Replies to post #649104 on Fannie Mae-No Politics (FNMA)

[HappyAlways]

The housing crisis was caused mainly by the Administration. The Senators/Congressman kept pressing the market to accept sub-prime mortgages (in order to support low-income family housing). At some points, they passed regulations that the GSE MBS had to include certain % (15% ?) of sub-prime mortgages. Banks and mortgage brokers did not have any concern, as they requested higher interest for subprime mortgages and immediately sold them (risk) to the GSEs.

Fannie (according to a retired CFO) was aware of the risk as early as 2006. But, they could do nothing. So, they started piling up reserves and buying CDSs (i.e. to cover the mortgage risk) hoping to transfer the risks to other financial institutions and insurance companies. It ended up all TBTFs were unable to cope with the crisis. The GSEs bailout in 2008 was actually to bailout the TBTFs. That's my understanding and may not be correct. Please do your own DD.

[Glossy]

As i remember. The cause of all the problem in the 2008 crash was when Bill Clinton enforced his social housing policies. He enforced "new" flexible mortgage guidelines to boost low income and minority ownership. Which means, banks or lenders are forced to lend to people who are not even qualified to buy a house. After 5 years this was implemented, problems started to come out. Millions who were unqualified who were approved are not able to pay for their mortgage and started defaulting and walked out. This has caused the market crash in the 2008. I think The Big Short movie kinda showed this.

[mrfence]

Thursdays and Saturdays ;-)