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Re: navycmdr post# 581395

Tuesday, 12/10/2019 11:55:42 AM

Tuesday, December 10, 2019 11:55:42 AM

Post# of 790515
Generally the article is on point and addresses the core issue surrounding the '08 financial crisis, Affordable Housing Goals. However, there are still 2 disturbing statements that were allowed to creep in:

1. FROM THE ARTICLE

Fannie and Freddie imploded during the financial crisis after backing loans to borrowers who couldn't pay them. The government seized the companies and beefed up their affordability mandates.


This statement is FALSE in part and extremely misleading in part. Fannie and Freddie did NOT implode unless one believes the 3-card monte accounting of FHFA. Fannie alone had $30 BILLION+ CASH in the bank at the time of seizure.

https://www.housingwire.com/articles/34280-the-three-card-monte-accounting-of-fannie-freddie-conservatorship/


Fannie and Freddie "backing loans to borrowers who couldn't pay them" was in fact a FORCED MANDATE imposed on them by HUD policy through the Affordable Housing Goals initiative where as high as 56% of all loans purchased by the GSE's in 2008 had to be subprime, alt-A, no-doc high risk loans.


2. FROM THE ARTICLE

Fannie's and Freddie's affordability mandates remain in place, and Mr. Calabria said the recent changes are a joint effort between the companies and the FHFA.


Can we trust FHFA to properly throttle affordability mandates through future administrations with different political goals, many of which politicize the GSE's? I seriously doubt it. This SCREAMS for a more permanent solution. FHFA attempt to justify it's existence? Sure looks like it.


GSE ACT AFFORDABILITY MANDATES FROM FCIC REPORT

As shown in Table 7, the GSEs’ acquisition of subprime loans and other NTMs (Non-Traditional Mortgages) began in the 1990s, when they first became subject to the AH (Affordable Housing) goals. Research shows that, in contravention of their earlier standards, the GSEs began to acquire high loan-to-value (LTV) mortgages in 1994, shortly after the enactment of the GSE Act and the imposition of the AH goals, and by 2001—before the PMBS market reached $100 billion in annual issuances—the GSEs had already acquired at least $700 billion in NTMs, including over $400 billion in subprime loans.

https://www.govinfo.gov/content/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf p.487-533

So you see, it was FAILED U.S. government housing policies (Affordable Housing Goals) that were the root cause of the '08 crash.

Finger-pointing in Washington is endemic when problems occur, and agencies and individuals are constantly trying to find scapegoats for their own bad decisions, but HUD’s effort to blame Fannie and Freddie for the decline in underwriting standards sets a new standard for running from responsibility.

-FCIC Report p.487-488




https://www.justice.gov/storage/120919-examination.pdf