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Old November 6th, 2013, 10:49 AM   #1
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How Democrats Created the Sub-Prime Bubble

As our economy worsens, and poverty rates and dependence rise the mitigation's and excuses from the left become more and more desperate and creative. Apparently, the " Great Bush Recession " was so profound, that it will, understandably take almost a decade to right the ship so to speak.

Well, that's BS, and although Obama did "inherent" a bad economic situation, it wasn't due to policies put forth by the Bush administration or the GOP.

In 1991, Democrat James Johnson, the then head of Fannie Mae proposed a new housing mission for the GSE's as he lobbied Congress for regulatory changes that would allow the GSE's to adjust their long held standards.

He committed a TRILLION dollars to the buying up of affordable loans and Congress set a 30% goal for the GSE's. That' out of all their loans purchased, the GSE's had to purchase loans from low income borrowers at a rate of 30%.

Well, it never got off the ground UNTIL, Clinton pushed through a long lit of Executive Order through his 1995 Homeowners Strategy, that among other things, lowered Capital Requirements for Fannie and Freddie.

In the Spring and Summer of 1994, Secretary Henry Cisneros met with leaders of major national organizations from the housing industry to solicit their views about establishing a national homeownership partnership.”
- HUD, "Partners in the American Dream", May 1995

“In 1994, at the President’s request, the U.S. Department of Housing and Urban Development (HUD) began work to develop a National Homeownership Strategy with the goal of lifting the overall homeownership rate to 67.5 percent by the end of the year 2000. While the most tangible goal of the National Homeownership Strategy was to raise the overall homeownership rate, in presenting the strategy HUD pointed explicitly to declines in homeownership rates among low-income, young, and minority households as motivation for these efforts.” - U.S. Department of Housing and Urban Development Office of Policy Development and Research website

"At the request of President Clinton, HUD is working with dozens of national leaders in government and the housing industry to implement the National Homeownership Strategy, an unprecedented public-private partnership to increase homeownership to a record-high level over the next 6 years.” - Urban Policy Brief Number 2, August 1995

“Federal institutions, policies, and programs alone cannot meet President Clinton's goal of record-high levels of homeownership within the next 6 years. HUD has forged a nationwide partnership that will draw on the resources and creativity of lenders, builders, real estate professionals, community-based nonprofit organizations, consumer groups, State and local governments and housing finance agencies, and many others in a cooperative, multifaceted campaign to create ownership opportunities” - The National Homeownership Strategy

Action 11: Removing Barriers to Mortgage Financing for Starter Homes
Action 29: Alternative Approaches to Homebuying Transactions
Action 35: Home Mortgage Loan-to-Value Flexibility
Action 36: Subsidies to Reduce Downpayment and Mortgage Costs
Action 44: Flexible Mortgage Underwriting Criteria
Action 45: Public-Private Leveraging for Affordable Home Financing

By 1996, HUD was directing the GSE's to provide at least 42% of their mortgage financing to low-income borrowers and 12% of their portfolios to “special affordable” loans.

"This unprecedented public-private partnership is founded on a deeply rooted and almost universally held belief that homeownership provides important advantages that merit continued public support. The National Homeownership Strategy cites four fundamental benefits:” Urban Policy Brief Number 2, August 1995

"Through homeownership, a family...invests in an asset that can grow in value and... generate financial security."
"Homeownership enables people to have greater control and exercise more responsibility over their living environment."
"Homeownership helps stabilize neighborhoods and strengthen communities."
"Homeownership helps generate jobs and stimulate economic growth."


Clintons Home-ownership Strategy also increased the initial quota of 30% to 40% in 1995, and mandated a rising percentage of loans from low income buyers that was 50 % in 2000, and 56% in 2007. It also put the GSE's under HUD regulatory control.

Removing the standards for the GSE's wasn't enough apparently, so Clinton, from 1993 to 1998, replaced all of the GSEs executive positions with his own political appointees, including appointing Franklin Raines to be the head of Fannie Mae...

cont...
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Old November 6th, 2013, 11:10 AM   #2
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Franklin Raines was fined 26 million dollars for hi corruption at Fannie Mae.

Corrupting the GSE's was only part of Clintons housing initiative. He also had to construct a massive false narrative, and it was called "Redlining".

In 1993, Clinton ordered a highly flawed study from the Boston Fed on "Discrimination in Lending ". It was filled with erros, typos and it used subjective analysis to legitimize his charge. That banks were discriminating based on the color of peoples skin.

After the release of that study Clinton and Janet Reno went into high gear to push the lie that banks were discriminating. Janet Reno publicly promised swift and vigorous DOJ action if banks did not comply with their CRA mandates.

Clintons 1995 Homeowner Strategy re-enforced the CRA requirements for banks and publicized the CRA scores for all home lending companies.

The National Bureau of Economic Research did a study on the effects of the CRA mandates on the Housing Collapse.

Did the Community Reinvestment Act (CRA) Lead to Risky Lending?

For their to be a boom in housing, the long held lending standards that kept banks solvent had to be removed, and since banks couldn't stay in business very long making Sub-Prime Loans, their risk had to be transferred over to a GSE that had been around since the 30's.

Fannie and Freddie prior to 1995 bought PRIME loans that were made with a minimum of 10% down and they turned those loans into securities called Mortgage Backed Securities.

In 1997, Fannie Mae created their first "AAA" rated MBSs backed by Sub-Prime loans, and continued unchallenged for 5 years until 2002, when private banks started creating MBS's backed by Sub-Prime Loans.

By 2004 Fannie Mae was the Primary Consumer of all Privately created Mortgage Backed Securities backed by low quality loans buying up over 40 %.

Since the GSE's were under HUD regulatory control it was left up to the HUD Secretary's to fund the mass purchase of new sub-prime debt by the GSE's.

In 2000, Andrew Cuomo, the then HUD Secretary, pledged over 2 TRILLION dollars to the buying up of affordable loans. New Yorkers gave him a Governorship for his troubles.

HUD Archives: Cuomo Announces Action to Provide $2.4 Trillion in Mortgages for Affordable Housing for 28.1 Million Families


cont.....
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Old November 6th, 2013, 11:34 AM   #3
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Housing under Clinton shot up to 68%, as his housing policies driven by a mandated of lowered standards created massive amounts of new and easy credit.

A September 1999 New York Times article describing the situation stated, “Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.”


By the time George Bush was elected the corruption at the two largest GSE's was becoming all to apparent.

2001

April: The Administration’s FY02 budget declares that the size of Fannie Mae and Freddie Mac is “a potential problem,” because “financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity.”

And in 2003...

From the New York Times..

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.


Democrat's rejected...

Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.

Clinton's appointed auditor for Fannie and Freddie was also ENRON's auditor, so Bush hired Price Water-House and Cooper, who started to uncover the massive corruption that existed at the two largest GSE's and found that Billions in profits never earned had been reported so executives could meet their bonus targets.

There was also evidence that the two GSE's were manipulating the value of their securities and collateral by applying their own subjective standards so they could qualify low quality highly risky loans as " AAA " investments.

The Democrats continued to dig in with 72 of them signing a letter that was sent to Bush, warning him not to regulate Fannie and Freddie.

http://www.redstate.com/moe_lane/fil...ic-reality.pdf

In front of Republican chaired Committees, they lied about the current financial health of the GSE's and in 2004 when Fannie and Freddie's regulator warned Congress and everyone else that the two GSE's were heading for insolvency, the executives at Fannie and Freddie dove into to increasingly riskier investments.

Democrats in their own words Covering up Fannie Mae, Freddie Mac scandal - YouTube

cont...
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Old November 6th, 2013, 11:44 AM   #4
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Fannie Mae was also Country Wides largest customer, buying up over 70 % of all Country-Wide's low quality loans as Country Wide issued VIP loans for top Democrat Politicians like Chris Dodd.

Dodd happened to be one of Fannie Mae's biggest defenders.

When the bottom fell out in 2008, Fannie and Freddie were taken into Conservatorship by the US Government, with a combined total of 5.6 TRILLION in loans and Securities.

According to Fannie Mae's Ex purchasing officer, Ed Pinto, Fannie and Freddie held 19.2 Million low quality loans or held securities that were backed by sub-prime loans.

That's 19.2 million out of 27 Million total low quality, Sub-Prime, Alt-A, and NINA loans made from 1994 to 2008.

To this day they have yet to offer up a itemized description of their debt.

But in 2011, the SEC went forward with a Securities Fraud investigation that found 6 Fannie and Freddie Executives guilty of securities fraud as it was discovered that Fannie and Freddie failed to disclose hundreds of Billions on bad unsecured debt.

Add to that they ex-Democrat CEO, Franklin Raines was found to have misreported over 10 Billion in profits that were never made.
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Old November 6th, 2013, 11:49 AM   #5
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I loved how the loan for TBTF bail outs came off of Bushs column and the pay backs that he negotiated went on the Obama column.
When computing last years deficit and tallied it on the last quarter every one forgot that all the CEOs bonus's stock dividends were paid out early and large ports, and anyone smart with a 401 k ready to cash in on did so before the capital gains and Obama care tax increases went into effect also. Sure they pulled in a whole lot of taxes but that was a one time increase due to everyone avoiding an outrageous raise in future tax payments.
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Old November 6th, 2013, 11:50 AM   #6
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good posts....
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Old November 6th, 2013, 11:52 AM   #7
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. How Wall Street Stoked The Mortgage Meltdown

Twelve years ago, Lehman Brothers Holdings Inc. sent a vice president to California to check out First Alliance Mortgage Co. Lehman was thinking about tapping into First Alliance's lucrative business of making "subprime" home loans to consumers with sketchy credit.

The vice president, Eric Hibbert, wrote a memo describing First Alliance as a financial "sweat shop" specializing in "high pressure sales for people who are in a weak state." At First Alliance, he said, employees leave their "ethics at the door."

The big Wall Street investment bank decided First Alliance wasn't breaking any laws. Lehman went on to lend the mortgage company roughly $500 million and helped sell more than $700 million in bonds backed by First Alliance customers' loans. But First Alliance later collapsed. Lehman landed in court, where a federal jury found the firm helped First Alliance defraud customers.

Today, Lehman is a prime example of how Wall Street's money and expertise have helped transform subprime lending into a major force in the U.S. financial markets. Lehman says it is proud of its role in helping provide credit to consumers who might otherwise have been unable to buy a home, and proud of the controls it has brought to a sometimes-unruly business.

Now, however, that business is in deep trouble, and some consumer advocates and policy makers are pointing the finger at Wall Street. Roughly 13% of subprime loans stand in or near foreclosure, bringing turmoil and sometimes eviction to tens of thousands of homeowners. Dozens of lenders have gone out of business. Bear Stearns Cos. is trying to bail out a hedge fund it manages that was hurt by subprime mortgage losses.

Critics say Wall Street firms helped create the mess by throwing so much money at the market that lenders had a growing incentive to push through shaky loans and mislead borrowers.

At a hearing in April, Sen. Robert Menendez (D., N.J.), said Wall Street firms "looked the other way" as they profited from questionable loans, "fueling a market that has very little discipline over itself."

Federal Reserve chief Ben Bernanke said in a May speech that some lenders focused more on feeding the marketplace than on the quality of loans, in part because most of the risks that loans would go bad were passed to investors. As a result, "mortgage applications with little documentation were vulnerable to misrepresentation or overestimation of repayment capacity by both lenders and borrowers," he said.

A generation ago, housing finance was different. Bankers took in deposits, lent that money to home buyers and collected interest and principal until the mortgages were paid. Wall Street wasn't much involved.

Now it plays a central role. Wall Street firms provide working capital that allows thousands of mortgage firms to make loans. After lenders sign up consumers for home loans, investment banks pool the income streams from these loans into bonds known as mortgage-backed securities. The banks sell them to yield-hungry investors around the world.

Before the mid-1990s, mortgage-backed securities consisted mostly of loans to borrowers with good credit and cash to make ample down payments. Then investment banks found they could do the same with riskier loans to borrowers with modest incomes and flawed credits. Pooling the loans created a cushion against defaults by diversifying the risk. The high interest rates on the loans made for bonds with high yields that investors savored. New technology helped make it easier for lenders to collect and collate mounds of information on borrowers.

Lehman, one of Wall Street's biggest players in the subprime boom, says it has gone to great lengths to screen loans for fraud and vet the lenders it works with. "No financial institution would knowingly want to make or securitize a loan that it expected would later go into default," David Sherr, Lehman's head of securitized products, told Mr. Menendez and other senators. "Rather, the success of mortgage-backed securities as an investment vehicle depends upon the expectation that homeowners generally will make their monthly payments, since those payments form the basis for the cash flows to bondholders."

At the sector's peak in 2005, with the housing market booming, loan defaults remained low. Wall Street pooled a record $508 billion in subprime mortgages in bonds, up from $56 billion in 2000, according to trade publication Inside Mortgage Finance. The figure slid to $483 billion last year as the housing market slumped and subprime defaults picked up.

Lehman topped other Wall Street firms over the past two years, packaging more than $50 billion in subprime-mortgage-backed securities in both 2005 and 2006. Overall, Lehman officials say the subprime business has accounted for 3% of the firm's overall revenues in recent quarters, or roughly $500 million in 2006.

Lehman has also been a leader in investment banks' push to buy their own lenders. Through its subprime unit BNC Mortgage Inc., it lends directly to consumers, bringing in more fees and giving it more control over the quality of the loans.

Lehman's deep involvement in the business has also made the firm a target of criticism. In more than 15 lawsuits and in interviews, borrowers and former employees have claimed that the investment bank's in-house lending outlets used improper tactics during the recent mortgage boom to put borrowers into loans they couldn't afford.

Twenty-five former employees said in interviews that front-line workers and managers exaggerated borrowers' creditworthiness by falsifying tax forms, pay stubs and other information, or by ignoring inaccurate data submitted by independent mortgage brokers. In some instances, several ex-employees said, brokers or in-house employees altered documents with the help of scissors, tape and Wite-Out.

"Anything to make the deal work," says Coleen Columbo, a former mortgage underwriter in California for Lehman's BNC unit. She and five other ex-employees are pursuing a lawsuit in state court in Sacramento that claims BNC's management retaliated against workers who complained about fraud.

Lehman officials say there's no evidence to support such claims. They say the firm has tough antifraud controls and goes to great lengths to ensure that it works with mortgage brokers and lenders who meet high standards and that loans are based on accurate information.

Lehman says company records clearly refute specific details of the accounts given by these former employees. It says most of them never raised concerns during their tenures at Lehman lending units, even though that was a requirement of their jobs. Some employees contacted by The Wall Street Journal said they weren't aware of improper practices.

"We think it is misleading to extrapolate from a handful of cases, in each of which we have a strong defense, and make a judgment about the way we conduct our business," Lehman says.

Lehman's history in subprime goes back to the mid-1990s, when the sector was still tiny. Back then, Lehman established itself as a leader in the market for subprime-mortgage-backed securities. It built a staff of experts who had worked at other securities firms and established relationships with subprime-mortgage lenders.

One of them was First Alliance. Mr. Hibbert, the Lehman vice president, traveled to Orange, Calif., in June 1995 to help decide whether Lehman should provide financing to First Alliance and underwrite its mortgage-backed bonds. In his memo, Mr. Hibbert reported back that there was "little risk of fraud or impropriety" at First Alliance. But he also said it was clear it made some loans "where the borrower has no real capacity for repayment."

Lehman officials say Mr. Hibbert ultimately supported going forward with First Alliance, a decision the investment bank made on the basis of extensive discussions and a 140-page memo. They also note that the $25 million line of credit that Lehman initially wrote for First Alliance was small compared with what other firms were putting up to finance the lender.

By late 1998, Prudential Securities and other investment banks had abandoned First Alliance. Federal regulators and seven states were investigating allegations it used deceptive sales tactics to get borrowers into loans with excessive upfront fees. First Alliance trained loan officers to use a sales pitch designed to "confuse and mislead" borrowers and disguise fees, U.S. District Judge David Carter in California found in a 2003 bankruptcy-related proceeding.

During the turmoil, Lehman helped keep First Alliance afloat with more loans. In early 1999, an internal Lehman memo noted the proliferation of government probes targeting the lender -- and the possibility that involvement with the lender might produce bad publicity for the investment bank. But the memo recommended going forward, arguing that First Alliance's borrowers rarely defaulted on their loans and noting that Lehman stood to earn millions in fees by managing the lender's mortgage-backed securities deals.

Lehman officials say they took close account of First Alliance's practices. Its reviews showed the lender was committed to improving its practices -- it hired a new in-house counsel, along with a chief financial officer who once worked at Lehman.

First Alliance shut down in March 2000 as pressure from lawsuits and investigations grew. In 2003 a federal jury in California delivered a $50.1 million verdict in a class action against First Alliance, attributing 10% of the damages -- $5.1 million -- to Lehman. (A federal appeals panel upheld the jury's decision but instructed the trial court to recalculate the dollar award. That decision is pending.) Lehman also settled a lawsuit filed in Broward Country Circuit Court by Florida authorities who said Lehman was an "accomplice" in First Alliance's frauds. The investment bank admitted no wrongdoing but agreed to pay $400,000 and review its practices.

Lehman calls the First Alliance saga an aberration, and says it is unfair to use it to draw conclusions about how it does business more than a decade later.

The subprime market contracted between 1999 and 2001, as continuing ripples from that era's Russian debt crisis and the collapse of hedge fund Long-Term Capital Management prompted investors to pull back from riskier markets. The crisis also presented a buying opportunity.

In 1999 Lehman started operating its own subprime lending unit, Finance America, as a joint venture with an ailing subprime lender named Amresco Inc. as a minority partner. It bought out Amresco in 2001 and another minority investor in 2004. Lehman also took an ownership stake in California-based BNC Mortgage in 2000 after helping management take the company private. It bought out management's remaining stake in 2004 and last year merged Finance America into BNC. Earlier this month, it said it would merge BNC with its Aurora Loan Services unit.

With interest rates low and the economy recovering, the market took off, and BNC and Finance America grew quickly. They ballooned from $3 billion in total loan originations in 2001 to $24 billion in 2005, ranking Lehman No. 11 among all subprime lenders.

As subprime grew, Lehman officials say, fraudulent schemes pushed by rogue mortgage brokers and others became more sophisticated throughout the industry. By taking full ownership of BNC and Finance America, the firm says, it was in a better position to combat these practices.

When Lehman consolidated its control of the two companies in 2004, Lehman officials say, the lenders' practices were consistent with industry standards. But they acknowledge the lenders -- like others in the subprime industry -- had problems with loan quality and fraud prevention. "Since then, we have worked long and hard, as we have taken control, to make these companies models for the industry on best practices for fraud detection and borrower protection," the firm says.

Since the start of 2004, BNC has nearly doubled the size of its staff devoted to quality control, fraud investigations and other jobs that help ensure the lender makes good loans.

Some former employees claim, however, that the pressure to boost loan volume during the boom years of 2004 and 2005 prompted some workers at the lending units to step over the line and push through questionable loans.

Dena Ivezic, a mortgage underwriter for both companies in Downers Grove, Ill., in late 2005 and early 2006, says some staffers at her branch used "cut and paste" techniques to fabricate documents they needed to get loans approved. Some workers tried "to take a stand" against such practices, she says, but "they were reprimanded for not being cooperative -- not wanting to be creative about making deals work....Everybody else just kind of bottled up and just never said anything, because you needed a job."

Cedric Washington, a former regional sales manager for Finance America in California, contended that employees at the lender actively pushed through questionable loans. In a 2005 employment-discrimination lawsuit in state court in Sacramento, Mr. Washington said he witnessed a fellow manager alter a loan document by forging a borrower's initials. Later, he said, he discovered Finance America employees forged borrowers' signatures on credit disclosures and used falsified documents to inflate loan applicants' incomes.

In one instance, the lawsuit said, a loan officer submitted a loan on a duplex that was "not a home or duplex at all but merely a greenhouse." Mr. Washington complained the loan was backed by falsified collateral, the suit said, but a Finance America executive refused to pull the loan.

BNC officials said Mr. Washington himself was complicit in fraud, which he denied, according to the lawsuit. Lehman officials say his lawsuit "had no merit" and was "not brought in good faith." It was settled last year for an undisclosed sum. As for Ms. Ivezic, Lehman says she worked at BNC for just 4½ months and her experiences are "hardly representative of BNC's employee base."

Other former employees contacted by the Journal said that fraud wasn't a problem at the lenders. They say their managers didn't hesitate to reject fishy loans. "Everything we did was by the guidelines," says Barbara Webb, a loan underwriter for both Finance America and BNC in Texas from 2004 into 2006.

Lehman officials say they have procedures in place to prevent mortgage brokers and others in the loan process from bending rules. BNC reviews brokers before putting them on its approved list and rechecks them annually, searching state licenses and lawsuits and making sure they're not on federal officials' watch list for problem brokers.

BNC says it has stopped doing business with more than 900 since 2003, largely because of fraud. It works with an average of about 1,800 brokers a month.

At BNC's headquarters in Irvine, Calif., officials say they've designed their business with an eye to weeding out bad loans. Mortgage underwriters and loan processors -- who make sure loan-application data is accurate -- get extensive training in how to spot fraud. Under BNC's organizational chart, they're set apart from sales, to avoid pressure to let problem loans slip through, BNC officials say.

Lehman notes the Office of Thrift Supervision, BNC's regulator, received just three complaints about the company from April 2006 through March 2007, a tiny fraction of the roughly 60,000 loans it made during that span.

Some complaints have surfaced in court. Borrowers' lawsuits in Pennsylvania, Louisiana, Mississippi and other states have alleged Finance America and BNC took advantage of unsophisticated borrowers or used falsified information to approve loans.

A lawsuit in state court in Saginaw, Mich., by UAW/GM Legal Services Plan, which serves auto workers and retirees, alleges a mortgage broker "confused and pressured" an elderly couple into signing up for a BNC loan that obligated them to pay as much as 17.5% as the interest rate adjusted upward. The suit says BNC was aware of "the seamy details of what happened here" because it prepared the documents, vetted the application and gave the broker "a set of instructions for how to proceed."

George and Evelyn Lee's July 2006 loan was pooled by Lehman with nearly 4,000 other subprime home loans from BNC into a securities deal that produced more than $800 million in mortgage-backed bonds.

The broker in the case, Real Financial LLC, has been the subject of 25 complaints to Michigan financial regulators and a fraud lawsuit that's pending in federal court in Michigan. State regulators dismissed many of the complaints, but have upheld eight of them and referred others for investigation.

Real Financial's attorney says the allegations stem from an unfavorable economy that's sparked rising foreclosures and unjustified complaints against lenders and brokers.

Lehman says it wasn't aware of complaints about Real Financial until the lawsuit was filed, but has since removed the firm from its broker list. "BNC was not aware of anything wrong with the Lees' loan because all it saw was the loan application which was in good order," Lehman said. "Real Financial was not BNC's agent, and BNC gave it no 'instructions' whatsoever. We strongly believe BNC has been added to this case only as a 'deep pocket.'"

Despite the controversy that's emerged in the subprime business, Lehman officials say they're proud of their role in helping the market grow and offering access to credit for consumers who might not otherwise have the chance.
http://online.wsj.com/news/articles/...88752469648903

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Old November 6th, 2013, 12:18 PM   #8
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I remember a couple of my stocks(cant remember which ones now) gave special dividends before the end of the year. This of course wasn't done out of the goodness of their heart but because they held so much company stock themselves that they had given to themselves in bonuses and so forth. There was a very large amount of taxes collected on those capital gains. Obama of course twisted it into a major boost in the economy when it was actually a tax loophole for stock holders.
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Old November 6th, 2013, 12:45 PM   #9
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TLDR. Also I'm not keen on blame shifting, since the thing a really enjoy, again and again, like one of those books you just have to read many times (Hustler Mag, for example), is Righties calling the Oblamer to task on blaming everything he's responsible for in his very unpresidential Bush bashing and blame avoiding diatribe:

"The economy was in crisis and job losses were at a record level. So while we were not come far enough, nearly fast enough, much has improved." (Oblamer dumping his failures off onto Bush, which the Righties are so tired of that "When can we stop blaming Bush???" will be on their headstones. Then follow it up with Obama is responsible for the Iraq war because he was in the Senate and voted to grant war powers, which the Administration was saying would give them the big stick needed to bring S Hussein in compliance with UN sanctions to stop making WMDs, which intelligence cherry picked and lied about deliberately made a case that perhaps some might be secretly in the works. And Capitol Hill got the same Neocon Get Iraq / Oil Scheme in "intelligence" drag, at a time (post 9/11) when saying Bill of Rights is kinda nice, was tantamount to being a Muslim loving supporter of the terrorists and not a lover of freedom, which is so beautiful and makes us so great and helpful in the world, the jealous Islamic hate it. (the amount of irony and contradictions in keeping rights makes us less free, lost on nearly all, among the populi and pols on Capitol Hill, save some whacked out Lefties that cannot see how it's no longer safe in America, such as me, my cong-rep, Bagdad Jim, Dr. Jim McDermott, who as it turned out was a voice screaming for rational thinking in a time of jingoism gone wild, wanting revenge for 9/11, without considering the cost to us with more human life, potentially invading a non combatant and innocent (of our charges) sovereign nation, and if revenge in the form it was taking, hurt or furthered the determination of Radical Islamic Terrorists. Stop and think wasn't on the menu. So no one is to blame outside of the Bush 43 Administration, except we are all to blame for letting our revenge last trump our values and interests, at the price of lives, limbs and emotional health of young people who will pay a price we cannot fathom, for years or the rest of their lives... many cut short by suicide and violent outbreaks once "safely" home.

That's the truth. And rather than assign blame for our petty little sakes of argument, I wonder how we'll do next time, since learning from errors is always our hope, as we did after Korea. Then the real teacher to end all, which we'd never forget (1 didn't ; two actually. George HW Bush and a brilliant general, Powell). Clear objective. Overwhelming force. Do the mission and go. Bagdad looked easy, but they learned from Vietnam that a people defending their own land, overwhelm the most awesome of "overwhelming" forces, through determination an invading force lacks (but would understand if forces were nearing their home and loved ones, and sense what they're up against) so if 10 of them must die to kill one of us, we lose. We'll tire of all the death, senseless news and just leave. It's a given. So they suffer 10 times what we do, and win. But the Neocons and George W Bush thought it a missed opportunity. We're the big guys, and it's easy. Heck; merely slam dunk Redux, with a couple weeks of kicking ass and losing maybe a handful of our guys, since pushing out of Kuwait is about like pushing them Bagdad and having some pithy words to go with the shiny dress uniform as we become the new sheriff in town, which some of ya'll died for in the few thousands. But we're the good guys, and our altruistic leadership will be loved in the long run. Arrogant obviously. Yet the greater crime was the ignorance by the folks surrounding Bush who thought it would go so easily. Some even suggesting oil revenue would cover expenses (how it is $0 was budgeted,if can even imagine such optimism bordering on fantasy.)
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Old November 9th, 2013, 12:13 PM   #10
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Originally Posted by Camelot View Post

Wall Street Journal

" It is important to understand that, as GSEs, Fannie and Freddie were viewed in the capital markets as government-backed buyers (a belief that has now been reduced to fact). Thus they were able to borrow as much as they wanted for the purpose of buying mortgages and mortgage-backed securities. Their buying patterns and interests were followed closely in the markets. If Fannie and Freddie wanted subprime or Alt-A loans, the mortgage markets would produce them. By late 2004, Fannie and Freddie very much wanted subprime and Alt-A loans. Their accounting had just been revealed as fraudulent, and they were under pressure from Congress to demonstrate that they deserved their considerable privileges."

Now the Democrats are blaming the financial crisis on "deregulation." This is a canard. There has indeed been deregulation in our economy -- in long-distance telephone rates, airline fares, securities brokerage and trucking, to name just a few -- and this has produced much innovation and lower consumer prices. But the primary "deregulation" in the financial world in the last 30 years permitted banks to diversify their risks geographically and across different products, which is one of the things that has kept banks relatively stable in this storm.

As a result, U.S. commercial banks have been able to attract more than $100 billion of new capital in the past year to replace most of their subprime-related write-downs. Deregulation of branching restrictions and limitations on bank product offerings also made possible bank acquisition of Bear Stearns and Merrill Lynch, saving billions in likely resolution costs for taxpayers.

"Beginning in 1992, Congress pushed Fannie Mae and Freddie Mac to increase their purchases of mortgages going to low and moderate income borrowers. For 1996, the Department of Housing and Urban Development (HUD) gave Fannie and Freddie an explicit target -- 42% of their mortgage financing had to go to borrowers with income below the median in their area. The target increased to 50% in 2000 and 52% in 2005."

"For 1996, HUD required that 12% of all mortgage purchases by Fannie and Freddie be "special affordable" loans, typically to borrowers with income less than 60% of their area's median income. That number was increased to 20% in 2000 and 22% in 2005. The 2008 goal was to be 28%. Between 2000 and 2005, Fannie and Freddie met those goals every year, funding hundreds of billions of dollars worth of loans, many of them subprime and adjustable-rate loans, and made to borrowers who bought houses with less than 10% down."

"Fannie and Freddie also purchased hundreds of billions of subprime securities for their own portfolios to make money and to help satisfy HUD affordable housing goals. Fannie and Freddie were important contributors to the demand for subprime securities."

quote from Fannie’s 2006 10-K report makes clear, is untrue:

"We have made, and continue to make, significant adjustments to our mortgage loan sourcing and purchase strategies in an effort to meet HUD’s increased housing goals and new subgoals. These strategies include entering into some purchase and securitization transactions with lower expected economic returns than our typical transactions. We have also relaxed some of our underwriting criteria to obtain goals-qualifying mortgage loans and increased our investments in higher-risk mortgage loan products that are more likely to serve the borrowers targeted by HUD’s goals and subgoals, which could increase our credit losses."

Blame Fannie Mae and Congress For the Credit Mess - WSJ.com

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In 2009, after listening to the primary excuses that were being bandied around, I started to research the Sub-Prime Bubble and it' Collapse.

The generic Bank Blame really didn't offer up any explanations as to the root causes that led to a Systemic collapse.

First off, there was never any real incentive for any private lender to lower underwriting standards in the first place. Standards that had been in-place for decades, standards that insured the viability and integrity of our entire system of credit and finance.

There was no incentive for a private lender to arbitrarily take on the level of risk that was involved in creating a special loan "Sub-Prime " for people with questionable credit.

What I was hearing in the context of the " Too Big to Fail " narrative was a description of interim activity, a part of the process and a process that for some reason no one, ( well with one or two exceptions ) was willing to discuss in terms of it's origination's.

IF banks had simply created these loans, whether by Federal mandate or by their own free will, there would have just been a rash of defaults and then a rash of bank failures, and it would have started and stopped before the end of Clinton's Presidency.

But that's not what happened. The moral hazard that went along with the creation of these loans was transferred, transferred from the Banks to the Tax Payer via the GSE's, who were placed under a HUD mandate in 1995, to buy up an increasing amount of low quality loans starting at 42% and ending at 56% in 2007.

That mandate, under Clintons 1995 Homeownership Strategy, also reduced the Capital requirement standards of the GSE's from 10% to 3 %.

Along with the Federal mandates, the GSE' received new leadership via Clinton's political appointees with Franklin Raines being selected as CEO.

Yes, there is a lesson to learn from the collapse, a lesson that's impossible to consider if you don't understand the ACTUAL REASON why the bubble turned into a Systemic Collapse.. Even now Obama's trying to appoint a Democrat Politician to run the Federal Housing Finance Corporation.

Fannie Mae and Freddie Mac for over a Decade manipulated the market, manipulated the values of their own securities and their own collateral. Bought Trillions in Low quality loans and securities and then qualified them internally by using their own subjective definitions.

They started packaging sub-prime loans, securitizing and selling them to the asset markets in 1997 as "AAA" securities. A full 5 years before any private MBSs were created. And then after 2002, they were the primary Consumer of all Privately created MBSs ending up with 33% of the total amount by 2008.

They posted over 10 Billion in profits they never made, and hid almost a TRILLION dollars in bad debt that was backed with no capital.

They were, the only two financial entitles involved in the Sub-Prime Collapse to be investigated by the SEC and as a result in 2011, 6 of their Ex-executives plead guilty to securities fraud on a unprecedented scale.

SEC Charges Former Fannie Mae and Freddie Mac Executives with Securities Fraud; Release No. 2011-267; December 16, 2011
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