Loading...
Symbols:
Get Seeking Alpha Free Stock Alerts by Email!
Get Free Stock Alerts by Email!
Transcripts
- H. J. Heinz Company F2Q08 (Qtr End 10/29/08) Earnings Call Transcript
- Hibbett Sports, Inc. F3Q09 (Quarter End 11/1/08) Earnings Call Transcript
- NewMarket Technology, Inc. Q3 2008 Earnings Call Transcript
- Foot Locker, Inc. Q3 2008 (Qtr End 11/01/08) Earnings Call Transcript
- Kirkland’s, Inc. Q3 2008 (Qtr End 11/01/08) Earnings Call Transcript
- Ann Taylor Stores Corporation Q3 2008 (Qtr End 11/1/2008) Earnings Call Transcript
- The J.M. Smucker Company F2Q09 (Qtr End 10/31/08) Earnings Call Transcript
- Outdoor Channel Holdings, Inc. Q3 2008 Earnings Call Transcript
- Salix Pharmaceuticals, Ltd. Q3 2008 Earnings Call Transcript
- Kite Realty Group Trust Q3 2008 Earnings Call Transcript
-
Editors' Picks
-
Most Popular
- Buffett's Gamble: $40 Billion Bet on Volatility
- China: The One Global Market with Gains Behind the Gloom
- GM: Buyout Better than Bailout
- What's Happening to Berkshire Hathaway?
- Preferred Dividend ETFs: Shelter from the Storm?
- Berkshire Hathaway Credit Risk, Index Puts Are Overblown Worries
- Full list of Editors' Picks »
- General Electric: Genuine Risk of Collapse? »
- Apple's Greatest Idea Yet »
- Citigroup: The End Draws Near »
- Berkshire Hathaway Credit Risk, Index Puts Are Overblown Worries »
- Jim Cramer's Stop Trading! Is Steve Ballmer a Diabolical Genius? (11/19/08) »
- Can You See Apple Under $60? »
- Where Will GE's Jeff Immelt Be at 2 PM Today? »
- Las Vegas Sands Corp. Q3 2008 Earnings Call Transcript »
- Buffett's Gamble: $40 Billion Bet on Volatility »
- Jim Cramer's Lightning Round - Dividends, Dividends, Dividends (11/19/08) »
- Friday Outlook: Out of Options? »
Hedge Fund Jobs
Job Seekers: Search jobs by category, get job alerts by email or live feed, apply online See full list of jobs »
Employers: See all recruitment options, get applications online or by email Post a job »
Trading Center
- Free E-Newsletters
- About Seeking Alpha
- About Us
- Contact Us
- What's New
- Readers Feedback
- Advertise With Us
- Contributors
- Contribute an Article
- Feature Your Book
- Our Contributors
- Anonymous Contributions
- Dispute an Article?
- Legal
- Terms of Use
- Privacy
- Copyright
redriver
20 Comments
When Lending Standards Really Changed
“Here is the article from the New York Times that was calling for Fannie Mae
to open up the subprime market by order of the Clinton Administration.
Maybe, all the Democrats that have had power of the congress and have been
led around by the nose by the lobbyist from Credit Suisse and UBS should stop
saying that the Republican trickle down theory created this mess and take
some ownership”.
Here is the article:
By STEVEN A. HOLMES
Published: September 30, 1999 !!!!!!!!!!!!!!!!
In a move that could help increase home ownership rates among minorities
and low-income consumers, the Fannie Mae Corporation is easing the
credit requirements on loans that it will purchase from banks and other
lenders.
The action, which will begin as a pilot program involving 24 banks in 15
markets -- including the New York metropolitan region -- will encourage
those banks to extend home mortgages to individuals whose credit is
generally not good enough to qualify for conventional loans. Fannie Mae
officials say they hope to make it a nationwide program by next spring.
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.
In addition, banks, thrift institutions and mortgage companies have been
pressing Fannie Mae to help them make more loans to so-called subprime
borrowers. These borrowers whose incomes, credit ratings and savings are
not good enough to qualify for conventional loans, can only get loans
from finance companies that charge much higher interest rates --
anywhere from three to four percentage points higher than conventional
loans.
''Fannie Mae has expanded home ownership for millions of families in the
1990's by reducing down payment requirements,'' said Franklin D. Raines,
Fannie Mae's chairman and chief executive officer. ''Yet there remain
too many borrowers whose credit is just a notch below what our
underwriting has required who have been relegated to paying
significantly higher mortgage rates in the so-called subprime market.''
Demographic information on these borrowers is sketchy. But at least one
study indicates that 18 percent of the loans in the subprime market went
to black borrowers, compared to 5 per cent of loans in the conventional
loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae
is taking on significantly more risk, which may not pose any
difficulties during flush economic times. But the government-subsidized
corporation may run into trouble in an economic downturn, prompting a
government rescue similar to that of the savings and loan industry in
the 1980's.
''From the perspective of many people, including me, this is another
thrift industry growing up around us,'' said Peter Wallison a resident
fellow at the American Enterprise Institute. ''If they fail, the
government will have to step up and bail them out the way it stepped up
and bailed out the thrift industry.''
Under Fannie Mae's pilot program, consumers who qualify can secure a
mortgage with an interest rate one percentage point above that of a
conventional, 30-year fixed rate mortgage of less than $240,000 -- a
rate that currently averages about 7.76 per cent. If the borrower makes
his or her monthly payments on time for two years, the one percentage
point premium is dropped.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not
lend money directly to consumers. Instead, it purchases loans that banks
make on what is called the secondary market. By expanding the type of
loans that it will buy, Fannie Mae is hoping to spur banks to make more
loans to people with less-than-stellar credit ratings.
Fannie Mae officials stress that the new mortgages will be extended to
all potential borrowers who can qualify for a mortgage. But they add
that the move is intended in part to increase the number of minority and
low income home owners who tend to have worse credit ratings than
non-Hispanic whites.
Home ownership has, in fact, exploded among minorities during the
economic boom of the 1990's. The number of mortgages extended to
Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according
to Harvard University's Joint Center for Housing Studies. During that
same period the number of African Americans who got mortgages to buy a
home increased by 71.9 per cent and the number of Asian Americans by
46.3 per cent.
In contrast, the number of non-Hispanic whites who received loans for
homes increased by 31.2 per cent.
Despite these gains, home ownership rates for minorities continue to lag
behind non-Hispanic whites, in part because blacks and Hispanics in
particular tend to have on average worse credit ratings.
In July, the Department of Housing and Urban Development proposed that
by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio
be made up of loans to low and moderate-income borrowers. Last year, 44
percent of the loans Fannie Mae purchased were from these groups.
The change in policy also comes at the same time that HUD is
investigating allegations of racial discrimination in the automated
underwriting systems used by Fannie Mae and Freddie Mac to determine the
credit-worthiness of credit applicants. (End Article)
Just google: Steven Holmes 1999 NY Times article.
An Absence of Leadership
All this to protect financials!? The normal investor has had a year to get out of financials and they did, hence the drops. The only "people" in the financials are greedy little investors/hedge funds looking for a quick fit. And they just got it by us gambling with your children's future.
How is anyone in american government supposed to go over to a second and third world country and tell them to receive our funding you have to do as we have in creating our great nation. Free markets, joke. Limited government intervention, lie. Power to the individual versus the government, shame. Well at least we will be able to finally "fit" into the United Nations family. We are of them now.
What country are we now? Not America. Shame on us all. Shame indeed.
Oh by the way, did any of your representatives listen to anything you had to say on this matter? We are Fools. Looking forward to that Carter era inflation.
We will never find leaders if we the people do not deserve them.
Good luck.
New Attack Plan: Bring Back RTC on a Grand Scale
There is only one way out of this mess and that's to spend our way out regardless of inflationary woes. Not that I am for any of this but when we allow ourselves through our representatives to get boxed into a corner, it is what it is. Spend a couple of Trillion on creating a new RTC or, on an infrastructure improvement plan........ either way its going to really really hurt. We got exactly what we deserved. The "Big Brain" concept highlighted by Greenspan and Ben has always been a joke. This economy is just too complicated for anyone person to understand, plan and guide.
Hope the Chinese, Japanese and the Saudi's keep buying our paper because if they stop, its over.
As for the really rich,there is nothing preventing them from dumping their citizenship to protect their assets from us poor suckers.
Residential Real Estate: How Much More Pain?
Residential Real Estate: How Much More Pain?
Forget $100 a Barrel - Oil Will Plummet to $30
These kids are so funny. I especially like the psuedo crazed brainwashed stare in his picture. Combined with the scam artist pusher it sure was funny. Look for him on an infomercial soon.
I guess this is one more example of what the audacity of hope breeds.
Why Visa Should Thrive
Visa Inc. = US consumers hmmmmmm.
So as Visa grows internationally let's say in Europe, the only benefit Visa Inc. gets is some small fee percentage vs. the overall profit stream. Whereas MC when it grows its numbers worldwide, the stock benefits to a much greater degree. If I have this right, it looks like its MC. Agree that Discover and Amex will be very competitive as well.
Oil Price Targets
Fannie and Freddie: Let’s Call the Whole Thing Off
But, "Its George Bush's Fault!!!!?????????&quo... God that's so old.
So for a dose of the truth here's " Taking you back to school", again:
Fannie Mae was created in 1938 as part of DEMOCRATIC PRESIDENT Franklin Delano Roosevelt's SOCIALIST New Deal. (Read, The Forgotten Man) The collapse of the national housing market in the wake of the Great Depression discouraged private lenders from investing in home loans. Fannie Mae was established in order to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing.(Sounds familiar, Socialists drooling now)
Initially, Fannie Mae operated like a national savings and loan, allowing local banks to charge low interest rates on mortgages for the benefit of the home buyer. This lead to the development of what is now known as the secondary mortgage market. Within the secondary mortgage market, companies such as Fannie Mae are able to borrow money from foreign investors at low interest rates because of the financial support that they receive from the U.S. Government. It is this ability to borrow at low rates that allows Fannie Mae to provide fixed interest rate mortgages with low down payments to home buyers. Fannie Mae makes a profit from the difference between the interest rates homeowners pay and foreign lenders charge.
For the first thirty years following its inception, Fannie Mae held a veritable monopoly over the secondary mortgage market. In 1968, due to fiscal pressures created by the Vietnam War, DEMOCRATIC PRESIDENT Lyndon B. Johnson privatized Fannie Mae in order to remove it from the national budget. At this point, Fannie Mae began operating as a GSE, generating profits for stock holders while enjoying the benefits of exemption from taxation and oversight as well as implied government backing. In order to prevent any further monopolization of the market, a second GSE known as Freddie Mac was created in 1970. Currently, Fannie Mae and Freddie Mac control about 90 percent of the nation's secondary mortgage market.
GSEs such as Fannie Mae and Freddie Mae, with their combination of private enterprise and public backing have experienced a period of unprecedented financial growth over the past few decades. The current assets of these two companies combine for a total that is 45 percent greater than that of the nation's largest bank.
On the other hand, their combined debt is equal to 46 percent of the current national debt. It is this combination of rapid growth and over leveraging that has lead to the current concerns of Congress, the Justice Department and the SEC with regards to the financial practices of these GSEs.
Fannie Mae and Freddie Mac are the only two Fortune 500 companies that are not required to inform the public about any financial difficulties that they may be having. In the event that there was some sort of financial collapse within either of these companies, U.S. taxpayers could be held responsible for hundreds of billions of dollars in outstanding debts. A recent investigation by the Justice Department and the SEC into the accounting practices at Freddie Mac revealed accounting errors in the amount of 4.5 to 4.7 billion dollars and resulted in the termination of three of the company's top executives. Ongoing investigations by DEMOCRATIC CONTROLLED Congress, particular the DEMOCRATIC CONTROLLED House Finance Services subcommittee that oversees the activity of GSEs, will determine the future role of Fannie Mae and Freddie Mac and the secondary mortgage market that they dominate.
Just the facts.
The Obama camp can now formulate a response.
U.S. Housing Market Forecast: 2008-2010
Nationalizing Oil: Well-Intentioned, But Wrong
Can't wait to see that Chinese oil rig being built off the Florida coast (first of six I am told), flying the Chinese flag half way into our "protected zone".
Hoping the Housing Crisis Is Over
Zeus
The WSJ Is Wrong on the Housing Crisis
Homebuilder Bailout: An Updated Analysis
"Be aware that if this provision becomes law, it will incentivize builders to dump assets at levels and prices that were previously imprudent and economically unfeasible in an attempt to reclaim cash in the form of back taxes. This will exacerbate the strain on the financial sector since it is the devalution of real assets that triggered much of this mess in the first place. Property values will drop faster, property value led defaults will accelerate, and MBS and related securities, products and pools will get hit that much faster and harder as well."
From Reggie himself.
My father doesn't think this will pass the house, "its pretty easy to get the senators to vote this way but its harder to get through the house since there are just so many more of those pinheads. This should work in our favor."
TWT
The Reverse Ripple Theory of Metropolitan Home Price Corrections
The only comps acceptable in Queen Creek are foreclosures.
Being based in Phoenix I will agree with the "concept" (actually the reality) that the outlying areas will be the first to rebound because that is where all the big right offs have been with the recent REO's. With Speedwagon finished lot prices of 30 cents on the improvement dollars (land is free - no joke here. Ex.: If it took $1200/Front foot to build, the finished lots went for $300/front foot), this will enable at least one old time Phoenix builder who bought some of these REO's to "begin selling new homes in the valley starting from $89,900 by year-end".
Now the really interesting phenom to watch (as mentioned) will be the reverse flow of devaluations back to the core. Flushing the toilet seems to be a good analogy. Can't wait for that calm flat water. In the mean time, its going to be very interesting.
The other point that needs to be addressed is that a great deal of the cost increase of new home construction was not caused by the usual suspects but by the cities and towns themselves. (Seeking Alpha 2/20 article 64780) Under the umbrella of "better" "quality" "livable" they drastically raised the cost of doing business. A University of Washington Economics professor completed a study last year on this very topic and found that in Seattle the city actually was responsible for over 88% of the cost increases over the last seven years! This number is lower here in Phoenix but a large number still. Larger lots=less density=more $/unit. Front porches on entry level homes. Stucco pop-outs on rear windows behind fences. 38' wide roadways. The list goes on. For us to get back to market, everything related to the run-up must be addressed.
Good article.