How Fannie -- And You -- Bought a Hapless House

All of this has everything to do with the CRA for those not completely blinded by their idolatry of people who would use a form of government blackmail to extort money from financial institutions so they can pay off their political cronies like those frauds at ACORN who figured prominently in the rise of community organizer now deemed by the illiterati to be the savior of his nation. That is, of course, unless you consider Countrywide not to have been part of the problem in this crisis. The minority grievance lobbyists at Fannie Mae whose direct contributions have always gone predominantly to Democrats and crooks like Dodd even went out of their way to praise Countrywide in this 2000 document entitled "Making New Mortgage Markets: Case Studies of Institutions, Home Buyers, and Communities" (PDF) from the Fannie Mae "foundation":

A majority of Countrywide's mortgage loans are sold to Fannie Mae, Freddie Mac, or Ginnie Mae. About 36 percent of the loans go to Ginnie Mae, 48 percent to Fannie Mae, and the balance go to jumbo, nonconforming, and other investors. Countrywide typically retains the servicing rights to mortgages it sells in the secondary market.
Of the approximately 494,000 loans made by Countrywide in 1998, about 12 percent
were made to "designated minorities"—that is black, Hispanic, or Native American borrowers.

The minority share is fairly consistent among loans of differing sizes; in other
words, loans to minorities are not exclusively small loans. The percentage of ountrywide's home purchase loans made to minorities has increased dramatically since 1992. In 1992, only 8 percent of purchase loans went to designated minorities. This figure rose to 9 percent in 1993, and in 1998, the figure increased to 15 percent. According to 1998 HMDA data, although Countrywide is the second largest mortgage lender in the country, it is the largest lender to the Hispanic market.

From a geographic perspective, Countrywide's purchase originations have increasingly come from minority and low-income neighborhoods.3 In 1993, only 3,671 purchase originations were made in minority neighborhoods and only 3,748 in low-income neighborhoods. In 1994, the numbers rose to 10,633 and 10,940, respectively; in 1995, to 11,458 and 12,176; and in 1998, to 17,878 and 21,169. The gains in loan share for minority and low-income households and neighborhoods came after the initiation of the House America program in 1992 (discussed in detail later).

Countrywide also services loans. Its servicing portfolio included roughly 2.1 million loans, worth nearly $215 billion, in FY 1999—up from only 280,000 loans in 1992. Countrywide mortgage loan servicing uses highly automated systems and generates a servicing fee of 0.25 percent to 0.50 percent per year on the unpaid principal balance of each loan. The servicing function is performed through two facilities, one in California and one in Texas.

Because it is not a federally insured depository, Countrywide is not subject to the federal
regulation for fair housing performance, although HUD has the ability to examine
any apparent fair lending violation that it might suspect. Instead, Countrywide is regulated
in various states by state departments of real estate. The regulations are primarily
financial, however, and do not usually address fair lending issues. Countrywide
is required to report HMDA data, but is not covered under the CRA. Nonetheless, on a
voluntary basis, Countrywide has pledged itself to be a leader in the affordable and
fair lending arena.

By making loans to people who shoudn't either have them or if so, have them only through traditional programs like FHA that have been around for decades, both Fannie, Freddie and Countrywide were trying to feather their own nests by increasing the borrowing pool:

Risks extend beyond banks and consumers to Washington-based Fannie Mae, which owned or guaranteed $340 billion of Alt-A mortgages in the second quarter, equal to about 11 percent of its total single-family mortgage credit book of business. The loans accounted for half of the company's second-quarter credit losses, according to a regulatory filing. Alt-A holdings at McLean, Virginia-based Freddie Mac were $190 billion, or 10 percent of its mortgages, in the second quarter, according to the company's Web site.

Fannie Mae said on Aug. 8 it won't accept any new Alt-A loans after Dec. 31.

While subprime home loans describe a type of borrower --those with bad or limited credit histories -- Alt-A, or Alternative A- paper, are shorthand for a type of loan developed in the mid- 1980s.

`No Doc' Push

Many Alt-A loans go to borrowers with credit scores higher than subprime and lower than prime, and carried lower interest rates than subprime mortgages.

So-called no-doc or stated-income loans, for which borrowers didn't have to furnish pay stubs or tax returns to document their earnings, were offered by lenders such as Greenpoint Mortgage and Citigroup Inc. to small business owners who might have found it difficult to verify their salaries.

Alt-A loans were used to expand home ownership among first- time buyers as prices climbed out of reach for many of them, according to Rick Sharga, executive vice president for marketing at RealtyTrac.

``To grow, the market had to embrace more borrowers, and the obvious way to do that was to move down the credit scale,'' said Guy Cecala, publisher of Inside Mortgage Finance. ``Once the door was opened, it was abused.''

There's so much dishonesty in the covering of this crisis it makes one's head spin.

I'm fully willing to assign some share of the blame to the Wall Street securitizers but if you don't have the crap being shoveled into the system by the advocates for "affordable housing", i.e., Fannie and Freddie and their Democratic patrons none of this comes about.

I'm not ignoring them:

Employees of the government-sponsored firms, which own or guarantee half of the nation's mortgages, have donated almost $4.3 million to federal elected officials and their various campaign committees since 2005.

Obama is the largest individual recipient at about $112,000, federal campaign finance reports show.

One reason Obama has collected the most is that he has raised far more than any other federal candidate, $390 million so far. The mortgage money has not influenced Obama's stands, a campaign aide said.

The candidate has "consistently supported stepped-up regulation for Fannie Mae and Freddie Mac to ensure that instead of rewarding speculators who relied on the government to reap massive profits, taxpayers and struggling homeowners are protected," the aide said.

Republican nominee John McCain has taken $16,400 from Freddie and Fannie employees since 2005.

Apparently you have McCain, who supported a 2005 bill that would have reigned in Fannie and Freddie but failed under the threat of a Democratic filibuster, confused with his campaign manager who isn't running for office and whose influence on McCain policy-wise would seem on this issue to be nil. Sorry.

Here's some vintage 2004 Democratic whine about those GOP meanies trying to over-regulate Fannie/Freddie. Drink up. Maxine Waters, Bill Clay and that idiot Greg Meeks are particularly entertaining.

Shep, it's not a question of lending to minorities. It's the demonstrable lowering of underwriting standards and pushing of marginal mortgage products through Fannie and Freddie who set the standards for the secondary market. This isn't even an arguable point for r.e. professionals.