what I think was an aberration, was a situation where corporate profits in the financial sector were such a heavy part of our overall profitability over the last decade," he said, adding that his "more vigorous regulatory regime" will "inhibit" the industry's growth.

Think about it: Obama is engineering a controlled starvation of America's most vital industry — capital, the lifeblood of the economy — as punishment for allegedly causing a crisis that anti-bank community organizers and housing-rights zealots like him actually caused.

The Financial Services Roundtable fears the president's policies could "take the industry and the economy back to the 1930s."

Why is Obama at constant war with "fat cat bankers" and Wall Street? His mentor, Chicago socialist Saul Alinsky, identified banks as one of the "power sectors" topping the industrial food chain, and therefore a top "target" for street agitators like Obama.  "The target, therefore, should be the banks," Alinsky wrote in "Rules for Radicals," the bible of the left.  This was drilled into Obama by his Alinsky trainer, Jerry Kellman, who first hired Obama as a South Side Chicago organizer, according to the book, "The Great American Bank Robbery." "The real enemy," Kellman told Obama, are "the investment bankers."  Obama was trained in Alinsky agitation tactics in Los Angeles and Chicago. After Harvard, he returned to South Side to train Acorn and National People's Action leaders. They, in turn, deployed busloads of thugs to terrorize bankers into making easy loans and subsidies in a multitrillion-dollar shakedown that sped the collapse of the banking and housing industries.

Obama also represented alleged victims rounded up by Acorn and NPA in class-action lawsuits against Citibank and others. The ilk that wrote "Rules for Radicals" wrote the rules for "fair lending." Now they're helping write them again to leverage banks anew, and make credit for the uncreditworthy even easier. This financial disaster didn't just happen. It was engineered. It was designed by people with radical agendas to redistribute credit and, ultimately, your wealth. And they are just getting started.


http://www.chicagotribune.com/business/la-fi-fha-funding-20111116,0,4176968.story        ( How smart can Obama and the Democrat’s be??  Didn’t they learn from Freddie AND Fannie?? Or do they want to destroy America with all this debt??  Voters wake up!! ) The federal agency that insures more than $1 trillion in mortgages faces a nearly 50% chance that it could need a taxpayer bailout next year, according to a government report released Tuesday. The FHA's annual independent actuarial study showed that the agency's cash reserves, which are not supposed to drop below 2% of projected loan losses, continued to plunge this year. They are down to 0.24% from the already seriously low level of 0.5% last year as the FHA's cash reserves fell to $2.6 billion from $4.7 billion last year.



http://www.investors.com/NewsAndAnalysis/Article/470609/200903061857/Home-A-Loan.aspx             Did anyone notice that most foreclosures are in four states, including Harry Reid's Nevada? We also feel for the guy next door who gets nothing out of this. He's one of the 90% who bought houses they could afford with substantial and long-saved down payments, then worked hard and paid their mortgages on time. Obama insists we are our neighbor's keeper, but do we have to pay for remodeling his kitchen too?

A revealing study by researchers at the University of Virginia took a look at foreclosures in all 50 states, 35 metropolitan areas and 236 counties. They found that 87% of housing value loss, including foreclosures, is taking place in just four states — California, Florida, Arizona and Nevada.

Nevada, California, Arizona and Florida rank first, second, third and fourth in foreclosure activity, together accounting for 55% of foreclosure activity. What do they have in common? They are Sun Belt states, the location of second homes, investment properties and the playground of flippers who invested in properties hoping to ride the housing bubble to a quick profit.

http://www.investors.com/NewsAndAnalysis/Article/471484/200903171753/Should-Bailed-Out-Homeowners-Be-Required-To-Pay-Restitution-.aspx                  The U.S. public is outraged at the $165 million in bonuses paid to employees of insurance giant American International Group after AIG received billions in government bailout funds — and Washington is looking for ways to make bonus recipients pay back the money.  But what about bailed-out homeowners? Shouldn't they also pay back money they receive from taxpayers? The government can provide stressed homeowners the help they need — and recover much of the cost — simply by taxing most of the capital gains that bailout recipients realize on home sales until the value of the assistance is fully paid back to lenders and taxpayers. Let's be clear: The administration's plan to help homeowners avoid foreclosure is a giveaway to those homeowners. And a restitution policy would have many benefits besides reducing the burden on taxpayers and lenders and providing economic incentives for future homeowners to avoid similar mistakes.




The mortgage debacle in America came to fruition because of promised government loan guarantees insured by assets from the VA, FHA, Freddie Mac (Federal Home Loan Mortgage Corporation), and Fannie Mae (Federal National Mortgage Association). It was the promise of the guarantee that made lending to high risk borrowers attractive to banks and other lenders.  Read more: Economic Lessons that Even a Fifth Grader Can Understand | Godfather Politics http://godfatherpolitics.com/1504/economic-lessons-that-even-a-fifth-grader-can-understand/#ixzz1ahIOcGXn



http://www.investors.com/NewsAndAnalysis/Article/528748/201003291824/Foreclosures-Lower-Prices-Will-Do-Trick.aspx                         Yet again, Team Obama is rewarding reckless behavior, punishing the 90% of responsible homeowners who are making good on their mortgages, and setting up a greater moral hazard that will surely lead to an expansion of bailout nation.

I'm talking about an add-on to HAMP, the $75 billion Home Affordable Modification Program, which has been a dismal failure. In fact, the entire foreclosure-prevention effort — including forgiveness of mortgage-loan principal — has been a failure.

The Office of the Comptroller of the Currency reports that nearly 60% of modified mortgages re-default within a year.   Team Obama would actually subsidize people making up to $186,000 a year who have a mortgage balance of over $700,000. This isn't even a middle-class entitlement. It's an upper-middle-class entitlement.

I don't want you to pay for my mistakes. And I don't want to pay for yours. That's an oft-heard Tea Party complaint, and it's a good one. Why should the 90% of folks who make good financial decisions on their homes have to pay for the 10% who did not?

Or put it another way, just because a home loan is "underwater" — meaning its value is lower than today's current market price — why should a responsible person whine about it and walk away? Why not service this loan for the longer term and wait for prices to improve? That's called personal responsibility.


http://news.investors.com/article/609562/201204271858/citigroup-forgets-cra-history-in-subprime-woes.htm?Ntt=undoing-glass-steagall-didnt-cause-crisis&p=full                    There's no evidence any bank, including Citibank, got into trouble because of a securities or insurance affiliate. The banks that suffered subprime losses were engaged in activities — namely, mortgage lending — that were always permitted by Glass-Steagall.   And none of them was affiliated at the time with the investment banks that got into trouble — namely, Lehman, Bear Stearns and Merrill Lynch, which overinvested in subprime securities. And they did so after Fannie Mae and Freddie Mac made a huge market for such investments in response to political pressure from Clinton’s HUD to meet affordable housing goals.

Finally, Glass-Steagall deregulation had nothing to do with the gutting of traditional mortgage underwriting standards — the core cause of the crisis.

Quite the opposite, this was a function of overregulation. Federal housing regulators pressured Fannie and Freddie and private lenders to reduce underwriting rules mainly during Clinton and then continued under the Bush administrations to boost minority home ownership.

Two years later, a young civil-rights lawyer by the name of Barack Obama shook down Citibank on behalf of alleged victims of racist lending rounded up by Acorn and National People's Action in a class-action lawsuit against the bank. Citi paid them off in a settlement.  Former Treasury Secretary Robert Rubin, a big CRA booster, pushed Citi even deeper into risky multicultural lending when he went to work there.  Corporate do-goodism got the best of Citigroup in 2007, when it bought subprime operator Ameriquest, in part to impress CRA extortionists.




Fight the Smears conceded the New Party did support Obama in 1996 but denied that Obama had ever joined.  According to documents from the Democratic Socialists of America, the New Party worked with ACORN to promote its candidates. ACORN, convicted in massive, nationwide voter fraud cases, was a point of controversy for Obama during his 2008 campaign for president.  the New Party, which sought to elect members to public office with the aim of moving the Democratic Party far leftward to ultimately form a new political party with a socialist agenda.  Now, researcher and author Stanley Kurtz, writing at National Review Online today, reports on documentation from the updated records of Illinois ACORN at the Wisconsin Historical Society that “definitively establishes” that Obama was a member of the New Party.   http://www.wnd.com/2012/06/obama-tied-to-architect-of-u-s-collapse/

Frances Fox Piven, co-architect of a strategy to overload the U.S. welfare system to precipitate a transformative economic crisis, (this was also applied to our banking system by using CRA & HUD in coercing subprime loans, now with the EPA and our energy sector etc., Obamacare regulations on insurance companies, while passing the blame onto the banks, the energy companies, insurance companies etc.) was an early builder of the socialist-leaning New Party. Scores of other New Party activists, meanwhile, have been tied to President Obama.


http://news.investors.com/article/615028/201206151805/fingerprints-of-obama-on-subprime-foreclosure-crisis.htm?Ntt=presidents-no-champion-of-black-homeownership&p=full                            Before the crisis, Obama pushed thousands of credit-poor blacks into homes they couldn't afford. As a civil-rights attorney, he sued banks to rubberstamp mortgages for urban residents.  Many are now in foreclosure. In fact, the lead client in one of his class-action suits has since lost her home and filed bankruptcy.

First some background: Obama focused on "housing rights" when he worked as a lawyer-activist and community organizer in South Side Chicago. His mentor — the man who placed him in his first job there — was the father of the anti-redlining movement: John McKnight. He coined the term "redlining" to describe the mapping off of minority neighborhoods from home loans.  McKnight wrote a letter for Obama that helped him get into Harvard. After he graduated, he worked for a Chicago civil-rights law firm that worked closely with McKnight's radical Gamaliel Foundation and National People's Action, as well as Acorn, to solicit lending-discrimination cases.

At the time, NPA and Acorn were lobbying the Clinton administration to tighten enforcement of anti-redlining laws.

They also dispatched bus loads of goons trained by Obama to the doorsteps of bankers to demand more home loans for minorities. Acorn even crashed the lobby of Citibank's headquarters in New York and accused it of discriminating against blacks.

The pressure worked. In 1994, Clinton's top bank regulators signed a landmark anti-redlining policy that declared traditional mortgage underwriting standards racist and mandated banks apply easier lending rules for minorities.  Also that year, Attorney General Janet Reno and her aide Eric Holder filed a mortgage discrimination case against a Washington-area bank that forced it to target minority neighborhoods for subprime loans.

Reno and Holder also encouraged civil-rights lawyers like Obama to file local lending-bias cases against banks.

The next year, Obama led a class-action suit against Citibank on behalf of several Chicago minorities who claimed they were rejected for home loans because of the color of their skin. It was one of 11 such suits filed against the financial giant in Chicago and New York in the 1990s.

As first reported in Paul Sperry's "The Great American Bank Robbery," the plaintiffs' claim lacked merit. Factors other than race figured in the bank's decision to turn them down for loans.

His lead African-American client, Selma Buycks-Roberson, who was denied a loan due to bad credit and low income, got her mortgage only to default on it years later.  She got a foreclosure notice in 2008, according to The Daily Caller website, along with many of her Chicago neighbors.

By putting them on the hook for loans they couldn't pay, Obama did them no favors. Blacks have been hit hardest by foreclosures. But what does Obama care? The Caller reports he pocketed at least $23,000 from the Citibank case. Today, he blames the devastating wealth drain in black communities on subprime mortgages. He says "greedy," "predatory" lenders tricked poor minorities into paying higher fees and interest rates.

But Obama was for subprime loans before he was against them. "Subprime loans started off as a good idea," he said as those loans began to sour in 2007.

His closest economic advisers also promoted subprime lending. Several months earlier, Chicago pal Austan Goolsbee, who later became his top economist, sang the praises of subprime loans in a New York Times column. He argued they allowed poor blacks "access to mortgages." One of Obama's top bank regulators, Gary Gensler, once bragged that thanks to subprime mortgages, banks made home loans to minorities at "twice the rate" they made to other borrowers, according to "Bank Robbery." "A subprime loan is a good option when the alternative is no access to credit," he said years before the crisis. Obama hasn't learned from his mistakes.



http://news.investors.com/article/614416/201206111754/president-obama-wants-government-control-of-economy.htm?Ntt=obama-politics-more-insidious-than-socialism&p=full                      What President Obama has been pushing for, and moving toward, is more insidious: government control of the economy, while leaving ownership in private hands. That way, politicians get to call the shots but, when their bright ideas lead to disaster, they can always blame those who own businesses in the private sector.

Politically, it is heads-I-win when things go right, and tails-you-lose when things go wrong. This is far preferable, from Obama's point of view, since it gives him a variety of scapegoats for all his failed policies, without having to use President Bush as a scapegoat all the time.  Government ownership of the means of production means that politicians also own the consequences of their policies, and have to face responsibility when those consequences are disastrous — something that Barack Obama avoids like the plague.  Thus the Obama administration can arbitrarily force insurance companies to cover the children of their customers until the children are 26 years old. Obviously, this creates favorable publicity for President Obama. But if this and other government edicts cause insurance premiums to rise, then that is something that can be blamed on the "greed" of the insurance companies.

The same principle, or lack of principle, applies to many other privately owned businesses. ( BANKS, ENERGY COMPANIES etc.) It is a very successful political ploy that can be adapted to all sorts of situations.  What socialism, fascism and other ideologies of the left have in common is an assumption that some very wise people — like themselves — need to take decisions out of the hands of lesser people, like the rest of us, and impose those decisions by government fiat.  So long as we buy their heady rhetoric, we are selling our birthright of freedom.



http://news.investors.com/article/618147/201207131919/fair-credit-zealots-on-war-path-against-fico.htm?Ntt=racial-arsonists-now-gun-for-fico-credit-scoring&p=full         It was bad enough the government pressured banks to rubberstamp home loans for folks with poor credit scores. Now there's a more dangerous push to attack the credit-scoring system itself.  The first shot across the bow was fired last week by the Washington Post. In a front-page story, it warned that "the country is headed toward a kind of financial segregation" from "long-lasting (credit) damage done to the black community."  The Post said civil-rights groups and federal regulators fear blacks will be denied credit for years to come due to subprime foreclosures that have left deep scars on their credit reports.  "Credit scores of black Americans have been systematically damaged, haunting their financial futures," said the Post, quoting the usual anti-bank suspects. 

These same Post sources demonized as racist the neutral credit-scoring system banks have used for half a century to measure risk in loans for homes, cars, college tuition and businesses. And they demanded the government review it for fairness, while forcing banks to "repair" the damaged credit of blacks.  What the Post left out of its one-sided story is key history explaining how blacks were put in such jeopardy.  Starting in the 1990s, Washington declared traditional bank rules for approving mortgages racist, after a deeply flawed federal study showed a greater share of blacks were rejected for home loans than whites.  To close the "mortgage gap," regulators demanded Fannie Mae and Freddie Mac, as well as primary lenders, do anything they could to get low-income, high-risk minority borrowers into home loans — including waiving down payments and offering them subprime mortgages and other fringe products.

Their affirmative-lending crusade backfired. African-Americans ended up holding a disproportionate share of subprime mortgages, which defaulted at alarming rates. If they had weak credit before the crisis, they have worse credit now.  The problem then, as now, has little, if anything, to do with racism. The higher loan rejection rates were due to lower credit scores, which are almost flawless in predicting a borrower's ability to pay back a loan.  Studies show blacks on average have the worst credit, even among the wealthiest, and default on loans at high rates. Another minority, Asians, typically have the best credit — better than whites — and the lowest default rates, even among the poorest. As a result, they tend to get the best deals on loans. 

Banks get consumer credit scores from San Rafael, Calif.-based Fair, Isaac and Co. FICO, as it's known, calculates them based on a color-blind formula that takes into account a consumer's history of paying bills and other credit factors that, again, have nothing to do with race.  Borrowers with FICO scores above 660 are viewed by lenders as posing a relatively low risk of defaulting on a loan. They typically qualify for traditional or prime loans, though the higher the score — 750 or higher is considered excellent credit — the better the loan terms.  Applicants with sub-660 scores historically wouldn't qualify for a mortgage without bringing a lot of cash or collateral to the table. But that changed in the 1990s and 2000s, when the government downgraded underwriting standards and mainstreamed subprime mortgages.  Sinfully, the Post article is part of a new, post-crisis crusade to show how the credit scoring, not just underwriting, process is allegedly biased against minorities. It agitates for the ultimate round in a reckless cycle of easier and easier credit.  I first warned of the anti-FICO assault last year in my book, "The Great American Bank Robbery." Efforts already are under way by the Obama administration to undermine this bedrock indicator of financial risk

But credit scores are not set in stone. Even foreclosed-on minorities can rebuild them in as little as two years if they stay current on their other bills.  Instead of attacking color-blind statistics vital to the health of our financial system, race zealots would better serve the minority community by pushing more effective programs to combat financial illiteracy — including educating borrowers about the importance of paying bills on time and maintaining good credit. How to budget, track spending, prioritize etc. • Sperry is author of the "Great American Bank Robbery: The Unauthorized Report about What Really Caused the Great Recession."




The 2008 banking collapse was triggered by a series of failures in the mortgage-backed securities market resulting from massive defaults in the subprime mortgage market and derivatives supporting the mortgage market that caused Lehman Brothers and Bear Stearns to go bankrupt. Financial giants such as Freddie Mac, Fannie Mae, Merrill Lynch and AIG threatened to follow suit, as detailed by the Guardian of London.  As WND reported in May 2009, Obama himself played a role as an activist lawyer in Chicago, representing ACORN in the 1994 case Buycks-Roberson v. Citibank Federal Savings Bank. In the case, ACORN pressed Citibank to make more loans to marginally qualified African-American applicants “in a race neutral way.”

ACORN Housing, then a nationwide organization with offices in more than 30 cities, used the Citibank litigation to push the group’s radical agenda to get subprime homebuyers mortgages under the most favorable terms available.

Community Reinvestment Act of 1977:  The Community Reinvestment Act, or CRA, was signed into law by President Jimmy Carter in 1977 with the goal of forcing banks to provide credit to businesses and homeowners with poor credit.  The CRA’s purpose was to stop banks from “red-lining,” or refusing to lend to people in low-income areas because the risk of the loan not being repaid was too high.  Even though lending to people with poor credit is inherently risky, the Carter administration was intent on forcing banks to accept a social responsibility to provide credit to homeowners and businesses in low-income neighborhoods.

The CRA was super-charged during the Clinton administration with a set of new rules that allowed subprime mortgages to be securitized.  Federal Reserve Chairman Ben Bernanke, in a speech to the Community... in Washington, D.C., on March 30, 2007, noted a 1992 law passed during the Clinton administration expanded the CRA market by requiring the government-sponsored enterprises Fannie Mae and Freddie Mac to securitize “affordable housing loans,” a euphemism widely understood to mean low-income housing loans.

Clinton expands subprime mortgage market:  Securitization of mortgages into bonds, a process that became a multi-trillion-dollar business in the 1990s, increased dramatically the liquidity, or amount of money available, to make new home loans.  Because mortgage originators could sell their mortgages to investment bankers, creating mortgage-backed securities, mortgage originators did not have to hold the mortgage in their portfolio. As a result, mortgage lenders could more easily engage in riskier lending, including lending to less qualified buyers in the subprime market.  By allowing CRA-generated and other subprime mortgages to be included in mortgage-backed securities, the Clinton administration advanced a social agenda to extend homeownership into inner-city poverty, where prospective homeowners were typically not qualified to obtain a mortgage.  By definition, subprime lenders are not credit-worthy under normal lending standards. They typically cannot meet normal lending requirements to verify income and have a history of credit problems.

Gretchen Morgenson and Joshua Rosner, in their 2011 book “Reckless Endangerment,” detailed how the subprime mortgage crisis resulted in the collapse of financial institutions in September 2008. The authors demonstrated, as noted on page 3 of the book, how Clinton’s “calamitous” homeownership strategy developed and “came to blow up the economy.” The authors calls it a “story of greed, good intentions, corporate corruption and government support.”  In the aftermath of the U.S. government takeover of Fannie and Freddie, attention focused on three prominent Democrats who served as Fannie Mae executives: Franklin D. Raines, former Clinton administration budget director; James Johnson, former aide to Democratic Vice President Walter Mondale; and Jamie Gorelick, former Clinton administration deputy attorney general.  All three prominent Democrats earned millions in questionable compensation while serving as top Fannie Mae executives.  Raines earned $90 million in his five years as Fannie Mae CEO, from 1999 to 2004; Johnson earned $21 million in just his last year serving as Fannie Mae CEO, serving from 1991 to 1998; and Gorelick earned an estimated $26 million serving as vice chair of Fannie Mae from 1998 to 2003.

All three were subsequently involved in mortgage-related financial scandals concerning their stewardship at Fannie Mae.

Franklin Raines:  Franklin Raines’ problems began in 2004, when Fannie Mae’s regulator, the Office of Federal Housing Enterprise Oversight, or OFHEO, and the Security and Exchange Commission’s top accountant issued reports charging that under Raines’ stewardship Fannie Mae had misstated earnings for three and a half years. 

The $9 billion restatement of earnings required by the OFHEO and SEC ended up wiping out 40 percent of Fannie Mae’s originally stated profits fro....

Raines resigned from Fannie Mae in December 2004, with a $19 million severance package.  Raines continued playing the victim until April 2008, when he and two other Fannie Mae top executives were ordered in a civil lawsuit to pay nearly $31.4 million for their roles in what amounted to an Enron-like accounting scandal.  Raines and the other Fannie Mae executives were accused in the civil suit of manipulating Fannie Mae books to manufacture earnings over a six-year period that stretched from 1998 through 2004 to trigger for themselves millions of dollars in otherwise unearned bonuses.  In the final settlement, Raines was also forced to give up Fannie Mae stock options then valued at $15.6 million.  A controversy broke out when the Washington Post noted in July 2008 Raines had taken calls from Barack Obama’s presidential campaign seeking his advice on mortgage and housing policy matters.  Republican presidential candidate Sen. John McCain ran a television advertisement using the Post article as a source to claim Raines was an Obama adviser. But Raines issued a denial that he was an adviser to Obama or that he had provided the Obama campaign with advice on housing or economic matters.  In September 2008, as the controversy developed, the Washington Post stood behind its original report, noting Raines statement that month that he never provided Obama’s campaign with advice on housing or economic matters contradicted what he told the newspaper in July 2008.

James Johnson:  James Johnson was appointed to head Obama’s vice presidential selection committee until a controversy concerning an alleged $7 millions in questionable real estate loans he received on favorable terms from failed sub-prime mortgage lender Countrywide Financial surfaced and forced him to resign.  The controversy over Johnson began when the Wall Street Journal reported June 7, 2008, that Countrywide had extended to Johnson and Raines millions of dollars in favorable home loans because they were “Friends of Angelo,” or “FoA,” as such preferential borrowers were known in the inner circles of Countrywide.  The Wall Street Journal carefully noted there is nothing illegal about a mortgage firm treating some borrowers better than others.  Yet, when two top Fannie Mae executives received the preferential mortgage treatment, it spelled political trouble for the government-sponsored, shareholder-owned company, as well as for the Democratic Party and the Obama presidential campaign with which Raines and Johnson were connected.  A lawyer for Johnson insisted to the Wall Street Journal that Johnson’s Countrywide home mortgage loans were within industry practice; Raines did not respond to the newspaper’s requests to comment.

Jamie Gorelick:  In 1998, Fannie Mae Vice Chairman Jamie S. Gorelick received a bonus of $779..., despite her alleged involvement in a scandal in which Fannie Mae employees falsified signatures on accounting transactions to manipulate books to meet 1998 earning targets. The targets, in turn, triggered multi-million-dollar bonuses for top executives, including Gorelick.

The 1998 bonus reported for then-Fannie Mae Chairman and CEO James Johnson was $1.932 million. Then-Chairman-designate Raines received $1.11 million.  After leaving Fannie Mae, Gorelick encountered controversy a second time, over an alleged conflict of interest when a 1995 memo she authored as deputy attorney general at the Justice Department during the Clinton administration surfaced while she was a member of the 9/11 commission.  The memo, which outlined a policy that became known as the “Gorelick Wall,” appeared to put in place barriers that barred federal anti-terrorist criminal investigators from accessing various federal records and databases that may have assisted them in their criminal investigations.




The rules issued Thursday by the “Consumer Financial Protection Bureau”, the credit watchdog agency created by the Dodd-Frank "financial reform" law, require income verification and limits on household debt loads.  They also ban mortgages with risky features, such as interest-only payments, where the borrower doesn't make payments on the loan principal, or negative amortization, where the principal rises over time.  But the devil is in the details of the 804-page regulation, titled the "Ability to Repay and Qualified Mortgage Standards." What's not required is any minimum down payment or credit score, which studies show are the two most important factors for predicting the ability of a borrower to pay back a home loan.  The regulation "does not require creditors to obtain or consider a consolidated credit score or prescribe a minimum credit score that creditors must apply," page 741 states.

Contrary to some published reports, moreover, no job is required to qualify for a home loan, just "documented" income, which could include welfare payments, as well as alimony or child support payments.  "Income received from government assistance programs are acceptable," the Obama administration decrees in its ruling.  It maintains that credit scores "may not be indicative of the consumer's ability to repay."  Also, lenders may "look to nontraditional credit references, such as rental payment history or utility payments."  This underwriting practice has been widely blamed for waves of mortgage defaults in states with high Hispanic immigrant populations, such as California and Nevada.

The rule, further, does not require verification of debt obligations. And the 43% debt-to-income ratio requirement applies to a small slice of borrowers taking out jumbo home loans of more than $400,000 nationally, or $700,000 in high-cost markets like New York. 
Also missing from the new mortgage rules are any minimum down payment or credit score requirements for federally controlled Fannie Mae or Freddie Mac or the Federal Housing Administration, which together underwrite nine out of every 10 new mortgages in the country. In fact, Fannie and Freddie are grandfathered from any of the rule changes for up to seven years. So is the FHA, which is now staring at insolvency, after taking up the affordable-lending slack from failed Fannie and Freddie.  "This rule does little to limit borrower leverage and lays the foundation for the next bust," said Edward Pinto, former chief Fannie Mae credit officer and now an American Enterprise Institute fellow.



Democrats and the media insist the Community Reinvestment Act, the anti-redlining law beefed up by President Clinton, had nothing to do with the subprime mortgage crisis and recession.

But a new study by the respected National Bureau of Economic Research finds, "Yes, it did. We find that adherence to that act led to riskier lending by banks."  http://www.nber.org/papers/w18609

Added NBER: "There is a clear pattern of increased defaults for loans made by these banks in quarters around the (CRA) exam. Moreover, the effects are larger for loans made within CRA tracts," or predominantly low-income and minority areas.

"We want your CRA loans because they help us meet our housing goals," Fannie Vice Chair Jamie Gorelick beseeched lenders gathered at a banking conference in 2000, just after HUD hiked the mortgage giant's affordable housing quotas to 50% and pressed it to buy more CRA-eligible loans to help meet those new targets. "We will buy them from your portfolios or package them into securities."

She described "CRA-friendly products" as mortgages with less than "3% down" and "flexible underwriting." From 2001-2007, Fannie and Freddie bought roughly half of all CRA home loans, most carrying subprime features. Lenders not subject to the CRA, such as subprime giant Countrywide Financial, still fell under its spell. Regulated by HUD, Countrywide and other lenders agreed to sign contracts with the government supporting such lending under threat of being brought under CRA rules.



Bill Clinton’s Remarks on his National Homeownership Strategy  June 5, 1995

 It's 100 specific actions that address the practical needs of people who are trying to build their own personal version of the American dream, to help moderate income families who pay high rents but haven't been able to save enough for a downpayment, to help lower income working families who are ready to assume the responsibilities of home ownership but held back by mortgage costs that are just out of reach, to help families who have historically been excluded from home ownership. Today, all across the country, I say to millions of young working couples who are just starting out: By the time your children are ready to start the first grade, we want you to be able to own your own home.




By quietly expanding the regulation, analysts say President Obama is picking up where President Clinton left off in April 1995, when he rewrote rules for what had been a largely toothless law as first drafted in 1977.  Through executive orders, Clinton set strict numerical lending targets for banks in "underserved" neighborhoods, while ordering regulators to crack down on alleged bank redlining.



President Obama argues Republicans want to go back to pre-recession policies of cutting "taxes for the folks at the very top" and rolling back "regulations on big banks." He warned: "We tried that top-down approach. It's what caused the mess in the first place." Did it, though? Most economists agree the recession was caused by the subprime mortgage crisis,



The American home mortgage market has, for all practical purposes, become nationalized since the 2008 financial meltdown, according to an analysis by ProPublica, the non-profit investigative journalism project*.  The takeover, without which the housing market could barely function, has occurred against a backdrop of little planning or public discussion.  In fact, nine out of every 10 new mortgages are now backed by the U.S. taxpayer, up from three in 10 in 2006.  “It is creeping nationalism,” said Jim Millstein, an investment banker and former Treasury official in the Obama administration.  Fannie Mae and Freddie Mac, the taxpayer-supported housing giants, alone guaranteed 69 percent of new mortgages in the first nine months of 2012.   The federal government has put $187.5 billion into Fannie Mae and Freddie Mac since the financial crisis, and many observers expect heavy eventual taxpayer losses from that investment.

*While the Sandler Foundation provided ProPublica with significant financial support, it has also received funding from the Knight Foundation, MacArthur Foundation, Pew Charitable Trusts, Ford Foundation, the Carnegie Corporation and others. ProPublica and the Knight Foundation have various connections. For example, Paul Steiger, President of ProPublica, is a trustee of the Knight Foundation.[10] In like manner, Alberto Ibarguen, the President and CEO of the Knight Foundation is on the board of ProPublica.[11] In 2010, it received a two-year contribution of $125,000 each year from George Soros' Open Society Foundations.   (+ these are Democrat/Left/Socialist types)





Washington, D.C., Dec. 16, 2011 — The Securities and Exchange Commission today charged six former top executives of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) with securities fraud, alleging they knew and approved of misleading statements claiming the companies had minimal holdings of higher-risk mortgage loans, including subprime loans.

"Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," said Robert Khuzami, Director of the SEC's Enforcement Division. "These material misstatements occurred during a time of acute investor interest in financial institutions' exposure to subprime loans, and misled the market about the amount of risk on the company's books. All individuals, regardless of their rank or position, will be held accountable for perpetuating half-truths or misrepresentations about matters materially important to the interest of our country's investors."

The SEC's complaint against the former Fannie Mae executives alleges that, when Fannie Mae began reporting its exposure to subprime loans in 2007, it broadly described the loans as those "made to borrowers with weaker credit histories," and then reported — with the knowledge, support, and approval of Mudd, Dallavecchia, and Lund — less than one-tenth of its loans that met that description. Fannie Mae reported that its 2006 year-end Single Family exposure to subprime loans was just 0.2 percent, or approximately $4.8 billion, of its Single Family loan portfolio. Investors were not told that in calculating the Company's reported exposure to subprime loans, Fannie Mae did not include loan products specifically targeted by Fannie Mae towards borrowers with weaker credit histories, including more than $43 billion of Expanded Approval, or "EA" loans.  Fannie Mae's executives also knew and approved of the decision to underreport Fannie Mae's Alt-A loan exposure, the SEC alleged. Fannie Mae disclosed that its March 31, 2007 exposure to Alt-A loans was 11 percent of its portfolio of Single Family loans. In reality, Fannie Mae's Alt-A exposure at that time was approximately 18 percent of its Single Family loan holdings.  The misleading disclosures were made as Fannie Mae's executives were seeking to increase the Company's market share through increased purchases of subprime and Alt-A loans, and gave false comfort to investors about the extent of Fannie Mae's exposure to high-risk loans, the SEC alleged.



page 7:  Affordability products: To provide an alternative to risky subprime products, we have purchased or guaranteed more than $53 billion this year in Fannie Mae loan products with low down payments, flexible amortization schedules, and other features.

Increased securitization: Demand for loan securitization in our conventional 15- and 30-year

products has increased dramatically, and we expect 2007 to be our single biggest year in history for growth in Fannie Mae MBS outstanding.


Page 16: We are a government-sponsored enterprise (“GSE”) chartered by the U.S. Congress under the name “Federal National Mortgage Association” and are aligned with national policies to support expanded access to housing and increased opportunities for homeownership. We are subject to government oversight and regulation. Our regulators include the Office of Federal Housing Enterprise Oversight (“OFHEO”), the Department of Housing

and Urban Development (“HUD”), the SEC, and the Department of the Treasury.


Page 19: Our lender customers supply mortgage loans both for securitization into Fannie Mae MBS and for purchase

for our mortgage portfolio. During 2006, over 1,000 lenders delivered mortgage loans to us, either for

securitization or for purchase. We acquire a significant portion of our single-family mortgage loans from

several large mortgage lenders. During 2006, our top five lender customers, in the aggregate, accounted for

approximately 51% of our single-family business volume compared with 49% in 2005. Our top customer,

Countrywide Financial Corporation (through its subsidiaries), accounted for approximately 26% of our singlefamily

business volume in 2006 compared with 25% in 2005.


Page 29 of 328: Annual Housing Goals and Subgoals

For each calendar year, we are subject to housing goals and subgoals set by HUD.

We report our progress toward achieving our housing goals to HUD on a quarterly basis, and we are required to submit a report to HUD and Congress on our performance in meeting our housing goals on an annual basis.


Page 31 of 328:  We have made significant adjustments to our mortgage loan sourcing and purchase strategies in an effort to  meet the increased housing goals and subgoals. These strategies include entering into some purchase and securitization transactions with lower expected economic returns than our typical transactions. We have also relaxed some of our underwriting criteria to obtain goals-qualifying mortgage loans and increased our investments in higher-risk mortgage loan products that are more likely to serve the borrowers targeted by HUD’s goals and subgoals, which could further increase our credit losses. The Charter Act explicitly authorizes us to undertake “activities ... involving a reasonable economic return that may be less than the return earned on other activities” in order to support the secondary market for housing for low- and moderateincome families. We continue to evaluate the cost of these activities. Meeting the higher goals and subgoals for 2007 in the face of previous increases in home prices and, more recently, higher interest rates, which have reduced housing affordability during the past several years, is

extremely challenging.



http://www.newgeography.com/content/002324-the-costs-smart-growth-revisited-a-40-year-perspective      The largest house price drops occurred in the markets that had experienced the greatest cost escalation, both because prices were artificially higher but also because prices in smart growth markets are more volatile.  The "ground zero" markets, with only 28 percent of the owner occupied housing stock, accounted for 73 percent of the pre-crash losses ($1.8 trillion). Thus, much of the cause of the housing crash, which most analysts date from the Lehman Brothers bankruptcy (September 15, 2008), can be attributed to these 11 metropolitan areas.   The 11 "ground zero" metropolitan markets were Los Angeles, San Francisco, San Diego, San Jose, Sacramento, Riverside-San Bernardino, Las Vegas, Phoenix, Tampa-St. Petersburg, Miami and the Washington, DC area.  Since World War II, median house prices in US metropolitan areas have generally been between 2.0 and 3.0 times median household incomes (a measure called the Median Multiple). This included California until 1970.  "Soaring" land and house prices "certainly represent the biggest single failure" of smart growth, which has contributed to an increase in prices that is unprecedented in history. This  finding could well have been from our new The Housing Crash and Smart Growth, but this observation was made by one of the world's leading urbanologists, Sir Peter Hall, in a classic work 40 years ago. Hall led an evaluation of the effects of the British Town and Country Planning Act of 1947 (The Containment of Urban England) between 1966 and 1971.   




The Subprime Lending Bias

Media: If, as they say, it's journalists who write history's first draft, then future texts will be riddled with errors about the origins of the subprime disaster, teaching future leaders the wrong lessons.

Just how did Americans come to lose $10 trillion in real estate and stock wealth? And why are our children and grandchildren on the hook for as much as $8 trillion in federal bailout money? These are some of the most important questions of our time. Yet the mainstream media, plagued by monopartisan bias, are not providing the public honest answers.

Take, for instance, a recent front-page article in the Washington Post, under the headline, "How HUD Mortgage Policy Fed the Crisis." The piece correctly fingers HUD for helping fuel risky lending at Fannie Mae and Freddie Mac. But the newspaper starts its analysis in 2004 (in fact, the first sentence begins, "In 2004 ... "), making it seem as if the Bush administration crafted "affordable housing" policy and created the subprime market.

The Post knows better. The Bush HUD merely continued a politically correct policy launched by the Clinton administration. For the first time, President Clinton ordered HUD to set quotas for Fannie and Freddie to buy huge portions of Community Reinvestment Act loans and other low-income mortgages made to borrowers with poor credit. The Post failed to mention this key fact.

By 2000, fully half of the mortgage giants' portfolios consisted of these risky loans, most of them subprime mortgages. In effect, the Clinton HUD set a time bomb that would explode years later with the collapse of home prices, which happened to occur on Bush's watch.

The Post also provided just one side of the data in its story. The paper said that Bush "ratcheted up" the affordable-housing goal for Fannie and Freddie, from 50% to 56%. But it left out the fact that the previous president, Bill Clinton, the liberal Democrat, institutionalized the quota and ballooned it up to 50%.  Which move do you think had a greater impact on the subprime market?

At the same time, HUD pressured the federally subsidized giants to lower their loan-to-value ratios and other underwriting requirements to accommodate minority borrowers. HUD Secretary Andrew Cuomo even admitted that the administration was mandating a policy of "affirmative action" lending (his words, not ours).

And it was Clinton who initially spread the subprime rot to Wall Street. To help Fannie and Freddie reach their "affirmative action" lending quotas, HUD in 1995 let them get affordable-housing credit for buying subprime securities that included loans to low-income borrowers.

Less than two years later, Freddie partnered with Wall Street investment banker Bear Stearns to issue the first securitizations of low-income CRA loans.

There's even a press release still available on the Web that memorializes the historic deal, which dumped hundreds of millions of dollars in the risky loans on the market — a down payment on the hundreds of billions that were to follow. http://www.investors.com/NewsAndAnalysis/Article/453682/200812191853/The-Subprime-Lending-Bias.aspx



  Top Recipients of Fannie Mae and Freddie Mac
Campaign Contributions, 1989-2008

Name Office Party/State Total
1. Dodd, Christopher J S D-CT $133,900
2. Kerry, John S D-MA $111,000
3. Obama, Barack S D-IL $105,849
4. Clinton, Hillary S D-NY $75,550
5. Kanjorski, Paul E H D-PA $65,500
6. Bennett, Robert F S R-UT $61,499
7. Johnson, Tim S D-SD $61,000
8. Conrad, Kent S D-ND $58,991


Barnie Frank was one of the architects of the 1992 legislation authorizing HUD to slap the affordable housing goals on Fannie and Freddie in the first place.  Congress, enacting the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, allowed legislation to "amend and extend certain laws relating to housing and community development." The Act created the Office of Federal Housing Enterprise Oversight (OFHEO) within HUD to "ensure that Fannie Mae and Freddie Mac are adequately capitalized and operating safely." It also "established HUD-imposed housing goals for financing of affordable housing and housing in central cities and other rural and underserved areas."


Rep. Jim Leach (R-Iowa) warned about the impending danger non-regulated GSEs posed. As the Washington Post reports, his concern was that Congress was "hamstringing" the regulator. Complaint was that OFHEO was a "weak regulator." Leach worried that Fannie Mae and Freddie Mac were changing "from being agencies of the public at large to money machines for the stockholding few."

the Times' one-sided story. The paper's reporters didn't even bother to search their own archives. Had they done so, they would have found a Sept. 20, 1999, article by Steven A. Holmes that reported:

"Fannie Mae has been under increasing pressure from the Clinton administration to expand mortgage loans among low and moderate income people."

It quoted former Clinton Budget Director Franklin Raines, who Clinton installed at the helm of Fannie. Raines said he had relaxed credit standards to meet the Clinton administration's goal of 50% loans to low-income minority borrowers.

Further on in the story, a highly regarded scholar warned that Fannie was taking on too much risk and could fail if the housing market ran into trouble.

"If they fail," warned American Enterprise Institute fellow Peter Wallison, "the government will have to step up and bail them out."

His warning was not unique. There were many like it back then. Even Clinton's own Treasury Secretary Lawrence Summers in 1999 and 2000 warned of the dangers subprime lending posed, well before Bush was in office.

Winter 2000  The City Journal warned that the Clinton administration had turned CRA into "a vast extortion scheme against the nation's banks," committing $1 trillion for mortgages and development projects, most of it funneled through the community organizers.

Cuomo's Quotas 

Subprime Scandal: Andrew Cuomo is running for governor of a state whose economy he helped sink when he ran the agency regulating Fannie and Freddie's "affordable housing" mission.

The Democratic candidate's role in the subprime mortgage scandal has not come out in New York's gubernatorial debates or in the media. But he's a chief reason Fannie and Freddie invested so heavily in the subprime loans still plaguing the mortgage giants and the overall economy.

As HUD secretary from 1997 to 2001, Cuomo pushed government-sponsored Fannie and Freddie to buy more home loans to low-income borrowers with impaired credit, in an attempt to end what he thought was lending discrimination against minorities. By 1999, they had committed $1 trillion in such high-risk loans.

But Cuomo still was not happy. So in 2000, he hiked their affordable-housing quota to 50%. That meant Fannie and Freddie had to devote fully half their mortgage financing to "underserved" borrowers with unproven or damaged credit. To help them meet that drastic new goal, Cuomo pressured them to relax their lending criteria and invest in subprime loans. He also authorized them to buy subprime securities.

In November 2000, HUD Secretary Andrew Cuomo issued a press release trumpeting the government's reckless plans: "HUD Announces New Regulations to Provide $2.4 Trillion in Mortgages for Affordable Housing for 28.1 Million Families."

This isn't ancient history. The quota Cuomo set in 2000 remained in force through 2004 and beyond. Four years after he required Fannie and Freddie to commit half their lending to support affordable housing, they together commanded almost half the subprime securities market.

Credit quality suffered while risk soared. By 2005, most of the loans they'd bought had down payments of 3% or less. Many had no down payment at all. By 2008, Fannie and Freddie had drowned in a toxic soup of bad subprime paper.

Relevance to New York voters? Like the rest of taxpayers, they are on the hook for an estimated $1 trillion in losses in what could end up being the mother of all bailouts. Meanwhile, related foreclosures are still rattling Wall Street.

Subprime lender Countrywide Financial was Fannie's biggest customer, and now it's Bank of America's biggest headache. BofA can't finalize foreclosures and liquidate the toxic debt it inherited from Countrywide until it untangles the chain of title on the subprime mortgages its subsidiary originated and sold to Fannie.

Ex-Fannie chief credit officer Ed Pinto blames Cuomo for the mess. He says he and other HUD officials "should have known the risks were large," adding that "Cuomo was pushing mortgage bankers to make loans and basically saying you have to offer a loan to everybody." Why? Because like Bill Clinton, whose housing policies he was following, Cuomo championed the faulty notion that "racist" bankers erected barriers to minority homebuyers, creating a "mortgage gap." And he was hellbent on closing it.

Four federal agencies enforce the CRA, a banking regulation whose original purpose of encouraging homeownership among the poor was well-intended  These agencies, which over the years have become entrenched in pushing the act, include the FDIC, Office of Thrift Supervision, the Comptroller of the Currency and the Federal Reserve. Top agency officials each took a turn Monday defending the CRA during a C-SPAN-covered panel discussion on the housing crisis.

OTS director John Reich insisted it "had absolutely nothing to do with the mortgage crisis." FDIC chief Sheila Bair said it was a "myth," adding that "it's really unfortunate that this is out there." "It's simply not true," she asserted. Next up was Comptroller of the Currency John Dugan, who agreed the CRA "certainly was not the cause of the subprime crisis."

Though they offered little evidence to support their assertions, a Fed governor released findings of a study the Fed did with the Brookings Institution to quash the idea the CRA encouraged high-risk subprime lending to uncreditworthy borrowers.

In a speech to the "Confronting Concentrated Poverty Policy Forum," Randall Kroszner asserted that CRA-mandated loans are "nearly as profitable" as conventional loans. He cited a 2000 Fed study on CRA loan performance.

A careful reading of the 99-page report finds evidence that seems to undercut his conclusion that CRA loans are just as safe. For example, the study found that "nearly 90% of large banking institutions report higher 30-89 day delinquency rates for CRA-related home lending than for overall home lending."

That little gem was left out of Kroszner's argument, along with this one: "CRA-related home loans do not appear to perform as well as other home loans when the analysis is conducted on a per CRA-dollar basis."

What do current data show? "Unfortunately," Kroszner said, "the available data on loan performance do not let us distinguish which specific loans in lower-income areas were related to the CRA."  In other words, he doesn't really know, and therefore can't clear the CRA.

http://www.occ.gov/news-issuances/bulletins/1994/bulletin-1994-30.html     All this Government Oversight of the banks and Affordable Housing mandates…How did they do??  (Affordable Healthcare coming to you soon…)  On March 8, 1994, the Comptroller, as a member of the Interagency Task Force on Fair Lending, joined with the top officials of the nine other member agencies to announce a policy statement on discrimination in lending. The policy statement has been formally approved and adopted by the member agencies and was published in the Federal Register on April 15, 1994.  The agencies participating in the Interagency Task Force on Fair Lending are (10 GOVERNMENT agencies that OVERSEE & ENFORCED policies and procedures that produced the Clinton & Democrat Housing Crisis with our banks and lenders.  Government is the problem here.  These 10 agencies oversee our banks and lenders.  They didn’t stop the crisis did they, no because they caused it.  You think the government can miraculously oversee things now???

1.     The Department of Housing and Urban Development
2.     The Department of Justice

  1. The Office of the Comptroller of the Currency
  2. The Board of Governors of the Federal Reserve
  3. The Office of Thrift Supervision
  4. The Federal Deposit Insurance Corporation
  5. The Federal Housing Finance Board
  6. The National Credit Union Administration
  7. The Federal Trade Commission
  8. The Office of Federal Housing Enterprise Oversight




The task force policy statement on fair lending describes what constitutes discrimination under the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FH Act) for purposes of administrative enforcement of those statutes. It will be used by the agencies as a tool for administrative enforcement of fair lending statutes. The policy statement applies to all lenders, including banks and thrifts, credit unions, mortgage brokers, finance companies, retailers, credit card issuers and any other persons or entities who extend credit of any type. 

 http://www.occ.gov/news-issuances/federal-register/94fr9214.pdf           SUMMARY: The Department of Housing and Urban Development (HUD), the

Office of Federal Housing Enterprise Oversight (OFHEO), the Department

of Justice (DOJ), the Office of the Comptroller of the Currency (OCC),

the Office of Thrift Supervision (OTS), the Board of Governors of the

Federal Reserve System (Board); Federal Deposit Insurance Corporation

(FDIC); Federal Housing Finance Board (FHFB), the Federal Trade

Commission (FTC), and the National Credit Union Administration (NCUA)

(collectively, ``the Agencies'') have adopted a statement entitled

``Policy Statement on Discrimination in Lending'' that describes the

general principles that these Agencies will consider to identify

lending discrimination in violation of the Equal Credit Opportunity Act or the Fair Housing Act.


The Community Reinvestment Act (``CRA''), 12 U.S.C. 2901

et seq., seeks affirmatively to encourage institutions to help to meet

the credit needs of the entire community served by each institution

covered by the statute, and CRA ratings take into account lending

discrimination by those institutions.

When a lender's treatment of two applicants is compared, even when

there is an apparently valid explanation for a particular difference in treatment, further investigation may establish disparate treatment on a

prohibited basis.


Even if a policy or practice that has a disparate impact on a

prohibited basis can be justified by business necessity, it still may

be found to be discriminatory if an alternative policy or practice

could serve the same purpose with less discriminatory effect.


Affirmative measures to correct past discriminatory

policies, procedures, or practices, so long as consistent with safety

and soundness, such as:

<bullet> Expansion of the lender's service areas to include

previously excluded minority neighborhoods;

<bullet> Opening branches or other credit facilities in under-

served minority neighborhoods;

<bullet> Targeted sales calls on real estate agents and builders

active in minority neighborhoods;

<bullet> Advertising through minority-oriented media;

<bullet> Self-testing;

<bullet> Employee training;

<bullet> Changes to commission structures which tend to discourage

lending in minority and low-income neighborhoods; and <bullet> Changes in loan processing and underwriting procedures

(including second reviews of denied applications) to ensure equal

treatment without regard to prohibited factors; and

<bullet> Record keeping and reporting requirements to monitor

compliance with remedial obligations.


HUD also is authorized to direct Fannie Mae and Freddie Mac to

undertake various remedial actions, including suspension, probation,

reprimand, or settlement, against lenders found to have engaged in

discriminatory lending practices in violation of the FH Act or the

ECOA.  The Office of Federal Housing Enterprise Oversight

The Office of Federal Housing Enterprise Oversight is authorized to

use its enforcement authority under 12 U.S.C. 4631 and 4636, including

cease and desist orders and CMPs for violations by Fannie Mae and

Freddie Mac of the fair housing regulations promulgated by the

Secretary of HUD pursuant to 12 U.S.C. Sec. 4545.


In all cases where referrals to other agencies are made, the

appropriate federal financial institutions regulatory agency will

engage in ongoing consultations with DOJ or HUD regarding coordination

of each agency's actions. The Agencies will coordinate their

enforcement actions and make every effort to eliminate unnecessarily

duplicative actions.








Setting the Record Straight: Six Years of Unheeded Warnings for GSE Reform

Over the past six years, the President and his Administration have not only warned of the systemic consequences of failure to reform GSEs but also put forward thoughtful plans to reduce the risk that either Fannie Mae or Freddie Mac would encounter such difficulties.  In fact, it was Congress that flatly rejected President Bush's call more than five years ago to reform the GSEs.  Over the years, the President's repeated attempts to reform the supervision of these entities were thwarted by the legislative maneuvering of those who emphatically denied there were problems with the GSEs.

2002  May: The Office of Management and Budget (OMB) calls for the disclosure and corporate governance principles contained in the President's 10-point plan for corporate responsibility to apply to Fannie Mae and Freddie Mac.  (OMB Prompt Letter to OFHEO, 5/29/02)

http://www.sodahead.com/united-states/bush-called-for-reform-of-fanniefreddie-34-times-since-2001/blog-16522/        2003  February: The Office of Federal Housing Enterprise Oversight (OFHEO) releases a report explaining that "although investors perceive an implicit Federal guarantee of [GSE] obligations," "the government has provided no explicit legal backing for them." As a consequence, unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market.  ("Systemic Risk: Fannie Mae, Freddie Mac and the Role of OFHEO," OFHEO Report, 2/4/03)


The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.  Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.







http://www.investors.com/NewsAndAnalysis/Article/588856/201110201854/Wall-Street-Did-It-.htm  Based on the number of toxic loans in the system in 2008, the government was responsible for not just a simple majority, but more than two-thirds. It's quantifiable — 71% to be exact (see chart). And the remaining 29% of private-label junk was mostly attributable to Countrywide Financial, which was under the heel of HUD and its "fair-lending" edicts.  (chart link below too)  http://www.investors.com/NewsAndAnalysis/PhotoPopup.aspx?path=ISSloan_111021.png&docId=588856&xmpSource=&width=348&height=185&caption=         

In the wake of the crisis, the Obama White House and Pelosi-Reid Congress engineered a cover-up of Washington's role in the mess through the Democrat-led Financial Crisis Inquiry Commission. The national media now defer to it as the final authority on what caused the crisis and ensuing recession.

"The FCIC's report put the majority of the blame squarely where it belonged: on the shoulders of the Wall Street executives," Bloomberg News opined.

While not blameless, Wall Street is an easy scapegoat. And investment houses that made billions slicing and dicing mortgages into CDOs, derivatives, credit default swaps and other exotic paper are easy to demonize. But the problem wasn't these financial instruments. Or even the obscene profits they generated. Mortgage-backed securities were nothing new, and we've always had speculation in the market.

The problem was the underlying assets: low-quality mortgages. We've never had so many junk home-loans poisoning the financial well before. And who poisoned the well? Washington and its affordable-housing policies.  It was Washington that declared prudent home-lending standards racist and gutted traditional underwriting rules in the name of diversity. It was government that created the risk on Main Street. Yes, Wall Street spread it, with the help of Treasury-backed Fannie and Freddie. But who's at greater fault for harming the village — the person who poisons the well or the one who distributes the water?




http://newsbusters.org/blogs/p-j-gladnick/2008/09/25/1999-ny-times-article-revealed-true-cause-current-fannie-mae-crises           ''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute.

''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''  Yup. The conservative American Enterprise Institute was accurately warning about this impending financial disaster back in 1999. If you don't believe me, then check out the New York Times archive. 

http://www.nytimes.com/1999/09/30/business/fannie-mae-eases-credit-to-aid-mortgage-lending.html?pagewanted=1      In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

            ''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

http://articles.latimes.com/1999/may/31/news/mn-42807     Minorities' Home Ownership Booms Under Clinton but Still Lags Whites'

May 31, 1999|RONALD BROWNSTEIN | Ronald Brownstein's column appears in this space every Monday

It's one of the hidden success stories of the Clinton era. In the great housing boom of the 1990s, black and Latino homeownership has surged to the highest level ever recorded.   Since 1994, when the numbers really took off, the number of black and Latino homeowners has increased by 2 million

All of this suggests that Clinton's efforts to increase minority access to loans and capital also have spurred this decade's gains. Under Clinton, bank regulators have breathed the first real life into enforcement of the Community Reinvestment Act, a 20-year-old statute meant to combat "redlining" by requiring banks to serve their low-income communities. The administration also has sent a clear message by stiffening enforcement of the fair housing and fair lending laws.

Lenders also have opened the door wider to minorities because of new initiatives at Fannie Mae and Freddie Mac.  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.

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.


http://money.cnn.com/magazines/fortune/fortune_archive/2005/01/24/8234040/index.htm  The real problem was that as Fannie's mortgage portfolio continued to balloon, top government officials became concerned about the potential consequences. In late 1999, then Treasury Secretary Lawrence Summers made a speech that included this sentence: "Debates about systemic risk should also now include government sponsored enterprises, which are large and growing rapidly." It was an incendiary remark. Then in March, Gary Gensler, Treasury's undersecretary for domestic finance, suggested in a speech that the Treasury should reconsider Fannie and Freddie's $4.5 billion line of credit.


http://www.city-journal.org/html/10_1_the_trillion_dollar.html      The Clinton administration has turned the Community Reinvestment Act, a once-obscure and lightly enforced banking regulation law, into one of the most powerful mandates shaping American cities—and, as Senate Banking Committee chairman Phil Gramm memorably put it, a vast extortion scheme against the nation's banks. The CRA funnels billions of investment dollars through groups that understand protest and political advocacy but not marketing or finance. This amateur delivery system for investment capital already shows signs that it may be going about its business unwisely. And a quiet change in CRA's mission—so that it no longer directs credit only to specific places, as Congress mandated, but also to low- and moderate-income home buyers, wherever they buy their property—greatly extends the area where these groups can cause damage.  Marks, a Scarsdale native, NYU MBA, and former Federal Reserve employee, unabashedly calls himself a "bank terrorist"—his public relations spokesman laughingly refers to him as "the shark, the predator," and the NACA newspaper is named the Avenger. They're not kidding: bankers so fear the tactically brilliant Marks

an experiment with extraordinarily high risks. There is no surer way to destabilize a neighborhood than for its new generation of home buyers to lack the means to pay their mortgages—which is likely to be the case for a significant percentage of those granted a no-down-payment mortgage based on their low-income classification rather than their good credit history. Even if such buyers do not lose their homes, they are a group more likely to defer maintenance on their properties, creating the problems that lead to streets going bad and neighborhoods going downhill. Stable or increasing property values grow out of the efforts of many; one unpainted house, one sagging porch, one abandoned property is a threat to the work of dozens, because such signs of neglect discourage prospective buyers.

A no-down-payment policy reflects a belief that poor families should qualify for home ownership because they are poor, in contrast to the reality that some poor families are prepared to make the sacrifices necessary to own property, and some are not. Keeping their distance from those unable to save money is a crucial means by which upwardly mobile, self-sacrificing people establish and maintain the value of the homes they buy. If we empower those with bad habits, or those who have made bad decisions, to follow those with good habits to better neighborhoods—thanks to CRA's new emphasis on lending to low-income borrowers no matter where they buy their homes—those neighborhoods will not remain better for long.


Make the Treasury Responsible for "Unofficial" Debt

The huge debt of Fannie Mae, Freddie Mac, other government-sponsored enterprises and Ginnie Mae fully relies on the credit of the United States.  It is in fact government debt, but it is not accounted for as government debt.  It is not "considered officially to be part of the total debt of the federal government," the Federal Reserve notes.  Not "considered officially" -- but agency debt has proven its ability to generate huge losses for the taxpayers.  It is off-balance sheet debt and hidden leverage for the government, says Alex J. Pollock, a resident fellow at the American Enterprise Institute.

In 1970, Treasury debt held by the public was $290 billion.  Agency debt was minor by comparison: it totaled only $44 billion.  But by 2006, at the height of the housing bubble, while Treasury debt was up to $4.9 trillion, agency debt has inflated to $6.5 trillion.  Treasury debt had increased 17 times during these years, but agency debt had multiplied 148 times!  In 1970, agency debt represented only 15 percent of Treasuries.  By 2006, this had inflated to 133 percent.

Effective government debt -- adding the on- and off-balance sheet debt together -- held by the public now totals nearly $17 trillion (this is not counting the intra-government debt held by the Social Security and other "trust funds"). What should be done now?

Make the Treasury Department truly responsible for managing all the government's debt.  In addition, Treasury should be responsible for reporting to Congress on the cost to the Treasury created by the use of agency debt.

In this way, we could help control, for the future, the use of the government's credit card by agency debt, the consequent possibility of huge taxpayer losses, and the overleveraging of the housing sector which uncontrolled agency debt aggressively promotes. Source: Alex J. Pollock, "Make the Treasury Responsible for 'Unofficial' Debt," American Banker, October 25, 2011. For text: http://www.americanbanker.com/bankthink/make-treasury-responsible-unofficial-debt-off-balance-sheet-1043498-1.html





In 1922, Commerce Secretary Herbert Hoover launched the "Own Your Own Home" campaign, hailed as unique in the nation's history.

Responding to a small dip in homeownership rates, Hoover urged "the great lending institutions, the construction industry, the great real estate men ... to counteract the growing menace" of tenancy.

He pressed builders to turn to residential construction. He called for new rules that would let nationally chartered banks devote a greater share of their lending to residential properties.

Congress responded in 1927, and the freed-up banks dived into the market, despite signs that it was overheating.

The great national effort seemed to pay off. From mid-1927 to mid-1929, national banks' mortgage lending increased 45%. The country was becoming "a nation of homeowners," the Times exulted.

But as homeownership grew, so did the rate of foreclosures, from just 2% of commercial bank mortgages in 1922 to 11% in 1927.

This happened just as the stock market bubble of the late '20s was inflating dangerously. Soon after the October 1929 Wall Street crash, the housing market began to collapse. Defaults exploded; by 1933, some 1,000 homes were foreclosing every day.

The "Own Your Own Home" campaign had trapped many Americans in mortgages beyond their reach.

Financial institutions were exposed as well. Their mortgage loans outstanding more than doubled from the early 1920s to 1930 — $9.2 billion to $22.6 billion — one reason that about 750 financial institutions failed in 1930 alone.

For decades, the United States has actively promoted homeownership through a raft of programs: generous mortgage interest tax breaks, subsidized loans, Fannie Mae and Freddie Mac loan guarantees, limits on what banks can repossess when a borrower defaults and so on, says Jim Powell, senior fellow with the Cato Institute.  Government oversight by HUD?  How about bank oversight and regulation by HUD, FDIC, OCC etc.  How good a job did the government do?

The result has been an increase in homeownership, but it has also convinced far too many people to buy homes who couldn't afford them, helping to unrealistically push up home prices, which inevitably led to the subsequent collapse.

What's needed isn't more government involvement to help to prop up homeownership, but less, says Powell.  And if you don't think so, look at what's happened in Canada.  

·         More Canadians (68 percent) than Americans (66 percent) own their homes, yet the Canadian government has interfered very little in the private housing market.

·         Canada doesn't have an income tax deduction for mortgage interest. Nor is there a tax advantage to converting home equity into debt.

·         In Canada, mortgages aren't issued without verification of employment and income, and people must buy mortgage insurance if their down payment is less than 25 percent of the purchase price.

·         Unlike Americans, Canadians cannot walk away from their homes without serious consequences -- Canadian mortgages are generally full recourse, which means a bank can attach an individual's other assets and wages/salaries if necessary to pay the deficiency in the event of a mortgage default.

As a result of these policies, people in Canada generally buy a home when they can afford it and the Canadian housing market has been remarkable for its long-term stability, says Powell.

Source:  Jim Powell, "Housing Crisis?  Look to Canada for Answers," AOL News, September 3, 2010. http://www.aolnews.com/opinion/article/opinion-housing-crisis-look-to-canada-for-answers/19619199

Two federally chartered financial institutions, Freddie Mac and Fannie Mae overseen by HUD, bought and sold mortgage-backed securities, and provided financing for individuals without the income necessary to repay them.  But the proposed law does nothing to rein-in the mortgage giants, says Kling. 

Federal Reserve monetary policy helped fuel the housing bubble with low interest rates, but the most important cause of the crisis was a change in capital regulations.  That was not deregulation, and it will not be reversed by the legislation, says Kling. 

Source: Arnold Kling, "The Myth of Financial Reregulation," National Center for Policy Analysis, Brief Analysis No. 711, June 24, 2010.  




   http://www.investors.com/NewsAndAnalysis/Article/476122/200905061835/Federal-Homeownership-Subsidies-Have-Left-A-Trail-Of-Catastrophes.aspx                     In 1922, Commerce Secretary Herbert Hoover launched the "Own Your Own Home" campaign, hailed as unique in the nation's history.

Responding to a small dip in homeownership rates, Hoover urged "the great lending institutions, the construction industry, the great real estate men ... to counteract the growing menace" of tenancy.

He pressed builders to turn to residential construction. He called for new rules that would let nationally chartered banks devote a greater share of their lending to residential properties.  Congress responded in 1927, and the freed-up banks dived into the market, despite signs that it was overheating.

The great national effort seemed to pay off. From mid-1927 to mid-1929, national banks' mortgage lending increased 45%. The country was becoming "a nation of homeowners," the Times exulted.

But as homeownership grew, so did the rate of foreclosures, from just 2% of commercial bank mortgages in 1922 to 11% in 1927.  This happened just as the stock market bubble of the late '20s was inflating dangerously. Soon after the October 1929 Wall Street crash, the housing market began to collapse. Defaults exploded; by 1933, some 1,000 homes were foreclosing every day.

The "Own Your Own Home" campaign had trapped many Americans in mortgages beyond their reach.  Financial institutions were exposed as well. Their mortgage loans outstanding more than doubled from the early 1920s to 1930 — $9.2 billion to $22.6 billion — one reason that about 750 financial institutions failed in 1930 alone.

Under demands to keep pumping out loans, the government began loosening its mortgage-lending standards in subsidized programs, attracting riskier homebuyers and provoking a surge in foreclosures on government-backed mortgages.  The failure rate on FHA-insured loans spiked fivefold from 1950 to 1960, according to a 1970 National Bureau of Economic Research study, while the failure rate on mortgages made through the Veterans Administration nearly doubled over the same period. By contrast, the foreclosure rate of conventional mortgages barely increased.

Rather than learn from this lesson, the government embarked on yet another failed attempt to increase homeownership: the FHA's urban-loan debacle of the 1960s. This time, the object was to solve America's urban discontent through ownership.  In 1968, the federal government decided to give poor families FHA-insured loans that required down payments of as little as $250. The idea was that homeownership would bolster deteriorating cities.  Not urban uplift, but urban disaster, followed. Unprepared for ownership, many families defaulted on mortgages or were fleeced by seedy speculators.

Foreclosures spread, infecting at least 20 cities, where massive abandonments served to hasten urban deterioration.  In the end, the government absorbed an estimated $1.4 billion in losses because of Washington's unexamined assumption that homeownership would transform the lives of low-income buyers in positive ways.

In 1977 the federal government passed the Community Reinvestment Act (CRA) to give regulators the power to deny banks the right to expand if they didn't lend sufficiently in those neighborhoods.  When banks responded that they couldn't find many credit-worthy customers in some neighborhoods, housing advocates backed by federal officials argued that banks had to change their lending criteria.  Using protests under CRA, community groups like Acorn were able to pressure banks




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