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Fannie Mae Eases Credit To Aid Mortgage Lending

By STEVEN A. HOLMES

Published: September 30, 1999 The New York Times

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 sub prime 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.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called sub prime market.''

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the sub prime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

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.'' :-2

Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.



Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

Capitalist Economic policy cannot be bent to be charitable (kinder, gentler, Cumbiya); it's a rationing mechanism. Meddling with that efficiency leads to a very heavy price.

And here is the best part, there is more of the ssame thinking in the "bail out" legislation just passed.

And, this article was written in 1999. Remember the law of unintended consequences, well here is a real good example. And, for those of you who like to place blame, it is not the failed economic policies of the Bush administration that got us into this mess (other messes perhaps), it is more that social engineering by politicians does not fit into economic markets.

If you hunt around you will find a lot of articles warning of what was to come. The ones I know of relate to the british market-although our subprime lenders never loaned such ridiculous income multiples they were re-securitising them mainly with american banks. When the money dried up the specialist lenders went bankrupt. Unfortunately some of our high street banks were at it as well. They can't be allowed to go bankrupt though maybe they should be allowed to.

This crisis is not a big surprise. Every single one of the management in these places should at least lose their jobs. Morally perhaps they should lose their assets as well

This crisis is not a big surprise. Every single one of the management in these places should at least lose their jobs. Morally perhaps they should lose their assets as well


For once, I actually agree with you on something. :wah:

AND WE WONDER WHY WE ARE IN THE MESS WE NOW FIND OURSELVES IN?????

Here is why the financial markets are in meltdown.... It's worth 4 minutes of your time to listen all the way to the end....... (by the way, Daniel Mudd is the son of newsman Roger Mudd)

Shocking Video Unearthed Democrats in their own words Covering up the Fannie Mae, Freddie Mac Scam that caused our Economic Crisis

Burning Down The House: What Caused Our Economic Crisis?

Covering Your Fannie, Who Really Caused Our Economic Crisis?

BTS;1007687 wrote: Covering Your Fannie, Who Really Caused Our Economic Crisis?








Who cares anymore whom is to blame ?

Is this like a na na na na response ?

You win ?

Grow up.

Scrat;1007648 wrote: I don't know what to make of this. I hear a lot of crap about how the poor caused this ect but if you think about it who can afford a home that will take you 40 years to pay off? Here in Seattle a 300 sqft ''apartment" will cost you 250k, 5'' x 6" closets have been converted into "bedrooms" and "guest bedrooms" so the owners can call a 3 br house a 4 br house. A sink stuffed under a staircase with a mirror over it off the livingroom a bathroom does not make.

Ramshackle turn of the century houses with 100 year old wiring selling for 500k is to say the least, ridiculous.

Freemarket greed has its hand in this also.


It's not greed it's growing value real or sometimes perceived. I bought my first house in 1971 for $29,500 and sold it four years later for $42,500 four years later it was sold again for $70,000. That's a good thing.

I bought my second house in 1975 for $59,000 and I still live in that house. Today it would sell for $500,000 or more, two years ago it would have sold for nearly $700,000 based on the houses on my street that have been sold in the last few years.

As long as people were willing to pay, the prices were going to go up, but as it turns out many of the people willing to pay could not afford what they were paying for. If you buy a house with no down payment, you don't own anything you are renting in effect and hoping to make a profit in the future. Over 80% of the homes sold in the last two years had no down payment.

If people bought houses for homes (instead of ATMs) and lived in them for their lives (generally speaking) instead of for an investment we would not have the growth in prices or much of the mess we are in.

QUINNSCOMMENTARY;1008470 wrote: It's not greed it's growing value real or sometimes perceived. I bought my first house in 1971 for $29,500 and sold it four years later for $42,500 four years later it was sold again for $70,000. That's a good thing.

I bought my second house in 1975 for $59,000 and I still live in that house. Today it would sell for $500,000 or more, two years ago it would have sold for nearly $700,000 based on the houses on my street that have been sold in the last few years.

As long as people were willing to pay, the prices were going to go up, but as it turns out many of the people willing to pay could not afford what they were paying for. If you buy a house with no down payment, you don't own anything you are renting in effect and hoping to make a profit in the future. Over 80% of the homes sold in the last two years had no down payment.

If people bought houses for homes (instead of ATMs) and lived in them for their lives (generally speaking) instead of for an investment we would not have the growth in prices or much of the mess we are in.


And here's my home buying history in California.

House purchased 1960 for $18,000 and sold 1968 for $33,500

Second home purchased 1968 for $25,000 and sold in 1973 for $38,500

Third home purchased 1973 for $60,000 and sold in 1995 for $345,000

Fourth and last home (retirement community) purchased 2000 for $226,000

Present value of current home without mortgage is $355,000 ---- Last year at this time it would have bee $420,000 but who cares, I'm not going anywhere.

Nomad;1007883 wrote: Who cares anymore whom is to blame ?

Is this like a na na na na response ?

You win ?

Grow up.


Nah - that's like expecting a politician to giveadamn about anything but his career.

[QUOTE=Scrat;1008572]I read a statistic the other day that said 50% of the US population makes on average $9 an hour. You can't buy a 500k house with that wage, no way no how.


I kind of doubt that statistic, that would mean have the population is in poverty.

2008 HHS Poverty Guidelines

Persons in Family or Household 48 Contiguous States

1 $10,400

2 14,000

3 17,600

4 21,200

5 24,800

6 28,400

7 32,000

8 35,600



SOURCE: Federal Register, Vol. 73, No. 15, January 23, 2008, pp. 3971–3972

QUINNSCOMMENTARY;1008709 wrote: [quote=Scrat;1008572]

I kind of doubt that statistic, that would mean have the population is in poverty.

2008 HHS Poverty Guidelines

Persons in Family or Household 48 Contiguous States

1 $10,400

2 14,000

3 17,600

4 21,200

5 24,800

6 28,400

7 32,000

8 35,600



SOURCE: Federal Register, Vol. 73, No. 15, January 23, 2008, pp. 3971–3972


Yes, and that's exactly the statistics I see published.

The other day I was asked to contribute to a charity called Philabundance. They're based in Philadelphia and, in this instance, we raising money to be able to feed the children of the city whilst they were on school holiday and not getting school meals.

Lon asked a while back, who's hurting? I think a lot of people are.

Bryn Mawr;1008871 wrote: [quote=QUINNSCOMMENTARY;1008709]

Yes, and that's exactly the statistics I see published.

The other day I was asked to contribute to a charity called Philabundance. They're based in Philadelphia and, in this instance, we raising money to be able to feed the children of the city whilst they were on school holiday and not getting school meals.

Lon asked a while back, who's hurting? I think a lot of people are.


Here you go, it depends on how you look at the figures. From Wikipedia

The most common measure of poverty in the United States is the "poverty line" set by the U.S. government. This measure recognizes poverty as a lack of those goods and services commonly taken for granted by members of mainstream society.[1] The official threshold is adjusted for inflation using the consumer price index. Poverty in the United States is cyclical in nature with roughly 12% to 16% living below the federal poverty line at any given point in time, and roughly 40% falling below the poverty line at some time within a 10 year time span.[2] Most Americans (58.5%) will spend at least one year below the poverty line at some point between ages 25 and 75.[3] While there remains some controversy over whether the official poverty threshold over- or understates poverty, the United States has some of the highest absolute and relative pre- and post-transfer poverty rates in the developed world.[4][5] Overall, the U.S. ranks 12th on the Human Development Index.[6]

Those under the age of 18 were the most likely to be impoverished. In 2006 the poverty rate for minors in the United States was the highest in the industrialized world, with 21.9% of all minors and 30% of African American minors living below the poverty threshold.[7] Moreover, the standard of living for those in the bottom 10% was lower in the U.S. than other developed nations except the United Kingdom, which has the lowest standard of living for impoverished children in the developed world.[8] According to a 2008 report released by the Carsey Institute at the University of New Hampshire, on average, rates of child poverty are persistently higher in rural parts of the country relative to suburban areas and share similar rates with many central cities.[9][10]

QUINNSCOMMENTARY;1010366 wrote:

Here you go, it depends on how you look at the figures. From Wikipedia

The most common measure of poverty in the United States is the "poverty line" set by the U.S. government. This measure recognizes poverty as a lack of those goods and services commonly taken for granted by members of mainstream society.[1] The official threshold is adjusted for inflation using the consumer price index. Poverty in the United States is cyclical in nature with roughly 12% to 16% living below the federal poverty line at any given point in time, and roughly 40% falling below the poverty line at some time within a 10 year time span.[2] Most Americans (58.5%) will spend at least one year below the poverty line at some point between ages 25 and 75.[3] While there remains some controversy over whether the official poverty threshold over- or understates poverty, the United States has some of the highest absolute and relative pre- and post-transfer poverty rates in the developed world.[4][5] Overall, the U.S. ranks 12th on the Human Development Index.[6]

Those under the age of 18 were the most likely to be impoverished. In 2006 the poverty rate for minors in the United States was the highest in the industrialized world, with 21.9% of all minors and 30% of African American minors living below the poverty threshold.[7] Moreover, the standard of living for those in the bottom 10% was lower in the U.S. than other developed nations except the United Kingdom, which has the lowest standard of living for impoverished children in the developed world.[8] According to a 2008 report released by the Carsey Institute at the University of New Hampshire, on average, rates of child poverty are persistently higher in rural parts of the country relative to suburban areas and share similar rates with many central cities.[9][10]


The last paragraph says it all, really - certainly does not reflect well on either of our countries

Bryn Mawr;1010528 wrote: The last paragraph says it all, really - certainly does not reflect well on either of our countries


Can't argue with that.

Nomad;1007883 wrote: Who cares anymore whom is to blame ?

Is this like a na na na na response ?

You win ?

Grow up.


$100.00 says nomad never even watched the links!!!!!!!!!!!!!!!!





So you REALLY don't care who caused it?

Kinda like putting the fox's right back in the ol hen house isn't it?

Look pal, this is going on my 5 children's backs not to mention my 9 grandchildren and yes I do want people to know who caused this mess, especially in a election year and the magnitude of their screwing of the US citizen.



Don't you want to know too? If not why not? :-5



Ever wonder why the DemoRats are not calling for investigations?

You know as well as me if they were not the foxes suckin eggs in the hen house they would be looking to take down their enemy................Don't ya think?

oopsie......That might be a redundant question in you case :wah:.....



NO pal................ You grow up!!