Subprime Suspects

Republicans great ability is to attack before they have to answer for their mistakes. It is a mongering
strategy, bomb first talk later. Their deregulation in 1999, gave the banks the ability to go this far .
Non american in spirit or ethical and moral behavior this country was founded on.
I am sure there are good men among the conservatives but the party has began to stink like a 3 day old fish.

This article makes a valid point but it does miss a few facts. First of all there were programs backed by Fannie Mae and Freddie Mac that were specifically targeted to low income neighborhoods that were intended to do help low income buyers to buy homes with no money down and even up to 106% of the selling price to cover closing costs. MyCommunity (Fannie) Home Possible ( Freddie). These programs should never have been offered since they were very risky loans. Freddie and Fannie also allowed Stated loans and 100% loans to all who qualified which weren't very strict guidlines. No it isn't only low income families that caused the problem but the programs that were created to help serve these buyers that opened the flood gates to people of all income brackets and races to buy over their heads. The fault of the Democrats here is that theywere against oversight of these programs and the Republicans failed us since they didn't force the issue. Why didn't they force the issue? More then likely because they didn't want to be accused of Racism that famous rally cry. No it isn't the minorities that caused the problem but it was the programs that were created to help them that is the root of the problem that enbled greed and abuse to run rampant.

This is a brilliant article based on facts, and anyone who comments otherwise is probably one of those bitter Republicans who refuses to take any blame for anything. Get real. As the author suggest, we can't simply dump the blame on the heads of the poor while ignoring Wall Street's greed and stupidity.

Get real. And quit trying to pass the blame. Lending money to minorities and pooor people did NOT cause the problem. But lending money to people who did not have the ability to pay DID create the problem, or, at least, started the problem.

Please stop playing the race card or the class card. You insult the intelligence of the readers.

As a loan originator I find this article absurd. A credit report doesn???t show an underwriter if you are a minority. When a person comes to me for a loan I don???t see black white brown or red, I see green. No one cares if the person is a minority, we just care if they can qualify for the loan. This article just encourages hate, fear and mistrust.
And to the poster who insinuated that it was the ???unscrupulous brokers??? get with the times. The investors like Bear Stearns and Meryl convinced or bought off Fannie and Freddy to make the rules ridiculously easy. You can???t blame the brokers for following the rules. Blame the rule makers and the people who bought them. Blaming the little guy was just something that the Banks made up to shift the blame off of them and the GSEs.
Subprime wasn???t really needed. FHA, the most popular loan now, has always said if a person has had a job for 2 years without gaps over 2 months, makes good money compared with their debts, and has 12 months clean credit including Chap. 13 BK, 24 months from a Chap. 7 and 36 from a foreclosure then you can get a loan with a rate comparable to conventional loans. This is all that was needed and we wouldn???t be in this mess. When house values went down FHA loans can still be refinanced because it doesn???t require an appraisal to get a lower rate or to fix the rate from an adjustable. You don???t even have to have a job to qualify you just have had no payment be over 30 days late. Subprime was the problem created because the afore mentioned guidelines were ???too tight.???
Stated income and ???Alt A??? loans were a problem too. This is largely the fault of a tax system that encourages people to understate their income or work under the table. If people would just show what they make then these loans wouldn???t be needed.

I did enjoy your article on the "Subprme Suspects". This a multifactorial problem which has been festering for decades. FInally eveything seemed to come together, as the stars coming into alignment, to creat this credit mess we find ourselves in. Although I agree with your premise, I do think that the CRA and pushing low-income loans contributed to the foreclosures we now see. Easy money and leveraging was no longer a class specific evil. Low income family wanting to live the American dream were led into subprime loans that they would not be able to pay. They are just as culpable as the investors that took equity out of their homes to buy three "flips" trying to get rich, or the investors building condo complexes. It just caught up to all of us. We can not regulate greed whether it be from banks, mortgage giants, politicians, or the everyday taxpayer being duped into an "easy money" loan. There the concept of personal responsibility to consider here.

I did enjoy your article on the "Subprme Suspects". This a multifactorial problem which has been festering for decades. FInally eveything seemed to come together, as the stars coming into alignment, to creat this credit mess we find ourselves in. Although I agree with your premise, I do think that the CRA and pushing low-income loans contributed to the foreclosures we now see. Easy money and leveraging was no longer a class specific evil. Low income family wanting to live the American dream were led into subprime loans that they would not be able to pay. They are just as culpable as the investors that took equity out of their homes to buy three "flips" trying to get rich, or the investors building condo complexes. It just caught up to all of us. We can not regulate greed whether it be from banks, mortgage giants, politicians, or the everyday taxpayer being duped into an "easy money" loan. There the concept of personal responsibility to consider here.

Couldn't have said it better myself. The rich got richer and the poor got poorer. I'm so tired of being in the class of people who gets blamed for tis economic mess. And I couldn't get a mortgage. So guess, what. The media still blames me. Oh, you couldn't get a mortgage, then you must be the poor that messing up the system. No, I'm the poor who pays 20% on a car loan while the rich get richer!!!!

THANK YOU for this analysis. You are right (Murdoch wrong again!). Examples of successful lending to "poor" people abound around the globe. The present crisis has its roots in four phenomena. Banks taught loan originators to hoodwink people and sell them loans while hiding the true cost. Federal regulators and the Administration ignored warnings and relaxed regulation on mortgage bundlers since 2001. Following the example of the government, homeowners borrowed money from their home equities to maintain a style of life in a declining economy since 2001. As the dollar was devalued, unscrupulous brokers induced more and more people to invest in multiple properties to get rich, thus creating a "housing bubble" that is now deflating. These are the four causative factors, not the policy of statesmen to try and give every citizen a chance to own a home.
Now we need a policy shift that will let renters buy, perhaps sharing equity with lenders or Fannie/Freddie and will let honest owner-iccyoabts re-negotiate and retain the homes they are struggling to buy.
Strange, in all the righteous neocon blaming, I find non demands that fraud-iniducing brokers and bank employees be prosecuted! Where is the indignation over college-educated licensed professionals who lied and induced undereducated people to lie on fraudulent loan applications? Fairness should not be a social class issue.

you hit it on the head. analysis of recent economic history clearly demonstrate that quantitatively with certainty. but still not as simple as blaming the weakest among us, as always.

Very interesting Daniel Gross. Let's get to the bottom of it and demand that the Treasury detail for us the quantify of loans they had to buy broken down by the income level, and ethnicity of the the borrowers. Then you will have the facts to set those Wall Street Journal types straight.

The NeoCon minimalist government stance is the problem. When no one looks after the store, the shelves end up empty. Like any good corporation, a poor CEO can bankrupt a company or in this case a Country, My Country. We need good managers, a plan, a direction. Just like a corporation, America need a strong and intelligent leader. The chaos of Capitalism has to be monitored and directed like any large organization.

Minorities are not to blame. All the defaulted and foreclosed loans could have been paid off entirely for 100 billion. The 850 billion is a joke, given to high class CIO's and CEO's. Basically what is to blame is the greedy corporations who hired millions of offshore workers to do the jobs americans were doing. Simple math...give the people good jobs and they pay their mortagages.

The *** Johnston ??? The meltdown is his fault...learn why here:
http://aardvarkzone.com/holtblog/?p=299

The *** Johnston ??? The meltdown is his fault... find out why here: http://aardvarkzone.com/holtblog/?p=299

As a low income earner, my upkeep of payments is driven by the fear of loosing shelter. Millionaires are not driven by fear, and their personal liability is very easy to hide legally. To very different motivators - the former to keep payments up, the later to do whatever you want, as the consequences no longer exist.

All you have to do is compare Freddie & Fannie's underwriting guidelines vesus "Sub-Prime"s underwriting guidelines. Freddie & Fannie requires mortage insurance for loans above 80%, mortgage insurance is responsible for anything above that 80%. Sub-prime circumvented this protection by issuing 80/20 combo loans, with the lack of proof of the ability to pay.
Why isn't FHA loans caught up in the headlines, why is because the sub-prime pushed them out of the markert.
FHA requires the ability to pay. Compare HUD repo list to sub-prime reos.
These 100% CLTV / "stated income" programs also facilitated the "artificial" market values of these properties. Without any skin in the game, anything goes as far as values for properties went. That is why these foreclosed properties lacked any equity, the "purchase" price were just illusions.
These 80/20 sub-prime loan also usually carried 2-3 years resets, for all intend and purpose these were balloon payments. This was a way to circumvent the minimun 5 years balloon rule. This rule was put in place after the last depression.

THANK YOU! That was so informative and logical. We've been homeowners for eight years. We've carried our mortgage even when stationed (we were military members) away from home. Our parents on boths sides come from generations of homeowners. They did this, at a time in our country's history when a black person was only expected to clean homes, not own one. It is insulting and demeaning to insinuate that minorities are the cause of the financial crisis. Poor management of resources caused this mess, not minorities.