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My apologies for the late response.
A toxic MBS is one that has collapsed in terms of price due to an interruption of cash flows owed to the security (default). Remember, F&F nearly went under due to a collapse in the housing market (which degenerated the value of their mortgage security portfolio) forcing immense write downs in conjunction with a dramatic spike in loan-loss-reserves. As an emergency measure and with the company already in receivership with the U.S. Treasury, they did purchase (at the market bottom) billions of toxic MBS's. Did F&F put forth enough due-diligence with respects to analyzing the loans they were purchasing? Nope! A most serious risk management failure. Now days, they no longer rely on ratings agencies to assure the values of the assets they purchase.
Secondly, F&F were prohibited from purchasing sub-prime mortgage backed securities, the product of Wall Street; which is why they are due billions of dollars in settlements from a plethora of private lenders.
WTF are you talking about, lowering standards? F&F are underwriters, they do not set the standards for lending. Who the lender decides to lend to is up to the actual.... lender. No-Income/No-Asset loans would be prohibited from F&F's mortgage security portfolio. Why on earth did Citi agree to pay Fannie $850 million?
WTF are you talking about?
Not entertaining your strawman.
Where did i say such a thing? Show me.
Another instance of putting words in my mouth.
CRA loans are about zip codes! It has nothing to do with low income borrowers, only low income neighborhoods. Now, it is true that potential low-income borrowers live in CRA districts. It's just that CRA loans were less likely to default relative to non-CRA loans of similar risk.
Nope! Private lenders and their special investment vehicles started this mess; issuing short term debt and then lending the proceeds to mortgage originators. The SIV's would then package the debt into specific securities and sell them as mortgage bonds. Sometimes F&F would purchase them, but during the bubble years it was primarily the likes of Goldman Sachs, Bear Stearns, Morgan Stanley, Merryl Lynch, Lehman, etc....
Not to be left out: the same investment banks mentioned above were also heavily active in the mortgage securitization market, often creating exotic instruments e.g. synthetic MBS's (securities composed entirely of credit derivatives, or credit default swaps). You see, it is the synthetic assets that did the most damage because they were highly leveraged on their very foundations, not to mention the fact that IB's were purchasing them on margin. As the value of the asset falls, the asset that derives its value based on the volatility of underlying asset will rise or fall exponentially.
Of course, there were a few people who took the short sides of these positions. Think Hank Paulson. Hell, even Goldman settled on allegations it held short positions prior to selling investors long positions on various MBS, and not disclosing it.
Even if we assume your figure is true, it still does not attest as to how these mortgages came into existence. Why were lenders purposefully creating risky mortgages and passing them off as low risk investments? That is the very definition of fraud. That's right, I'll ask again! Even if we assume F&F were just a couple of bonehead companies blindly buying up any mortgage they could, why was the market saturated with such fraud?
But in reality:
A toxic MBS is one that has collapsed in terms of price due to an interruption of cash flows owed to the security (default). Remember, F&F nearly went under due to a collapse in the housing market (which degenerated the value of their mortgage security portfolio) forcing immense write downs in conjunction with a dramatic spike in loan-loss-reserves. As an emergency measure and with the company already in receivership with the U.S. Treasury, they did purchase (at the market bottom) billions of toxic MBS's. Did F&F put forth enough due-diligence with respects to analyzing the loans they were purchasing? Nope! A most serious risk management failure. Now days, they no longer rely on ratings agencies to assure the values of the assets they purchase.
Secondly, F&F were prohibited from purchasing sub-prime mortgage backed securities, the product of Wall Street; which is why they are due billions of dollars in settlements from a plethora of private lenders.
WTF are you talking about, lowering standards? F&F are underwriters, they do not set the standards for lending. Who the lender decides to lend to is up to the actual.... lender. No-Income/No-Asset loans would be prohibited from F&F's mortgage security portfolio. Why on earth did Citi agree to pay Fannie $850 million?
WTF are you talking about?
Not entertaining your strawman.
Where did i say such a thing? Show me.
Another instance of putting words in my mouth.
CRA loans are about zip codes! It has nothing to do with low income borrowers, only low income neighborhoods. Now, it is true that potential low-income borrowers live in CRA districts. It's just that CRA loans were less likely to default relative to non-CRA loans of similar risk.
Nope! Private lenders and their special investment vehicles started this mess; issuing short term debt and then lending the proceeds to mortgage originators. The SIV's would then package the debt into specific securities and sell them as mortgage bonds. Sometimes F&F would purchase them, but during the bubble years it was primarily the likes of Goldman Sachs, Bear Stearns, Morgan Stanley, Merryl Lynch, Lehman, etc....
Not to be left out: the same investment banks mentioned above were also heavily active in the mortgage securitization market, often creating exotic instruments e.g. synthetic MBS's (securities composed entirely of credit derivatives, or credit default swaps). You see, it is the synthetic assets that did the most damage because they were highly leveraged on their very foundations, not to mention the fact that IB's were purchasing them on margin. As the value of the asset falls, the asset that derives its value based on the volatility of underlying asset will rise or fall exponentially.
Of course, there were a few people who took the short sides of these positions. Think Hank Paulson. Hell, even Goldman settled on allegations it held short positions prior to selling investors long positions on various MBS, and not disclosing it.
Even if we assume your figure is true, it still does not attest as to how these mortgages came into existence. Why were lenders purposefully creating risky mortgages and passing them off as low risk investments? That is the very definition of fraud. That's right, I'll ask again! Even if we assume F&F were just a couple of bonehead companies blindly buying up any mortgage they could, why was the market saturated with such fraud?
But in reality:
