Wednesday, February 17, 2010

Finally the Truth about the Housing Collapse

First we all learn the truth about Man-made Global Warming; now comes the truth about the housing bubble and its collapse:

We are hearing lots of jokes about the Obamaites continuing to blame Bush for all the ills of America here in the year 2010. What has been swept under the rug, though, is the real blame for the economic meltdown of 2008 – the policies and the corruption of liberal Democrats who first imposed the Community Reinvestment Act that was the proximate cause of the housing bubble, and then the actions of Barney Frank, Chris Dodd and Barack Obama who resisted all efforts to bring Fannie Mae and Fannie Mac under control.

The true facts finally come out in the open:

Fannie, Freddie Housing Goals May Exclude Subprime

By Theo Francis February 17, 2010 Business Week (Excerpt)

Feb. 17 (Bloomberg) – “Fannie Mae and Freddie Mac would no longer be able to rely on subprime mortgages to meet their government-mandated goals for helping lower-income Americans obtain home loans, according to proposed regulations.

The rules offered by the Federal Housing Finance Agency would restrict the companies from using private-label bonds backed by Alt-A and subprime mortgages, or commercial mortgage- backed securities, to meet affordable-housing targets.

Fannie Mae and Freddie Mac, the largest sources of money for U.S. residential mortgages, had been relying on riskier private-label debt to satisfy goals of financing loans for low- and moderate-income homebuyers, according to FHFA. Fannie Mae and Freddie Mac were seized in 2008 largely because of regulators’ concern that the companies wouldn’t have enough capital to cover losses on that type of debt.

“The results of providing large-scale funding for such loans were adverse for borrowers who entered into mortgages that did not sustain homeownership and for the enterprises themselves,” the agency said in the proposal.

Private-label, or non-agency, bonds are issued by banks and don’t carry guarantees by Fannie Mae, Freddie Mac or government- agency Ginnie Mae. Freddie Mac held about $176 billion in non- agency debt in its $755.3 billion portfolio as of December, according to its monthly volume summary. Fannie Mae had about $90 billion in its $772.5 billion portfolio.

Second Liens

The companies have been required to devote a certain amount of their annual business to low- and moderate-income borrowers, economically depressed neighborhoods and other disadvantaged groups. Those goals were modified after the companies were seized by federal regulators in September 2008.

At least half the dwellings the companies helped finance with their more than $500 billion in total mortgage purchases in 2008 were used to satisfy affordable housing goals, according to calculations made from company filings

The new affordable-housing rules would also forbid Fannie Mae and Freddie Mac from counting second-lien debt such as home- equity and “piggy-back” loans and the financing of some rental units toward the goals. It would also change how the companies account for multifamily financing.

Much of the new structure is set out in the 2008 law that created FHFA and strengthened oversight of Fannie Mae and Freddie Mac. The rules would establish separate targets for multifamily and owner-occupied properties as well as set efforts to include poorer borrowers than before, the FHFA said.” Business Week

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