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The Reason For The Mortgage Meltdown

Mike

Well-known member
Sandhusker said:
How do you figure?

The CRA basically forced banks/lenders to make unsafe loans, hence, the sub-prime mortgages.

I guess it woulld prolly fall back on Greenspan to a degree, but had the CRA not become law it would have been less likely.

Read the Background and Purpose, (but not limited to), and put 2+2 together.
 

Sandhusker

Well-known member
Mike said:
Sandhusker said:
How do you figure?

The CRA basically forced banks/lenders to make unsafe loans, hence, the sub-prime mortgages.

I guess it woulld prolly fall back on Greenspan to a degree, but had the CRA not become law it would have been less likely.

You hittin the bourbon early, son?
 

Mike

Well-known member
Sandhusker said:
Mike said:
Sandhusker said:
How do you figure?

The CRA basically forced banks/lenders to make unsafe loans, hence, the sub-prime mortgages.

I guess it woulld prolly fall back on Greenspan to a degree, but had the CRA not become law it would have been less likely.

You hittin the bourbon early, son?

No. If you will read and study the CRA a little more closely, it was designed for the low income groups that could not get mortgages, loans, etc. Exactly those that were stuck with Sub-Prime loans.

"The CRA provides types of equitable development financing support to target include:

Lending

1-Small business loans (less than $50,000) previously unavailable, or only available at substantially higher interest rates.
2-Mortgage loans with low down payments and reasonable interest rates available to moderate and low-income residents.
3-Monitoring and correction of discriminatory practices.
4-Financing of affordable rental housing built by nonprofit developers.
5-Mortgage financing for long-term affordability properties including LEHCs and CLT housing."

Yes, the Fed oversees the system. Along with a couple of others.
 

Sandhusker

Well-known member
CRA didn't make anybody make a loan people weren't qualified for nor had the cash flow to make payments on. The problem was making notes to people requiring them to make $2000/mo payments when they could only cash flow $1000. Those people qualified for a loan, but just not the one they got.
 
A

Anonymous

Guest
Two things caused the subprime fiasco-- GREED- and an Administration that does not believe in any oversight/regulation over any type Big Business which has given them a license to steal......
 

Mike

Well-known member
His Fault
Greenspan’s book will make headlines over the next few weeks, in part because of his surprisingly downbeat assessment of the economy and financial markets. But even though he left the Fed more than a year and a half ago, his recollections aren’t of merely historical interest. The current turmoil on Wall Street is largely a result of policy decisions he made during his final years. By keeping interest rates too low for too long, he encouraged a borrowing-fueled speculative binge, which has now given way to a credit squeeze. By failing to crack down on the mortgage industry, he allowed subprime hucksters to peddle dubious loans, which the financial industry’s math whizzes packaged for investors. Coming on top of his role in creating the internet-stock mania a decade ago, the mistakes Greenspan made—now playing out in home foreclosures and hedge fund collapses—will surely color historians’ views of his long tenure, if not his own account of it.
 

Sandhusker

Well-known member
Oldtimer said:
Two things caused the subprime fiasco-- GREED- and an Administration that does not believe in any oversight/regulation over any type Big Business which has given them a license to steal......

It was the flippin yeahoo mortgage lenders who got paid on a percentage of the mortgage - so they did all they could to write the biggest mortgages they could combined with consumers who didn't know what they were getting into combined with investment "professionals" who didn't know what they were buying when they bought those blocks of mortgages. In every deal, you had Mr. Niave, Mr. Crook, and Mr. Idiot.
 

Mike

Well-known member
Sandhusker said:
Oldtimer said:
Two things caused the subprime fiasco-- GREED- and an Administration that does not believe in any oversight/regulation over any type Big Business which has given them a license to steal......

It was the flippin yeahoo mortgage lenders who got paid on a percentage of the mortgage - so they did all they could to write the biggest mortgages they could combined with consumers who didn't know what they were getting into combined with investment "professionals" who didn't know what they were buying when they bought those blocks of mortgages. In every deal, you had Mr. Niave, Mr. Crook, and Mr. Idiot.

They got by with it because the Office of the Comptroller of the Currency, Federal Reserve System, Federal Deposit Insurance Corporation, and the Office of Thrift Supervision that oversees the CRA was not watching closely and they were meeting "Undiscriminatory" practices as outlined by the CRA.

They had to meet a quota.................................
 

Sandhusker

Well-known member
Mike said:
Sandhusker said:
Oldtimer said:
Two things caused the subprime fiasco-- GREED- and an Administration that does not believe in any oversight/regulation over any type Big Business which has given them a license to steal......

It was the flippin yeahoo mortgage lenders who got paid on a percentage of the mortgage - so they did all they could to write the biggest mortgages they could combined with consumers who didn't know what they were getting into combined with investment "professionals" who didn't know what they were buying when they bought those blocks of mortgages. In every deal, you had Mr. Niave, Mr. Crook, and Mr. Idiot.

They got by with it because the Office of the Comptroller of the Currency, Federal Reserve System, Federal Deposit Insurance Corporation, and the Office of Thrift Supervision that oversees the CRA was not watching closely and they were meeting "Undiscriminatory" practices as outlined by the CRA.

They had to meet a quota.................................

I don't know about all of the offices that you've mentioned, but the mortgage lenders that caused the problems aren't under the FDIC. The FDIC is for banks, and if they would of been over the lenders, I doubt the problem we have would be near as big if it even existed at all. I don't think those crappy notes would of got by a FDIC examiner.
 

aplusmnt

Well-known member
Oldtimer said:
Two things caused the subprime fiasco-- GREED- and an Administration that does not believe in any oversight/regulation over any type Big Business which has given them a license to steal......

There is only one cause for sub-prime fiasco. That is stupid people borrowing money they could not afford. There have been loan sharks around for 100's of years and any smart person knows not to borrow from them.

If you are not a smart person then you need to be renting, and the market will always make adjustments even for intelligence. We are currently seeing an idiot adjustment in the Housing market.

Personal responsibility caused the sub-prime mess, not Bush! Bush's only fault will be bailing out anyone that got burned, rather it be the loan sharks or the idiots. My tax dollars should not go to bail out stupid people.
 

Mike

Well-known member
There have been loan sharks around for 100's of years and any smart person knows not to borrow from them.

"SubPrime" in itself means that people who are borrowing this money are high risks to start with.

High risk people have always payed a higher rate on financing. That's the nature of the beast.


When the CRA dictates that a bank or lender must meet a percentage of loans within a particular area to the higher risk people, this is what you get. A mess... because lenders had to get creative to meet quotas.

A lender usually requires a larger down payment or larger fees for higher risk applicants but to meet quotas they had to waive these fees up front and add them to the back end of the loans and here we are.
 

Goodpasture

Well-known member
aplusmnt said:
There is only one cause for sub-prime fiasco. That is stupid people borrowing money they could not afford. There have been loan sharks around for 100's of years and any smart person knows not to borrow from them.
that is as stupid and simplistic a statement as I have ever seen. You have reached a new low. this is like saying it is the fish's fault for swallowing bait.
 
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