Charts SYSTEMS

[snootmagruder]

JLS, That WIKI article is long and states that the FCIC (Financial Crisis Inquiry Commision) stated it was not the fault of CRA and some may stop reading it right there. So I'll quote what I feel and the most important points:

"The Housing and Community Development Act of 1992
This legislation established an affordable housing loan purchase mandate for Fannie Mae and Freddie Mac, and that mandate was to be regulated by HUD. Initially, the 1992 legislation required that 30 percent or more of Fannie's and Freddie's loan purchases be related to affordable housing. However, HUD was given the power to set future requirements, and HUD soon increased the mandates. (to 52% at 2007)"
I have read on a couple sites that fines would be used to enforce the GSE's compliance on the above.

Note the name of the program above was not "CRA" and that "CRA" is used as a catchall phrase for all government low income loan programs and the reason why liberal studies that claim CRA was only a small percentage are flawed.
The above named government loan program was very significant and equal to CRA. Although CRA specifies loans to be made in a manner consistent with safe and sound operation, they applauded what they called "flexible" lending standards which entailed low to no down payments, low credit scores, gaps in employmentand payments of 50% or higher of income.
""Over the past decade Fannie Mae and Freddie Mac have reduced required down payments on loans that they purchase in the secondary market. Those requirements have declined from 10% to 5% to 3% and in the past few months Fannie Mae announced that it would follow Freddie Mac's recent move into the 0% down payment mortgage market"

"The GSEs had a pioneering role in expanding the use of subprime loans: In 1999, Franklin Raines first put Fannie Mae into subprimes, following up on earlier Fannie Mae efforts in the 1990s, which reduced mortgage down payment requirements. At this time, subprimes represented a tiny fraction of the overall mortgage market.[64] In 2003, after the use of subprimes had been greatly expanded, and numerous private lenders had begun issuing subprime loans as a competitive response to Fannie and Freddie, the GSE's still controlled nearly 50% of all subprime lending. From 2003 forward, private lenders increased their share of subprime lending, and later issued many of the riskiest loans. However, attempts to defend Fannie Mae and Freddie Mac for their role in the crisis, by citing their declining market share in subprimes after 2003, ignore the fact that the GSE's had largely created this market, and even worked closely with some of the worst private lending offenders, such as Countrywide. In 2005, one out of every four loans purchased by Fannie Mae came from Countrywide.[65] Fannie Mae and Freddie Mac essentially paved the subprime highway, down which many others later followed.

"It must be noted that the judgments made above (by Konczal, Krugman, McLean, the GAO, and the Federal Reserve) were made prior to the SEC charging, in December 2011, Fannie Mae and Freddie Mac executives with securities fraud. Significantly, the SEC alleged (and still maintains) that Fannie Mae and Freddie Mac reported as subprime and substandard less than 10 percent of their actual subprime and substandard loans.[82] In other words, the substandard loans held in the GSE portfolios may have been 10 times greater than originally reported"

"HUD mandates for affordable housing (The quote below was from this section)
Joseph Fried, author of "Who Really Drove the Economy Into the Ditch?" believes it was inevitable that the looser lending standards would became widespread: "…it was impossible to loosen underwriting standards for people with marginal credit while maintaining rigorous standards for people with good credit histories. Affordable housing policies led to a degrading of underwriting standards for loans of all sizes." [10]"
The above quote is my view in a nutshell

"Policies of the Clinton Administration
As noted, the National Homeownership Strategy, which advocated a general loosening of lending standards, at least with regard to affordable housing, was devised in 1995 by HUD under the Clinton Administration. During the rest of the Clinton Administration HUD set increasingly rigorous affordable housing loan requirements for Fannie and Freddie."

http://en.wikipedia.org/wiki/Government_policies_and_the_subprime_mortgage_crisis