Sounds Like a Great Idea
Radley Balko | September 29, 2008, 4:41pm
Journalist Trey Garrison wades ten years into the New York Times archives and finds warnings of what was to come:
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.
The moment of sanity:
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.''
Leave it to the evil free market economist to rain on the "everyone should own a home" parade. Good thing no one listened to him!
Fluffy | September 29, 2008, 5:28pm | #
I'm going to post a primer on the different types of loans under discussion, since they all keep getting confused:
1. "A" credit loans - these are the plain old vanilla conforming loans for people with verifiable incomes and decent credit histories that people have always gotten. These loans constitute the huge majority of Fannie and Freddie's loans.
2. "A Minus" loans - these are the types of loans described in this article. The agencies did indeed end up bringing these pilot programs national. A Minus loans were for borrowers with slightly higher debt-to-income ratios and slightly worse credit scores than agency vanilla guidelines would allow. Since they still required income verification, did not allow negative amortization, typically weren't available for the lowest down payment amounts, and carried heavier mortgage insurance than conforming loans, these loans actually haven't seen much higher delinquency rates than conforming loans even now.
3. "Alt A" loans - these loans were for people with high credit scores, but with some other problem going the straight conforming route. Usually the reason they didn't go conforming was because they wanted to go stated income, or wanted to exceed conforming LTV guidelines, or something like that. These are the types of loans that killed Indy Mac Bank, for example.
4. "Subprime" loans - These were the most atrocious products. Usually they combined the worst features of A Minus and Alt A - they were for people with bad credit, and they also generally weren't underwritten that critically, and they often allowed for stated income. This stuff killed more companies than I can remember at this point.
5. "CRA Loans" - These are loans that depository institutions are required to make in so-called underserved markets from which they draw deposits. These loans are still around even now. Their contribution to the current crisis was minimal, because most banks hold these loans in portfolio rather than bundling and selling them, and most banks make these loans knowing they'll lose money on them, so they aren't a "balance sheet surprise" when they tank.
dmoynihan | September 29, 2008, 7:07pm | #
See, there's your problem. You don't know what the word "planner" means; you don't know how planning commissions are staffed; and you don't know how zoning ordinances are written.
Let's see, for "planner," I'd go with, "someone otherwise unemployable," as you've shown.
For how they're "staffed:" "with otherwise unemployable flunkies, some having bogus degrees or other fringy certifications," as you no doubt have.
For "how zoning ordinances are written," I'll say, judging by local experience, either, "behind closed-doors with 'experts' on hand," or, "following numerous public hearings, garnering input from the citizenry, final matters to be settled, behind closed doors with 'experts' on hand."
The only real qualification to be a planner, one suspects, is the ability to shrink totally from any responsibility from actions taken or lives ruined from said actions. And yeah, near me (I bought by transit), the "planners" have done three things:
1. Encouraged "infill" building, but so complicated the process you have a handful of tract mansions on tiny lots that are vacant due to prices too high for the area, even during the bubble.
2. Decided we get more low-income housing, in addition to our existing low-income housing, and of course the half-dozen "group homes" in my community which house five or six autistics, one of whom kicked my dog.
3. So screwed up the "Neo-Urbanist New Downtown" thing, it's years late, only half-complete, most of the condos state "rent to own," and there is no grocery store.
I'm sure it'll be a while for the other half to get done. Like a decade. And the "planners" responsible have long since left for greener places to con the citizenry there.
/Of course, the old urban downtown in my community was ripped up by "planners," in the '60s, to make it more urban-renewalie.
//We'd be really screwed here if it wasn't for the Asians living 10 to a house and boosting test scores at the elementary school.
dmoynihan | September 29, 2008, 8:14pm | #
If high housing demand relative to supply was the cause of the price at the top of the bubble, then we wouldn't see that price drop precipitously absent a similarly-huge decline in demand. So it is not possible that the housing bubble could be caused by any alleged restriction on supply.
... There was no great restriction on the supply of housing units suddenly adopted in 2001....
I'm assuming that's for me, and further that you mean 2002.... something happened in 2001 and 2000 was a recession year, funny thing, those selective endpoints.
I do admire the denial of your earlier conduct. Typical, again, of the lack of responsibility and expectation of short memory by planners. What was your degree in, anyway? Is there like an association? Does the state send you to meetings?
Anyway, Joe, demand for housing increased 'cuz of a couple of factors. Immigration, baby boomlet, etc. "Planners," rather than meet this demand, and letting land be used for 80-house parcels at $200,000 per home, decided, cool, let's make it a 30-house parcel, for $600,000 apiece. There'll be a greater amount of tax revenues, but fewer services to provide. And we can use the extra dough to regulate smoking outdoors! Win!
Those extra starts tended to be in the exurbs, away from the crazy planners, in towns like Frederick, MD (45 miles from DC), Hagerstown (90 miles from DC), even Cumberland, MD (150 miles from DC), which a year or two ago had the fastest-rising prices in the country.
Then gas went to $4, and we all know what happened. No one thing bursts a bubble, but a
planner, rational adult, would know those 50 lost families have to live somewhere, and of course, 10 of the $600,000 houses on that tract would be vacant.
joe | September 29, 2008, 8:27pm | #
I'm assuming that's for me, and further that you mean 2002.... something happened in 2001 and 2000 was a recession year, funny thing, those selective endpoints.
I haven't the foggiest what you're babbling about. I picked 2001 because it was the year that investment capital went into the housing market and its derivatives in a big way, after fleeing the stock market, resulting in the housing bubble. There was no great increase in snob zoning or other land use restrictions that came into play and cause the sharp jump; just movement of speculative capital.
You know, speculative capital - the stuff that causes bubbles.
Anyway, Joe, demand for housing increased 'cuz of a couple of factors. Immigration, baby boomlet, etc. There was no sharp increase in these factors in 2001 that can explain why a price spike happened, and supply expanded greatly, with record numbers of housing starts over the next few years. Nice try, but sorry, no.
"Planners," rather than meet this demand, and letting land be used for 80-house parcels at $200,000 per home, decided, cool, let's make it a 30-house parcel, for $600,000 apiece. Really? In 2001 they did this? In 2001, there was a sharp increase in land use regulation that hadn't previously existed, sufficient to cause a sharp change in the market. You sure about that? Because I think you're full of shit, monkey.
Oh, and see Michael B Sullivan's comment above about planners and our awe-inspiring power to dictate local land use regulation based on our own preferences.
There'll be a greater amount of tax revenues, but fewer services to provide. Planners despise this argument, and while we are quick to point out its flaws, sadly, the policymakers rarely listen to us.
Those extra starts tended to be in the exurbs, away from the crazy planners, in towns like Frederick, MD (45 miles from DC), Hagerstown (90 miles from DC), even Cumberland, MD (150 miles from DC), which a year or two ago had the fastest-rising prices in the country. So, you're telling me that the fastest rise in prices were happening in exurbs that (you think) didn't have any zoning. First of all, you're wrong about Frederick, Hagerstown, and Cumberland not having zoning; and second, even if your assertion were true, it would refute your point.
You have very strong feelings, monkey, but you don't know what you're talking about, and you're making arguments that don't make any sense.
dmoynihan | September 29, 2008, 8:40pm | #
Joe, I ain't a monkey, I was born year of the rat. But you are clearly a parasite.
So, parasite. For housing starts, I looked
here. It said '01 was a recovery year, looka like '03 to me is when it really get... started.
Parasite, 2001, developers near me took Crown Farm, in G-Burg. There was a shiat-load of regulation. My first link. So much so, they still ain't decided what to do with it. Planners have been employed throughout this process. Though the fact that the developers fled end of '06, early '07, was only recently noticed...
Whether it's written "regulation" or "held up 'cuz it's being studied for a decade,"--and planners are always employed in the "study" process, ain't they, parasite?--I leave to you to determine.
If you're still going to argue that lack of housing in an available area (when so much of it is being held up by "planning phases"), had nothing to do with the rise in prices, the responsibility vortex for individuals in your parasitic "profession" may destroy the universe in a manner that the Large Hadron Collider never could. But I'd glad to know that it's never the fault of people who "plan" when "plans" go wrong.
And as to quality or depth of regulation, compared to Montgomery, County, MD, parasite, Fredneck is West Texas. (They did put a moratorium on building a while back, during a drought, when it was discovered the county would soon be out of water...)
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