"conservative"-Rhetoric; No Basis In Truth

[XCALIDEM]

Perhaps it would be helpful if you did. There are a lot of people who don't understand how mortgages really work, how they're bundled and sold, why they're sold, etc., and as they are a major part of the current economic heartburn we're all dealing with, your expertise could help all of us understand this small part of the equation.

Sure:

real estate mortgage market actually consists of two separate sections: the Primary Market and the Secondary Market. The primary market is where loans are originated; mortgage lenders and banks loan money to borrowers for the purpose of financing real estate transactions. These lenders make their profit on the fees that they charge to fund the loans. They then bundle these loan notes together in a package and sell them in the secondary market.

The secondary market, therefore, manages mortgages that were originated in the primary market. The secondary market consists of investors, both public and private, who buy the mortgage notes. This allows the mortgage lenders to replenish the cash reserves, so that they can originate more mortgages to more consumers. The investors profit from the interest that the mortgages charge.

In addition to private investors, which include banks, thrift institutions and other private individuals, the secondary market consists of a number of public investors. The major entities are the Federal National Mortgage Association (FNMA), or Fannie Mae; the Government National Mortgage Association (GNMA), also known as Ginnie Mae; and the Federal Home Loan Mortgage Corporation (FHLMC), or Freddie Mac.

Fannie Mae is a U.S. Government sponsored corporation that was founded in 1938 for the purpose of establishing a secondary market for mortgages insured by the Federal Housing Administration (FHA). It buys mortgages on the secondary market, pools them, and then sells them as mortgage-backed securities on the open market. As stated earlier, this helps to replenish the supply of lendable money in the primary market.

Ginnie Mae is a wholly owned corporation within the U.S. Department of Housing and Urban Development (HUD). It came into being through a partition of the Federal National Mortgage Association in 1968. Ginnie Mae’s main purpose is to provide financial assistance to low- and moderate-income homebuyers by promoting mortgage credit. It also guarantees the timely payment of principal and interest payments on mortgage-backed securities.

Freddie Mac is a corporation chartered by the U.S. Government in 1970 to purchase mortgages and related securities. It then issues bonds and securities backed by those mortgages in secondary markets. Freddie Mac is also regulated by HUD.

It should also be noted that banks and mortgage lenders do not set the interest rates of the mortgages that they sell. To a very large degree, those rates are set by the secondary market. Investors put their money into the mortgage-backed securities market that is created by these entities, which increases the price of the mortgage bonds and lowers their rates, which in turn lowers the interest rates on mortgages in the primary market. This allows more people to be able to buy and mortgage a home. And because these mortgage-backed securities are investments, their rates will fluctuate just as any other investments’ would.

As you can see, the secondary market is a very important player in the in the mortgage and home-owning industries. For more in-depth information on the various public investment entities, please visit the links to their respective websites.

For more information go here:

http://www.finweb.com/mortgage-loan-education/secondary-market.html

 

[Mr. Carpenter]

Thank you. Now, this is an area that I have concerns about, and perhaps you can shed a bit of light on it, that being MBS's/CDO's.

Once a mortgage institution sells a group of it's mortgages to the secondary, then the secondary uses those mortgages, combined with other mortgages and forms a CDO in order to be able to lend more money, so now we have a single piece of property that is being used as collateral for 2, 3, 4, or even more loans! Now, in a Bull market when everything is rocking along, everyone is working and things are good, that's a fairly safe system, but, and this is a REALLY big but, when things slow down like they started to do a couple of years ago, suddenly these CDO's aren't nearly as secure as they previously were, and in essence aren't worth the paper they're written on, which is why we're in the mess we're in today.

Is that a fairly accurate (albeit simplistic) analysis?

So now we've got federal regulations that prevent mortgage institutions from "redlining", as well as preventing them from being allowed to use 'conservative' measures when determining the eligibility of a client, combined with ARM's (which is where a lot of these lower income people got caught), sub-primes, and all of the other "tricks of the trade" that came out of the 'deregulation' over the past 40 years, and now we've got close to a trillion dollar mess on our hands, and nobody is willing to fess up to having any responsibility for it.

 

[Mr. Shaman]

If you recall, Back in 96, Clinton asked Henry Cisneros, his appointed HUD secretary to come up with new ways to help people get into new homes....

This sounds like (another) Everyone knows.... type-o'-comment. Link me to that statement.

Unfortunately, a good idea should had been modified at some point...

It was, in 2000.

It was sold as Allowing The Marketplace To Regulate Itself.

 

[Mr. Shaman]

From that hotbed of conservative thought, the Washington Post:

Fannie's Perilous Pursuit of Subprime Loans, Washington Post, August 19, 2008

In accordance with the mission of Fannie Mae to enable home ownership by a greater proportion of the population, Franklin Raines, while Chairman and CEO, began a pilot program in 1999 to issue bank loans to individuals with low to moderate income, and to ease credit requirements on loans that Fannie Mae purchased from banks. Raines promoted the program saying that it would allow consumers who were "A notch below what our current underwriting has required" to get home loans. The move was intended in part to increase the number of minority and low income home owners.[15] Some observers have noted that the expansion of easy credit to home buyers with a lesser ability to pay them back was one of the major contributing factors to the subprime mortgage crisis.[16] Although under Raines, Fannie Mae invested in some securities backed by subprime loans, it didn't start buying subprime and Alt-A loans directly (and bundling them into securities) until late 2004 after the accounting scandal. Purchasing of subprime and alt-A mortgages expanded exponentially under the guidance of Raines's successor Daniel H. Mudd

GOSH .......... LOOKS LIKE YOU'RE WRONNNNNNNNNNNNGGGGGG!!!!!!!!!!

GOSH.....no link.

How convenient.

 

[Mr. Shaman]

Your article hardly takes any blame off of a bank for giving a bad loan.... In fact it seems to demonstrate that they (the investment houses) were simply selling a product that the market demanded to counter act the risky investments that banks (local banks) were required to give out.

Whew!!! Yeah...what a great idea there was no governmental-interference for anyone to worry-about....right?

 

[Mr. Shaman]

You seem to be suggesting that the entire industry would have made horribly risky loans without prompting through GSEs and government policy?

Ohhhhhhhhhhhhhhhhhhhhh.....so, this is one o' those magical/different-situations, where institutions aren't expected to Take Responsibility, For Their Own Actions, huh? Such a dictum is reserved (primarily) for homeless-people, right?

Do you "conservatives" ever confuse yourselves??!!!

 

[BigRob]

Whew!!! Yeah...what a great idea there was no governmental-interference for anyone to worry-about....right?

Sure there was interference. It came in the form of requiring local banks to give "affordable" loans.

It seems to be that you want to blame the market for reacting to the new set of circumstances that interference brought about.

 

[BigRob]

Ohhhhhhhhhhhhhhhhhhhhh.....so, this is one o' those magical/different-situations, where institutions aren't expected to Take Responsibility, For Their Own Actions, huh? Such a dictum is reserved (primarily) for homeless-people, right?

Do you "conservatives" ever confuse yourselves??!!!

Well, most conservatives asked them to take responsibility for their actions by going out of business.

Most democrats said they should take responsibility for their actions by ensuring a bailout.

And I am sure you will just say it was Bush that proposed the plan, but he is hardly popular among fiscal conservatives. Most of them view him as completely splitting from the ideology.

 

[XCALIDEM]

Here's the proof of when things changed in the housing industry back in 1994:

http://www.archive.org/stream/hudcomponentsofp00unit/hudcomponentsofp00unit_djvu.txt

 

[Andy]

Ohhhhhhhhhhhhhhhhhhhhh.....so, this is one o' those magical/different-situations, where institutions aren't expected to Take Responsibility, For Their Own Actions, huh? Such a dictum is reserved (primarily) for homeless-people, right?

Do you "conservatives" ever confuse yourselves??!!!

The liar speaks.

Ok liar boy, point out where I ever said that banks should not be expected to take responsibility? You show me where I said that. The only thing I get confused about is where you think you can fabricate complete lies, and yet think no one will notice. But that confusion passes quickly when I remember I'm talking to a idiot liberal who has nothing to say but lies.

 

[Mr. Shaman]

Here's the proof of when things changed in the housing industry back in 1994:

http://www.archive.org/stream/hudcomponentsofp00unit/hudcomponentsofp00unit_djvu.txt

Gee......."PRESIDENT CLINTON'S ECONOMIC STIMULUS PLAN DIRECTED TOWARD INNER CITIES, DISTRESSED COMMUNITIES, ENTERPRISE ZONES, AND COMMUNITY DEVELOPMENT BANKS TO ENCOURAGE CREDIT AVAILABILITY AND LENDING."

That doesn't parallel (very well) with BigRob's insistance that..."It came in the form of requiring local banks to give "affordable" loans."

Nice try. Lil' Robby. You should find someone, other than Porky Limbaugh, to do your thinking, for you.

 

[Mr. Shaman]

The liar speaks.

Ok liar boy, point out where I ever said that banks should not be expected to take responsibility?

"You seem to be suggesting that the entire industry would have made horribly risky loans without prompting through GSEs and government policy?"

That's the excuse, huh.....that they were prompted to tears?

How horrible, for them.

 

[foggedinn]

Both sides of this arguement seem intent on apportioning blame to someone other than themselves. I'm sure a proper scapegoat will be found.

On this Day of Attonement, perhaps we should all re-read Leviticus 16. The scapegoat is always the least culpable, and in truth, carries our sins.

 

[XCALIDEM]

Gee......."PRESIDENT CLINTON'S ECONOMIC STIMULUS PLAN DIRECTED TOWARD INNER CITIES, DISTRESSED COMMUNITIES, ENTERPRISE ZONES, AND COMMUNITY DEVELOPMENT BANKS TO ENCOURAGE CREDIT AVAILABILITY AND LENDING."

That doesn't parallel (very well) with BigRob's insistance that..."It came in the form of requiring local banks to give "affordable" loans."

Nice try. Lil' Robby. You should find someone, other than Porky Limbaugh, to do your thinking, for you.

Hey Shaman,

What you are referring above in caps and color letters is also know as "CRA" Community Reinvestment Act!!!!!!!

Stop blaming others and go to the source of the issue.....

 

[BigRob]

Gee......."PRESIDENT CLINTON'S ECONOMIC STIMULUS PLAN DIRECTED TOWARD INNER CITIES, DISTRESSED COMMUNITIES, ENTERPRISE ZONES, AND COMMUNITY DEVELOPMENT BANKS TO ENCOURAGE CREDIT AVAILABILITY AND LENDING."

When you rating by the FED is linked to that... it is a requirement.

That doesn't parallel (very well) with BigRob's insistance that..."It came in the form of requiring local banks to give "affordable" loans."

See above.

Nice try. Lil' Robby. You should find someone, other than Porky Limbaugh, to do your thinking, for you.

I do not even listen to Limbaugh, I also notice you are already resorting to personal attacks... quite the argument you have going on... done with you as well. Bye.