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Obama’s housing bubble amnesia – wants weaker loans again

The Washington Post reported yesterday that the White House is again pushing banks to make loans to borrowers with weaker credit because many are not participating in Obama’s idea of an economic recovery.

Obama must suffer from amnesia, because this is one of the main reasons for the housing bubble in 2008, which started the “Great Recession” isn’t it?

Excerpt:

The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.

President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

The government is trying to get banks to do this with taxpayer backed programs, including those backed by the FHA to insure the loans.

Housing officials are even providing the banks with their assurance that the banks will not be prosecuted or face financial recriminations if the borrowers meet the government standards and then later default!

Obama officials are even offering these loans to people whose homes are underwater (owe more on the home than it is currently worth), and other high risk loans. This is an open invitation to another housing disaster again backed by taxpayer dollars.

Socialists must believe that if you keep doing things the same way, you will obtain different results – it’s called Washington insanity.

Also the race and class envy cards are again being played in the debate just as the housing officials did in 2008 when pressuring banks to make unsecured loans.

Excerpt:

“If you were going to tell people in low-income and moderate-income communities and communities of color there was a housing recovery, they would look at you as if you had two heads,” said John Taylor, president of the National Community Reinvestment Coalition, a nonprofit housing organization. “It is very difficult for people of low and moderate incomes to refinance or buy homes.”

Maybe the government should simply tell the banks to accept anything the borrower says about their income and credit rating and give them the loan without even checking whether they are telling the truth.

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32 Comments

  1. Subsidized government housing, disguised in a different wrapper. (no pun intended)

  2. swampy

    I know someone that clears about 3k a month that got preapproved for a 250k FHA loan recently. He knows better, but I’d say things are already slipping back into the stupid zone.

  3. Carol Foster

    Ted, I doubt from this article you are aware exactly who is benefiting from this housing market & why?
    That would be those with CASH to buy homes.
    This leaves out those who can afford their first home with regular financing. And the gov isn’t asking to go back to what caused the housing bubble,which were companies filling out paperwork using bogus figures, but asking everyone gets to buy a home who can actually afford it rather than just those with all cash who are often investors.
    We paid all cash for our home here in California. Banks didn’t want to hear from those without all cash upfront. I note you said the Post’s story made the point banks had nothing to worry about if they financed home loans from those quailified, so why are you pretending this President is suggesting a return to lying about incomes etc. to get home loans for those who can’t afford a property???????????????
    Just more politics where solutions are needed and you have no answers.
    We will be opening a Fidelity Account next week as an investment which contrains gov backed home loans. If I believed you line about loans being given to those who will default, I certainly wouldn’t be doing this investment. I put my money where my mouth is and that’s more than you do with this column.

  4. Let us put this in terms so you can comprehend what’s going on. Over the past few years this administration have been busy legislating bank and consumer regulations so we have a level playing field that protects both the lender and the borrower. Now that we have something in place the administration is encouraging banks to be receptive to home buyers. No Ted the sky is not falling on our communist empire.

  5. JRM_CommonSense

    Here are some important facts:

    “From 2007 through 2012, new-home purchases fell 30 percent for people with credit scores above 780 (out of 800), according to Federal Reserve Governor Elizabeth Duke. But they declined 90 percent for people with scores between 680 and 620 — historically a respectable range for a credit score.”

    “If the only people who can get a loan have near-perfect credit and are putting down 25 percent, you’re leaving out of the market an entire population of creditworthy folks, which constrains demand and slows the recovery,” said Jim Parrott, who until January was the senior adviser on housing for the White House’s National Economic Council.”

    Where were these facts presented? On the second page of the article that Ted quoted. Nowhere in the article does it say anything about lending to people with bad credit ratings or non-qualifying incomes. The article supports that by saying:

    “Administration officials say they are looking only to allay unnecessary hesi­ta­tion among banks and encourage safe lending to borrowers who have the financial wherewithal to pay.”

    Somehow or other, these facts in the article didn’t get mentioned.

    • Ted Biondo

      JRM, it’s still weaker loans with weaker credit backed by the taxpayers – that’s all the facts that are needed. And why should the American people believe anything said by an Obama official WRT housing or economics? They have lied before about balancing the budget, lowering unemployment, etc. They are printing money to shore up the economy – a proverbial house of cards – they are liars!!!

  6. kevind1986

    From a Democratic leadership letter to George Bush in June 2004 – signed by 76 Democrats: “We write as members of the House of Representatives who continually press the GSEs (Fannie Mae and Freddie Mac) to do more in affordable housing. Until recently, we have been disappointed that the Administration has not been more supportive of our efforts to press the GSEs to do more. We have been concerned that the Administration’s legislative proposal regarding the GSEs would weaken affordable housing performance by the GSEs, BY EMPHASIZING ONLY SAFETY AND SOUNDNESS. While the GSEs’ affordable housing mission is not in any way incompatible with their safety and soundness, AN EXCLUSIVE FOCUS ON SAFETY AND SOUNDNESS IS LIKELY TO COME, IN PRACTICE, AT THE EXPENSE OF AFFORDABLE HOUSING.” So —- the last time Dems pushed “safety and soundness” aside to allow riskier loans, it didn’t end really well, did it? What was that definition of insanity again? How did that go again?

  7. Even earlier than that, Kevin.

    http://www.thefreelibrary.com/Fannie+Mae+Chairman+and+CEO+Franklin+D.+Raines+Calls+for+Mortgage…-a058581131

    Actually there was a formal letter from Fannie in 1999 including Raines and Barney talking about how it could all blow up someday because of the risk to expand homeownership to more folks. I can’t find that but it is out there.

  8. JRM_CommonSense

    If you do not let credit worthy home buyers into the market (that is those people with credit scores that were acceptable before and who meet repayment criteria) the housing market will remain stagnant, the homebuilding business will not continue the recovery that has started, AND the housing crisis will continue.

    How is this different from the desire to lower taxes on businesses and getting rid of government regulations that prevent businesses from moving forward with hiring and expansion(all relatively reasonable arguments).

    It is housebuilding and home ownership by qualified buyers that adds to economica recovery and increases property tax revenue which finances many government entities. Without this controlled and regulated stimulus to the economy, recovery will remain as slow as it is.

    AND the taxpayer support that is being talked about is from the FHA and the GSEs, nothing different from how things worked in the past before the abuses that led to the housing crisis.

    The difference is the improved controls to prevent the abusive practices that became such a big part of how mortgage companies decided to manage their businesses, decided to sidestep good business and lending practices, and decided to reward this abusive bahavior by paying huge commissions to their mortgage brokers who skirted the rules and which ended up causing most of the problems in the housing industry.

    There are also improved controls over MBS creation, packaging, and insuring activities that prevent the abuses in these areas that had significant impact on the housing crisis.

    To prevent things from happening that will help the economy rebound because of a hatred of the opposition just continues several years of the insanity used by both side that has fostered the slow progress of the economic recovery. Maybe it would be both sides again repeating the insanity that has failed before. This recession was not a one side created problem and it will not be a one side created solution. We will continue down this road until both sides realize this and decide to work together to solve it.

  9. From Bill Clinton’s Labor Secretary Robert Reich:

    “…deftly trace the beginnings of the collapse to the mid-1990s, when the Clinton administration called for a partnership between the private sector and Fannie and Freddie to encourage home buying. The mortgage agencies’ government backing was, in effect, a valuable subsidy, which was used by Fannie’s C.E.O., James A. Johnson, to increase home ownership while enriching himself and other executives. A 1996 study by the Congressional Budget Office found that Fannie pocketed about a third of the subsidy rather than passing it on to homeowners. Over his nine years heading Fannie, Johnson personally took home roughly $100 million. His successor, Franklin D. Raines, was treated no less lavishly.”

  10. JRM_CommonSense

    So, if everything became Obama’s things on the day he took office, why didn’t all of those Clinton things become Bush’s things on the day he took office? I guess it depends on what the definition of is is!

  11. JRM,

    In September, 2003 Bush tried to reel in Fannie and Freddie. From Sec of the Treasury John Snow testifying before Congress:

    “There is a general recognition that the supervisory system for housing-related gov’t-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity, and importance of these enterprises.”

    A Congresswoman’s response: “I have sat through nearly a dozen hearings where, frankly, we were trying to fix something that wasn’t broke. Housing is the economic engine of our economy and in no community does that engine need to work more than in mine, we should do no harm to these GSEs’. We should be enhancing regulation, not making fundamental change, Mr. Chairman, we do not have a crisis at Freddie Mac, and in particular at Fannie Mae, under the outstanding leadership of Mr. Frank Raines. Everything in the 1992 Act has worked fine.” – Maxine Waters – Sept 25, 2003.

    Do you have a cut-off date when a new president becomes responsible for the condition of the country? One month? Three months? Six months? A year?

  12. JRM_CommonSense

    No, but you guys seem to. You talk about it constantly when saying that everything became Obama’s fault and legacy as of January 20th, 2009. You do everything you can to run from Bush’s actions and the results, but you never seem to provide a cutoff date for any former Democratic President. Why is that?

    How many jobs were lost in the last 3 years of Bush’s administration, but the resulting unemployment rate became Obama’s fault the minute he took office. From your perspective it was not Bush’s fault but the fault of the Democrats in Congress during Bush’s tenure.

    It will sure be funny to see the song and dance when you guys finally succeed in making Obama a two term President and still blame him for everything for the next eight years – even though there isn’t a Republican in the White House.

  13. JRM,

    You brought the issue up oin transition dates, so you must have something in mind. I’m open to suggestions.

    Considering unemployment went from 4.7% to 7.7% during the last three years of the Bush administration due to the housing bubble – see above for when that started. The Bush administration did try to reform fannie and Freddie which would have reduced the impact of teh housing bubble bursting. Congress, primarily democrats, but it was bi-partisan, stood in the way do to the millions that Fannie and Freddie threw around in campaign contributions. Read Reckless Endangerment for a good review of this economic tradegy.

    Obama already is a two-term president. I hope I get that chance to blame Obama in 2017 while a GOPer is in the White House.

    All of this debt that Obama has added to the federal balance sheet has not been issued over a long-term but it has been short term in order to take advantage of low short-term interest rates. This helps Obama, but hurts the next president – no matter which party that is, since this debt will need to be re-financed. It’s like buying a house and using a Adjustable-3 year mortgage instead of locking in 30 years – its foolish. Then again, I don’t expect anything different from a president that never took an economics class.

  14. JRM_CommonSense

    Time to do sense of humor and sarcasm-detection ability checks!

  15. JRM,

    I read you posts and do nothing but laugh.

    So that was a sarcastic question? Obama was responsible for things on the day he took office? Is that you position now? If not, pick a day. Quit dodging.

  16. Actually, we can blame the Democrat-controlled Congress that Pres. Bush had to work with, during his last two years in office. The economy tanked during their tenure (2007). Their actions were also the lead-in for Obama’s failed agenda, and massive spending increases.

  17. JRM_CommonSense

    Since you obviously didn’t get it, I will explain.

    The sense of humor is required to understand the joke about the Republicans limiting Obama to being a two-term president. Let’s see if you can figure that out now! Hint: Mitch McConnell!

    And the sarcasm is that you will blame Obama for everything that happened before he got into office as well as for many years after he is out of office. But you would not think of blaming Bush for anything the minute his helicopter left Washington.

    To ask me to “pick a day” shows you really do not get it here either. Let me explain, so you can understand. On the day he/she is inaugurated, the President becomes responsible for carrying out the responsibilities of his/her office. He/she does not inherit the blame for the condition that the country was in when he/she took office. He/she also does not gain the power to turn the ship on a dime and completely change the position it is in as a result of a long line of predecessors. As always, turning the ship takes time AND the cooperation of all those elected to fulfil the various levels of leadership.

    It is always interesting to see people blame all of the ills of the country on a President they did not vote for but blame the ills of the country on the Congress, or others, when a President that they have voted for has difficulties getting the job done and the ship back on course.

  18. One more time, when does a president become responsible for the happenings during his term? Simple question. It’s year 5, when does blaming Bush stop?

  19. JRM_CommonSense

    2 minutes and 23 seconds after midnight, 1236 days after he/she takes the oath of office.

    OR it could be 33 minutes and 58 seconds after 2:00am on the 432 day after taking the oath.

    Most likely it is the exact minute the oath is taken if it happens to be a president that you did not vote for and have chosen to carry an inordinate dislike for.

    After all, why would you want to show any level of support for a president who you didn’t vote for or be willing to work with him/her to try to make the country a better place for all of its citizens, not just the ones that agree with you?

  20. I’ll let Teddy Roosevelt answer that question:

    “The President is merely the most important among a large number of public servants. He should be supported or opposed exactly to the degree which is warranted by his good conduct or bad conduct, his efficiency or inefficiency in rendering loyal, able, and disinterested service to the Nation as a whole. Therefore it is absolutely necessary that there should be full liberty to tell the truth about his acts, and this means that it is exactly necessary to blame him when he does wrong as to praise him when he does right. Any other attitude in an American citizen is both base and servile. To announce that there must be no criticism of the President, or that we are to stand by the President, right or wrong, is not only unpatriotic and servile, but is morally treasonable to the American public. Nothing but the truth should be spoken about him or any one else. But it is even more important to tell the truth, pleasant or unpleasant, about him than about any one else.”

    The Obama regime has spent more money, faster, with less positive results, than every other President. We have more people on food stamps, and other forms of government assistance, than ever before. The percentage of our population in the workforce is at the lowest level since the Carter years. The “stimulus” cost over $270,000 per job created. ObamaCare costs are better than double what was promised, and are proving to be a massive drag on growing the economy. Obama also doesn’t view our $17 trillion debt as an immediate problem. Why would anyone with even the slightest bit of economic sense support the provider of policies that are harming so many Americans, and stifling our economic growth?

    • Ted Biondo

      Great research Snuss concerning Teddy Roosevelt quote on the governance of the president!

  21. JRM.

    So you just want to whine “It’s Bush’s fault” and not set a firm date. Typical Lib – can’t make a decision, just want an issue to whine about.

  22. JRM_CommonSense

    And Terry strikes out again. I answered your question earlier. A president’s responsibility to fulfill the requirements of his office starts when he/she takes the oath of office. The postion I have been trying to get into your hesad is that this does not mean that the conditions they are handed by their predecessors is their fault.

    Just because you didn’t like the answer doesn’t mean it is the wrong answer. It just means you do not like it. To continue ranting about getting a specific answer to such meaningless question is pedantic and self-serving to the maximum. There would be no answer that you would be happy with. Why is that?

    Well it is probably because all you really want to do is be able to whine “It’s Obama’s fault” and not have to face the facts that many of the things he inherited, like any other President (Republicans included), were caused by things that they were not involved in and/or had no control over.

    Typical extreme right winger – can’t make a decision or win an election; just wants issues to whine about and someone to blame.

    Some more Teddy Roosevelt quotes:

    “It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.”

    “…the man who really counts in the world is the doer, not the mere critic-the man who actually does the work, even if roughly and imperfectly, not the man who only talks or writes about how it ought to be done.”

    “Let the watchwords of all our people be the old familiar watchwords of honesty, decency, fair-dealing, and commonsense.”… “We must treat each man on his worth and merits as a man. We must see that each is given a square deal, because he is entitled to no more and should receive no less.””The welfare of each of us is dependent fundamentally upon the welfare of all of us.”

    “Men with the muckrake are often indispensable to the well-being of society, but only if they know when to stop raking the muck.” “An epidemic in indiscriminate assault upon character does not good, but very great harm.” “There should be relentless exposure of and attack upon every evil practice, whether in politics, in business, or in social life. I hail as a benefactor every writer or speaker, every man who, on the platform, or in book, magazine or newspaper, with merciless severity makes such attack, provided always that he in his turn remembers that the attack is of use only if it is absolutely truthful.”

    “There is not in all America a more dangerous trait than the deification of mere smartness unaccompanied by any sense of moral responsibility.”

  23. JRM,

    As usual, wrong again. You stated “No, but you guys seem to. You talk about it constantly when saying that everything became Obama’s fault and legacy as of January 20th, 2009.” Your assumption, not mine. That is when I inquired on a fair date and you kept dodging that date and now you have settled on January 20th.

    The economic recovery is Obama’s fault, its not Bush’s fault. The trillion dollar deficits – Obama’s fault. The chronic unemployment – Obama’s fault. It’s Year five – it well past time Obama is held accountiable for his economic policies.

  24. JRM_CommonSense

    Okay Terry, what ever you say has to be the truth. No sense trying to discuss this or any other issue with you. You have all of the answers and there is no one who can tell you anything different. So I am going to stop trying. I salute you for your brilliance and your unerring knowledge of all things.

  25. jrm, I would suggest that the last quote that you offered perfectly describes the Obama regime.

    Intelligence, applied without the benefit of moral guidance, or even plain old-fashioned common sense, is a threat not just to this nation, but the world.

  26. JRM_CommonSense

    There are a few posters on this site that exhibit the same traits. And please don’t prove me right by calling me a troll and saying I am one of them. But, I am sure you will.

  27. JRM,

    Simple questions, are the economic conditions, the deficits, and chronic unemployment Obama’s fault or not? If not, why not?

    I answered your question on muni bonds, now answer mine on Obama’s edconomic performance.

  28. JRM_CommonSense

    Pedantry is indeed your way of life. Unless someone says exactly the words you want to hear, you are unable to grasp what is being said. So, take your arrogance and pretend that you are right on everything. If that keeps you warm at night, at least something does. Your arogance and poedantry bores me.

    And please don’t bother answering this post. I know exactly what you are going to say, so don’t bore me even more.

  29. Chip Hilton,

    You just can’t admit that your Obama is a failure. Did you vote for hime twice? I wouldn’t admit it either if I did.

  30. truth hurts

    Ok lets first look at one cold, hard, maybe heartless but no less true fact.

    NO ONE IS ENTITLED TO OWN A HOME.

    I know that seems to fly in the face of the liberal rant that homeownership is as much a right as the first amendment but it is true.

    Hence the reason in our grandparents day it was such a big deal when someone moved out and got their own home and family.

    Supurisingly the housing market seemed to exist back then without freddy or fanie mae.

    While back then it was not easy by any means, but people took pride in using discipline, savings and sacrifice to EARN their home.

    Second people took responcibility in not only buying what they COULD AFFORD but did not scream it was someone elses fault when they bought a home they could not afford and LOST IT.

    Now I know there were shady practices and unscrupulus banks that did offer these people loans anyone with half a brain knew they could not afford.

    Again cold hard fact is those people MADE THE CHOICE to take on that situation.
    Then some continued to refinance over and over to take the cash for things that they DID NOT NEED.

    Three.
    Another cold hard inconvient fact is the government under OBAMA DID NOT HOLD the banks to the same consequences that many homeowners faced on their foolish decisions on getting what they could not afford,

    I noticed the liberal supporters (and occupy wall street crowd) do not admit but obama and the democrat MAJORITY BAILED OUT THE BANKS under the laughable “too big to fail”.

    They should have been held to the same cold standard that many people have been.
    They profited under the loose rules and the guarentee of the government (freddy and fanie mae).

    Now they SHOULD HAVE BEEN MADE TO SUFFER when it all imploded.

    Again who bailed them out liberals?

    Four.

    Bailouts were pushed by obama and liberals for those who were foolish enough to get more than they could handle.

    But those of us who played by the rules, bought within our means, and were economically responcible are expected to pay for those who were not.

    In one on air commentator stated “you are expected to pay for the extra bedroom and bathroom of your neighbor”.

    I was personally told when I tried to refinance to one of the lower rates (when the collapse happened and all the govt aid was comming out) that due to I was responsible (no missed payments, financially stable) that no help for me.

    Look I am not unsympathetic to those who were responsible and fell on situations beyond their control (example death, medical, or major job loss).
    So carol and others save your typical “mean conservative” talking points.
    I believe there should be some temporary help to get up on your feet and/or time to downsize to meet the current situation.

    But you be hard pressed to show this falls in the majority as apposed to buying homes they KNEW OR SHOULD HAVE KNOWN they COULD NOT AFFORD.

    Again the only way the housing market can come back and you increase RESPONSIBLE home ownership is to increase the economic climate.

    Jobs, responsible government budgeting, reducing debt at all levels, and MORE JOBS.

    Increased home ownership (and the increase in housing market) comes AFTER THAT not before.

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