I received a NYTimes article from September of 1999 titled “Fannie Mae Eases Credit To Aid Mortgage Lending” authored by Steven Holmes.The article addresses Fannie Mae’s movement at the time toward lending: I will paraphrase some of the select points of the article:
“In a move that could help increase home ownership rates among minorities and low-income consumers,” Fannie Mae is “easing the credit requirements on loans”. A pilot program will “extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans”.
Fannie Mae “has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people”. “Banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers”. This “may not pose any difficulties during flush economic times”, but the government may run into trouble in a downturn, and be forced to rescue these loans and institutions.
The blame game doesn’t really get us anywhere at all, but I’d start with Clinton, Fannie Mae, High Finance, Greenspan, Bush 2.0, Bernanke, as a short list. It is important for us to remember that housing, or anything else, doesn’t necessarily need to be manipulated into affordability. The markets react strongly when you mess with them, it just might take a decade.
March 5th, 2009 at
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March 6th, 2009 at
The role of Fannie and Freddie’s efforts to increase the number of lower/moderate valued mortgages can not be over looked. However as further research has been conducted into this current decline (decline seems too passive) it’s been found that the lower priced homes/mortgages were not the driving problem behind the collapse. WSJ had a recent article on this topic – the largest problem in defaults has come from people who took out adjustable rate mortgages and it cuts equally across all income groups.
March 6th, 2009 at
That is a very important point. There are certainly a variety of issues affecting the market. ARM loans, and 0 down most notably, compounded with job loss the effects have been widespread. I notice that if I drive through Monticello on 6th street, 40% of the block is for sale/rent. I attribute this to capable people living above their means. Arlington Heights doesn’t appear to this problem on the same level. Foreclosures on $2MM homes in Rivercrest and rampant defaults on $20k properties in Como and Meadowbrook.