Who built the "House Trap"...NY TIMES on bad mortgages

FHA TIME BOMB...

http://cr4re.com/FHAbadlender.html

you find the ny times credible..im impressed

sometimes..

Amazing that one of these underwater guys teaches real estate finance. That should be a story in itself.

In many cases , they teach because they are unemployable...

teaching isn't employment? what about the lawyer?

oh, i forgot, it was the stupid greedy overreaching ignorant but not-so-ignorant poor people who made up all of Wells's pick-a-pay portfolio. silly me.

Love the lawyer who acknowledges that he realizes he took a big risk but never anticipated that real estate would decline in value. Now he appears to be looking to the government to bail him out of his $960,000 house. After all, he works hard. Gee whiz, the Mollers actually decided to not buy a brand new car and are waiting on that flat screen? What planet do these people come from?

and who was the 'government' who allowed all of these practices to go on? The Bush administration!

The fact that the media continues to portray overextended borrowers as the victim of some once in a lifetime tsunami of falling real estate markets and financial markets is mystifying. Real estate markets, like financial markets, fall. Anyone who thought otherwise has never read a newspaper. And, what difference does it make to their ability to "afford" the house that its market value declined? Whether values went up or down, either they could afford the payment or not. Refinancing six months in to take additional "money out of the house" doesn't help. Where did that go? Who made them do that? The mortgage boogie man? And, if you want to point political fingers, point to the community reinvestment act and other legislation that forced banks to make riskier loans in a race to the bottom.

I am not sure how an interest only mortgage is "exotic," or beyond the comprehension of two teachers, a lawyer and a financial "advisor." They are eminently simple. Here is a know your customer test for "exotic" mortgages. If you can't add A (your interest payment) to B (the pricipal payment that will be due after the interest only period), then you can't have one.

The suggestion by the NYT by reference to these irresponsible morons that the outstanding interest only mortgage market is more troubled than others is typical of sensationalist NYT reporting. Lots of people have them for flexibility, not to save $300 a month by deferring principal repayment.

ok, we're back to clinton admin, pushing subprime mortgages and risk based pricing adn telling fanie mae to take half their money and back dead beat loans again...

The head of Fannie Mae came from Clinton admin, and made a lot of money before teh company failed.

Well Riversider if the Clinton administration begun the housing fiasco then why didn't the Bush administration CLEAN IT UP? They had complete control of he White House for the first 6 YEARS of his Presidency.

http://treas.gov/press/releases/js716.htm

This is a press release for a recommendation, they did nothing to clean up anything. Actually the fact that they KNEW how bad things were, recommended changes & still chose to do nothing about it is even worse.

History Lesson, Raines came from Clinton Admin...

Dec. 30 2003(Bloomberg) -- When Treasury Secretary John Snow
called on Congress in September to create a ``world-class''
regulator to crack down on Fannie Mae and Freddie Mac, the two
largest buyers of U.S. home mortgages were ready for him.
Fannie Mae and Freddie Mac between them had hired 46
lobbying firms in the first half of this year, including seven of
the 20 largest, to reinforce their permanent staffs of 20. They
spent at least $9.7 million on lobbying during that time, more
than any other company or association, according to
PoliticalMoneyLine.com, a nonpartisan group tracking such funds.
It wasn't just the numbers, it was the names. Among other
recruits, Freddie Mac took on Patrick Cave after he resigned in
January as a top official in the Treasury office that's seeking
authority over the companies. It hired Terry Haines after he quit
that same month as staff director for the House Financial
Services Committee, which is considering the legislation.
The companies ``are in a class by themselves,'' with the
most potent lobbying force in Washington, said Senator John
Sununu, a New Hampshire Republican. Sununu, 39, co-sponsored a
bill that would strengthen oversight, in response to accounting
errors that led to a $5 billion profit restatement by Freddie Mac
this year.
The lobbying effort paid off. A month after Snow's Sept. 10
testimony, the House Financial Services Committee indefinitely
postponed a vote on a bill that would have allowed Treasury to
oversee new business, capital standards and other aspects of what
Snow calls the companies' ``safety and soundness.''

Threat to Stability

For the Bush administration, that delay underlined its
warning that without stricter supervision the companies may
threaten U.S. financial stability because of their vulnerability
to interest-rate shifts and combined $1.75 trillion debt. They
own or guarantee 42 percent of the $7 trillion U.S. mortgage
market.
``It's important to have a regulator that is strong, capable
and competent and able to deal with the risks they could
present,'' Snow said in a Dec. 12 televised interview with
Bloomberg News.
The shareholder-owned companies, chartered by Congress to
increase financing for housing, buy mortgages from banks with
proceeds from bond sales. They profit from the difference between
their debt costs and the return on their mortgage holdings.
They lobby so hard because they ``owe their very life to
Congress,'' said Jonathan Koppell, a professor at the Yale School
of Management.

`Implied Guarantee'

Congress has exempted them from state and local taxes and
authorized the Treasury to buy $2.25 billion of their securities
in the event of possible default. That ``implied guarantee''
allows the mortgage buyers to hold down annual funding costs by
more than $15 billion, Congressional Budget Office Director
Douglas Holtz-Eakin told the Senate Banking Committee on Oct. 23.
The crackdown gained momentum in Congress in January when
Freddie Mac, the smaller of the two companies, disclosed that it
needed to restate earnings. The company said last month it
underreported income for 2000-2002 to hide earnings volatility.
That prompted a $125 million fine by the Office of Federal
Housing Enterprise Oversight, the companies' regulator.
In October, Fannie Mae disclosed a $1.1 billion accounting
error in its third-quarter earnings statement.
Fannie Mae and Freddie Mac sought to fend off a
congressional backlash by ``moving into full-bore opposition'' to
regulatory changes, said Representative Richard Baker, 55, of
Louisiana, a senior Republican on the Financial Services
Committee.

Rallying Supporters

Through a campaign of letter-writing and meetings with
lawmakers, they rallied the National Association of Homebuilders,
the National Association of Realtors and other groups that profit
from expanded mortgage finance, Baker said in an interview.
The Fannie Mae Foundation in 2002 gave $38 million to more
than 1,000 affordable housing associations, including $700,000 to
the Local Initiatives Support Corp., a nonprofit group that seeks
to revive low-income neighborhoods.
The companies ``manipulated'' the Financial Services
Committee, said Representative Christopher Shays, 58, another
Republican committee member, in an interview. They use such
tactics as paying firms not to lobby against them, Shays said.
Cave, 32, Haines, 46, and other lobbyists declined to
comment. Freddie Mac spokeswoman Sharon McHale said she's never
heard of the company hiring lobbyists not to work against them.
McHale said Freddie Mac is ``very well outgunned'' and must
vie for lawmakers' attention against more powerful rivals. These
include Wells Fargo & Co., the largest U.S. mortgage lender, GE
Capital Corp. and other companies that support FM Policy Focus, a
group that seeks to prevent Fannie Mae and Freddie Mac from
expanding into new areas of mortgage finance.

`Well-Resourced Critics'

``We have very, very well-resourced critics in the form of
FM Policy Focus and its many member companies, including
Congressman Shays' constituent'' General Electric Co. based in
Fairfield, Connecticut, the parent of GE Capital, McHale said.
General Electric spokesman Peter Stack declined comment.
Duane Duncan, Fannie Mae's senior vice president for
government relations and a former chief of staff for
Representative Baker, wasn't available for comment.
Fannie Mae Chief Executive Officer Franklin Raines said that
while the company supports ``having a strong, credible, well-
funded regulator,'' the authority must ``also preserve our
mission, which supports the housing finance system.''
``Congress needs to be extraordinarily careful to avoid
changes that would undermine our mission and stifle the flow of
low-cost mortgage capital and mortgage innovations,'' Raines, 54,
said in a speech this month in Washington. ``No one wants to harm
homeowners.''

New Recruits

To protect its interests, Fannie Mae and Freddie Mac enlist
as lobbyists former senior staff at the White House, Treasury and
congressional committees.
David Horne, a former counsel with the House Financial
Services Committee, registered this year as a Freddie Mac
lobbyist. So did Recording Industry of America Chairman Mitch
Bainwol, a former chief of staff for Senate Majority Leader Bill
Frist.
Among other hires, they were joined by Richard Roberts, a
former commissioner at the Securities and Exchange Commission and
aide to Senate Banking Committee Chairman Richard Shelby, who
guides company-related bills in the Senate.
Fannie Mae took on two other former Shelby aides, Lendell
Porterfield and Raymond Cole. It hired Ken Duberstein, a Fannie
Mae director and former chief of staff for President Ronald
Reagan, and Steve Ricchetti, a deputy chief of staff in the
Clinton administration.
Fannie Mae and Freddie Mac lobbyists this year have also
focused on other banking and finance issues unrelated to the
oversight legislation, including a tax credit promoting
homeownership among low-income Americans.

`Juggernaut'

Representative Barney Frank of Massachusetts, the senior
Democrat on the Financial Services Committee, said Fannie Mae
isn't the most powerful company seeking to safeguard its interest
in increasing homeownership.
``What is driving (the committee) is not Fannie Mae but the
homebuilders, the realtors and the low-income housing groups''
such as the Local Initiatives Support Corp., said Frank, 63.
Baker said Fannie Mae and Freddie Mac lead those groups in a
lobbying ``juggernaut'' by leveraging their own influence in
mortgage finance and by donating to affordable-housing
organizations and other politically active groups.
Two weeks before the Financial Services Committee postponed
a planned Oct. 8 vote on tightening regulation, Fannie Mae gave
$1 million to the Congressional Hispanic Caucus Institute.

`People Remember'

The donation was the seed money for a program to increase
homeownership among Hispanics in 63 congressional districts. Five
members of the Congressional Hispanic Caucus serve on the House
Financial Services Committee.
``It's the kind of largesse that gets noticed, that people
remember,'' Sununu said.
Fannie Mae and Freddie Mac ``work more comprehensively to
insure against political risk than any other companies in
America,'' said Representative James Leach, a 61-year-old Iowa
Republican on the House Financial Services Committee. ``They are
the most effective on the Hill today.''

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=108_house_hearings&docid=f:92231.wais
Mr. Frank. Thank you, Mr. Chairman.
I appreciate hearing from the two Cabinet secretaries, but
I would say at the outset that before we move on any
legislation, I would hope we would have some additional
hearings. And, in particular, I think it is important that the
variety of groups in our country who care about housing be
invited, because that is my major focus here, as it has been
during my service on this committee.
I want to begin by saying that I am glad to consider the
legislation, but I do not think we are facing any kind of a
crisis. That is, in my view, the two government sponsored
enterprises we are talking about here, Fannie Mae and Freddie
Mac, are not in a crisis. We have recently had an accounting
problem with Freddie Mac that has led to people being
dismissed, as appears to be appropriate. I do not think at this
point there is a problem with a threat to the Treasury.
I must say we have an interesting example of self-
fulfilling prophecy. Some of the critics of Fannie Mae and
Freddie Mac say that the problem is that the Federal Government
is obligated to bail out people who might lose money in
connection with them. I do not believe that we have any such
obligation. And as I said, it is a self-fulfilling prophecy by
some people.
So let me make it clear, I am a strong supporter of the
role that Fannie Mae and Freddie Mac play in housing, but
nobody who invests in them should come looking to me for a
nickel--nor anybody else in the Federal Government. And if
investors take some comfort and want to lend them a little
money and less interest rates, because they like this set of
affiliations, good, because housing will benefit. But there is
no guarantee, there is no explicit guarantee, there is no
implicit guarantee, there is no wink-and-nod guarantee. Invest,
and you are on your own.
Now, we have got a system that I think has worked very well
to help housing. The high cost of housing is one of the great
social bombs of this country. I would rank it second to the
inadequacy of our health delivery system as a problem that
afflicts many, many Americans. We have gotten recent reports
about the difficulty here.
Fannie Mae and Freddie Mac have played a very useful role
in helping make housing more affordable, both in general
through leveraging the mortgage market, and in particular, they
have a mission that this Congress has given them in return for
some of the arrangements which are of some benefit to them to
focus on affordable housing, and that is what I am concerned
about here. I believe that we, as the Federal Government, have
probably done too little rather than too much to push them to
meet the goals of affordable housing and to set reasonable
goals. I worry frankly that there is a tension here.
The more people, in my judgment, exaggerate a threat of
safety and soundness, the more people conjure up the
possibility of serious financial losses to the Treasury, which
I do not see. I think we see entities that are fundamentally
sound financially and withstand some of the disastrous
scenarios. And even if there were a problem, the Federal
Government doesn't bail them out. But the more pressure there
is there, then the less I think we see in terms of affordable
housing.
I want Fannie Mae and Freddie Mac to continue as government
sponsored enterprises with some beneficial arrangement with the
Federal Government in return for which we get both the general
lowering of housing costs and some specific attention to low-
income housing. In particular, I am concerned right now that
there has been--and it has been raised by Fannie Mae, it has
been raised by one of the rating agencies that have been
critical of the Federal Home Loan Bank--manufactured housing.
Manufactured housing is a very important housing resource
for low- and moderate-income people. You talk about increasing
homeownership among low- and moderate-income people, and
disproportionately, if you look at the increases in
homeownership, it has come with their ability to get
manufactured housing; and I do not want to see Fannie and
Freddie pushed in the direction of being tougher on
manufactured housing. And many of us will be in touch with
Secretary Martinez to see how we can improve this.
I have talked to my colleagues in the Congressional Black
Caucus, and the Blue Dogs. This is a very important and, I
think, somewhat underrated form of housing. I think we now see
pressure on it that is generated in part by exaggerated fears
of a financial crisis.
So I am prepared to look at possibilities here, but in
particular--and this is the major point I want to make; I saw
this in the letter from the homebuilders--I do not want to see
any lessening of our commitment to getting low-income housing.
And here is my concern: If you move the regulator to
Treasury and you leave HUD with the mission, I am not sure that
it isn't ``mission impossible,'' or at least implausible. What
is HUD going to do, yell at them? I mean, if all the regulatory
authority and all the clout is over in Treasury, what is left
in HUD? And I noticed that the homebuilders raised that.
So my threshold question is, if you move this regulator to
Treasury, if you bifurcate in terms of the Cabinet departments
the responsibility for the low-income housing mission,
including manufactured housing--very important to me, as I
said--and other forms of housing, if you bifurcate that, what
real strength is there left behind the mission if most of the
regulation and most of the teeth--I guess if you put all the
teeth from Treasury, having HUD gum them into doing more low-
income housing doesn't strike me as the ideal situation.
And that is why I say, Mr. Chairman, in closing, that as we
proceed on this, I would hope we would have a day when groups,
a range of groups that are concerned with housing, could
specifically address that. Thank you.

Again The Bush Administration had complete control of the Whitehouse for the 1st 6 years of his Presidency so while it's convenient to say "Well the Democrats stalled the bill. The truth is the Republicans were in control & did nothing. You guys had it all for 6 years and blew it!

And then Democrats got in charge, things got worse, and they still did nothing.

Barney Frank is on record fighting against a fix of Fannie and Freddie...

In all fairness, the Bush Administration was not the strongest of regulators, Greenspan & Cox come to mind. However it is amazing how some want to paint 100% of what went wrong on the Bush W years.

No Riversider I don't think it was ALL Bush's fault. There is blood on the hands of BOTH Republicans & Democrats. Which is why I'm an Independent. I don't trust either side. As for who fixes this mess, I could really careLESS who does it. It could be our current President. It could be John McCain, hell if they could resurrect Reagan from the dead & let him fix it, that would be great too. I don't care which side gets the credit--I, as an American citizen, just want this mess CLEANED UP!

nycreWTF
very refeshing, and contrary to the rants, i'm an independent too

Saying "You guys had it all for 6 years and blew it" about Republicans is not the mark of a real independent, just a Democrat who wants to act like a Democrat, but just doesn't want to admit they're a Democrat.

Both parties are filled with morons. Political parties are horrible for democracy, which is why most of the framers were against it.

Drudge did a great history of both sides showing disrespect...

WASHINGTON – Vice President Joe Biden says a Republican congressman's outburst during President Barack Obama's health-care speech Wednesday night "demeaned the institution."
*********************************

The Senate's top Democrat, Harry M. Reid of Nevada, called President Bush a "loser" yesterday just about the time Air Force One was touching down on foreign soil. Reid immediately called the White House to express regret.

The remark violated the restraint that the opposition party customarily exercises when a president is abroad and reflected the acrid environment on Capitol Hill as Republicans prepare to change a rule that lets Democrats use delaying tactics to block the confirmation of judges.

***********************************

TED KOPPEL (ABC host): When the president talked about the bankruptcy of Social Security, there were clearly some Democrats on the floor who thought that that was taking it too far. And they did something that, apparently, no one at this table has ever heard before. They booed. [ABC, Nightline, 2/2/05; Koppel's panel consisted of former Bush adviser Mary Matalin,