re: Bush Mortgage Bubble FAQs[W:1083,1531]
I dont consider the fed a politically motivated group. Also, the President's Working Group sole purpose is to examine things that affect the market.
The Fed is certainly a politically motivated group. If Congress can change who's in charge of the Fed, it's politically motivated. Second, in the 70s, Carter commissioned the US Geological Survey to determine how much Coal was left in the US. When the USGS reported that there was over 100 years of Coal left in the US, Carter had those people removed, and a new study was commissioned which shockingly came up with more politically supportable answers.
I don't care what the sole purpose is. If government has it's fingers in it, you can bet it's biased to whatever the government wants the answer to be. People who don't give the government, an answer the government wants, don't last long.
And by the way... it's not always an answer the President wants either. Sometimes political opponents get into any group, and steer it towards the answer they want. Again, I'm not against using information the government gives out, but only if it matches the facts of the question at hand. In this case, the information given does not match the facts, as I have shown many times.
And dont think Bush's working group is politically motivated by saying it started in late 2004. Politically motivated groups say it started in 1864, 1977, 1997 or any year other than 2004. And I posted the facts. Bush's working group did say it "was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007". They left out the part where it "quickly spread to all mortgages".
Again, you say some stuff, but the facts do not support that. Underwriting standards declined in 1997, when Freddie Mac directly guaranteed Sub-prime loans which did not follow underwriting standards.
You also failed to prove your claim that Sub-prime loans were not bad. You claimed they were not all bad. Prove it.
In 2004, 4.3% of all mortgages were No Doc.
You are convincing me that you don't even understand this part of your own argument.
You said previously that not all sub-prime mortgages are bad.
Now you complain that 4.3% of all mortgages were No Doc.
No Doc, and Low Doc loans are considered Alt-A. Alt-A is according to Freddie and Fannie, the 'safer' loans to Sub-prime.
The problem is, ignorant people claimed these were liar loans. Now certainly some of them were in fact liar loans. But No-Doc loans fit a specific area of the market.
In a typical conventional loan, you provide evidence of where you work, and what your salary is. The underwriting process verifies where you work, verifies your salary, verifies the company and how stable they are. This is documentation of your income.
But say that you have a bunch of rental property. That is not documented income. Those tenets could quit paying you tomorrow. Now your credit history is good, no late payments to a credit card or anything, but your income is not documentable. You qualify for a no-doc loan. Or an Alt-A loan.
Another example is someone who is self-employed. You run a business. The bank can't document your wage, because you make your own wage. You could open an account under your business, drop $10,000 in it, and write yourself a check for $10,000 from the business, and then claim you make $10,000 a month to the bank. See here's my check. Obviously that's not valid documentation. Again, you wouldn't qualify for a standard mortgage. You would have to get an Alt-A sub-prime mortgage. A no-doc or low-doc loan.
The rest of the sub-prime market is bad credit, defaults in your history, and other bad signs. These are absolutely horrible.
Alt-A are generally for people with good credit, who simply don't have documented income. Or another example would be someone who retired with a huge savings, but now works a part time retirement job earning $10 an hour. That person would be low-doc Alt-A loan, because his documented income is low. The savings account doesn't count.
You can look all this up, but I know you won't. Hopefully other people who read this thread will be more educated.
The point though, is that when you talk about not all loans being as bad as the horrible sub-prime loans.... Alt-A No Doc loans *ARE* those loans.
Alt-A loans do have a 'lower' default rate than the rest of the sub-prime market. But the fact is, they still have a higher default rate than prime-rate conventional mortgages. This is why I say all sub-prime loans are bad. These 'safer' loans are what caused the biggest bank bailout that has ever happened in world history, namely Freddie and Fannie.
And thats why every single regulatory effort (state and federal) after the Bush Mortgage Bubble deals with checking income and ability to repay. The Fed actually made No Doc Subprime loans 'illegal' or whatever they call it
Huh? Obama has pushed for no-doc loans.
Fannie Mae, Freddie Mac allow no-doc loan modifications - Washington Business Journal
Called the Streamlined Modification initiative, borrowers who are at least 90 days delinquent on mortgages that are at least one year old are not required to submit documentation when accepting a loan modification offer from Fannie or Freddie to lower their monthly payments.
So they are late, indicating there's a problem already, and Fannie and Freddie are offering 'free' mortgage modifications without any documentation whatsoever.
"Second, lenders are prohibited from making "stated income" loans and are required in each case to verify the income and assets they rely upon to determine borrowers' repayment ability. Lenders must also verify and consider the borrower's other debt obligations, such as by using a credit report. The rule is intended to ensure that creditors do not assess repayment ability using overstated incomes or understated payment obligations"
FRB: Testimony--Braunstein, Mortgage lending reform--March 11, 2009
And yet.... Fannie and Freddie are doing those loans right now as we speak. Fail again?
