Demand for mortgages led to an asset bubble in housing. … Calling this crisis a subprime crisis is a misnomer. For example, Wallison and Calomiris used 5 factors which, they believe, indicate subprime lending. This increased flexibility is due, at least in part to … liberalized affordable housing underwriting criteria established by secondary market investors such as Fannie Mae and Freddie Mac." When will he be held accountable?I forgot about Andrew Cuomo’s role in housing. Under the Bush Administration HUD continued to pressure Fannie and Freddie to increase affordable housing purchases – to as high as 56 percent by the year 2008.To satisfy these mandates, Fannie and Freddie announced low-income and minority loan commitments. Countless mistakes followed. Yes.The dot-com bubble was trivial in scope compared to the housing bubble precisely because it was not enabled by government policy. After the brutal Great Recession, this won't soon repeat itself. One example: The Washington Post recently reported that in the early 2000s, many middle-class black families took out huge mortgages, sometimes $1 million, to buy homes now worth much less. But it wasn't confined to the poor and was caused, at least in part, by a larger delusion that was the bubble's root source. "I’m a vegetarian and I love dogs, like Hitler. This banker also remembers management training cohorts that were nearly 100% minority and that the washout rate was nearly 100%.What rational businessman fears a boycott from a group he doesn’t want in their door?The kind that knows said group can prevent their expansion, among other things.“CRA regulations give community groups the right to comment on or protest about banks’ non-compliance with CRA. The creation by mergers of the mega-bank Banks that refused to abandon traditional credit practices remained small. Here's what really caused the housing crisis.
These programs generally worked as follows: "Let's say someone wanted to buy a $100,000 house but didn't have the required down payment and closing costs, which we will say totaled $6,000. If Wall Street's bad behavior was the only problem, the cure would be stricter regulatory policing that would catch dangerous characters and practices before they do too much damage. In a 2002 speech in the Housing Bureau for Senior's Conference, Edward Gramlich, a former Governor of the Federal Reserve Board, distinguished predatory lending from subprime lending: "In understanding the problem, it is particularly important to distinguish predatory lending from generally beneficial subprime lending… Subprime lending … refers to entirely appropriate and legal lending to borrowers who do not qualify for prime rates…. There was no question about why this was happening: the subprime mortgage originators were starting to dominate the market. But the new study examined the Second, borrowers were not saddled with progressively larger mortgage debt burdens. Of course the real estate wizards out there didn't mind such a movement because they got to sell more real estate and were allowed to pass the risk on to the Federal Government. The phrase “subprime” became commonplace.
This seems to be the view of the public and many "experts.
(See As part of the 1995 National Homeownership Strategy, HUD advocated greater involvement of state and local organizations in the promotion of affordable housing.In addition to the use of "silent seconds" HUD condoned and promoted the use of down payment gifting programs. The Fed has been driving interest rates lower for the last thirty years.Interest rates are lower now but credit standards are much higher thus the market has corrected itself just by credit policy.Basic economics says low interest rates (artificially or otherwise) spur debt and decrease saving and investment. Credit standards fell. Based upon the SEC charges, Wallison estimated that Fannie and Freddie held, in reality, over $2 trillion in subprime loans as of June 2008. Dec. 21, 2008; WASHINGTON — … … Tragically, when prices fell, lower-income folks who really could not afford these mortgages under normal credit standards, suffered massive foreclosures and personal bankruptcies.”However, according to new research from the Sloan School of Management at MIT, “A lot of the narrative of the financial crisis has been that this [loan] origination process was broken, and therefore a lot of marginal and unsustainable borrowers got access to funding. By Jo Becker, Sheryl Gay Stolberg and Stephen Labaton. Hovering in the background was the knowledge that the federal government would bail out troubled "too-big-to-fail" financial corporations, including Fannie and Freddie.The housing boom could last for a while, but the bust was inevitable. Groups at first only slowly took advantage of these rights. This seems too small to explain the financial crisis that actually happened.It is not that shoddy, misleading and fraudulent merchandising didn't occur.
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