Fannie and Freddie get something of a bad rap in these discussion. Taking Southern California as an example, the median price of a home exceeded conforming loan limits pretty early in the first bubble -- by the end of 2002 if I'm recalling correctly. Most of the crazy losses weren't agency paper. They weren't subprime, either. What I fin…
Fannie and Freddie get something of a bad rap in these discussion. Taking Southern California as an example, the median price of a home exceeded conforming loan limits pretty early in the first bubble -- by the end of 2002 if I'm recalling correctly. Most of the crazy losses weren't agency paper. They weren't subprime, either. What I find insidious about the Dem/Rep accepted narratives is they both arrive at the conclusion that loans were made to "the wrong people" -- either with a liberal spin (predatory lenders!) or the right wing spin (those broke ass people had no right to be buying houses!).
O.K., but the places with the greatest percentages of mortgage defaults weren't high-priced markets like NY or LA. They were places like Las Vegas and Phoenix. I don't think Fannie and Freddie were uniquely at fault - private label RMBS experienced the same failures - but at the end of the day, Fannie and Freddie purchased over half of all the defaulted mortgages, which was pretty much in line with their market share.
Their market share was 50% at the start of the bubble, but just 30% by 2006. This did lead F&F to make stupid decisions -- such as getting into Alt-A "liar" loans. Just 11% of their business but these loans accounted for half their losses. Perspective is needed: it was pressure from the reckless Wall Street casino boys that caused the mess -- as I said corrupting the whole process. Fannie and Freddie didn't do stupid things until the very height of the bubble, under pressure from market conditions they had no role in creating.
As a general note, people forget that until the advent of "government backed" mortgage finance there was no such thing as a "standard" 30-year fixed rate mortgage. The last thing banks want to do is lend large sums to average Joes at a fixed, reasonable interest rate with a 30-year payback. Liberals should be defending these companies, not lumping them in with the mega-dicks.
Back to the topic, Fannie and Freddie lost a combined $265 billion during the post-crash fallout period. A big number, sure, but hardly the cause of the End Times.
It's wild that having a roof over your head now involves both the federal government and private equity. 100 years ago you could just, you know, get off your ass and build yourself a house, out of adobe bricks or scrap lumber or whatever.
think i'm gonna start living in a tent by the river with the other cool people
There were/are predatory practices in lending, absolutely, and still are. Every day borrowers pay more than they would have qualified for. But the emphasis on this by the Democrats, and the Republican emphasis on "people buying homes they had no business buying" put the focus on borrowers -- either as victims or "takers" depending on political spin -- and not enough on the crooked system itself. When the dust cleared we still had trillion dollar banks, no top people held accountable, no real regulatory reform that would break up the banks or separate Wall Street from "Main Street" banking.
We did have fixes that had the effect of making it harder for people of limited means, the young and the self employed to buy a home.
The last part of your post I 100% agree with, and it gets at the big problem: the sewer pipe of easy money corrupting the process from one end to the other.
Fannie and Freddie get something of a bad rap in these discussion. Taking Southern California as an example, the median price of a home exceeded conforming loan limits pretty early in the first bubble -- by the end of 2002 if I'm recalling correctly. Most of the crazy losses weren't agency paper. They weren't subprime, either. What I find insidious about the Dem/Rep accepted narratives is they both arrive at the conclusion that loans were made to "the wrong people" -- either with a liberal spin (predatory lenders!) or the right wing spin (those broke ass people had no right to be buying houses!).
O.K., but the places with the greatest percentages of mortgage defaults weren't high-priced markets like NY or LA. They were places like Las Vegas and Phoenix. I don't think Fannie and Freddie were uniquely at fault - private label RMBS experienced the same failures - but at the end of the day, Fannie and Freddie purchased over half of all the defaulted mortgages, which was pretty much in line with their market share.
Their market share was 50% at the start of the bubble, but just 30% by 2006. This did lead F&F to make stupid decisions -- such as getting into Alt-A "liar" loans. Just 11% of their business but these loans accounted for half their losses. Perspective is needed: it was pressure from the reckless Wall Street casino boys that caused the mess -- as I said corrupting the whole process. Fannie and Freddie didn't do stupid things until the very height of the bubble, under pressure from market conditions they had no role in creating.
As a general note, people forget that until the advent of "government backed" mortgage finance there was no such thing as a "standard" 30-year fixed rate mortgage. The last thing banks want to do is lend large sums to average Joes at a fixed, reasonable interest rate with a 30-year payback. Liberals should be defending these companies, not lumping them in with the mega-dicks.
Back to the topic, Fannie and Freddie lost a combined $265 billion during the post-crash fallout period. A big number, sure, but hardly the cause of the End Times.
It's wild that having a roof over your head now involves both the federal government and private equity. 100 years ago you could just, you know, get off your ass and build yourself a house, out of adobe bricks or scrap lumber or whatever.
think i'm gonna start living in a tent by the river with the other cool people
There were/are predatory practices in lending, absolutely, and still are. Every day borrowers pay more than they would have qualified for. But the emphasis on this by the Democrats, and the Republican emphasis on "people buying homes they had no business buying" put the focus on borrowers -- either as victims or "takers" depending on political spin -- and not enough on the crooked system itself. When the dust cleared we still had trillion dollar banks, no top people held accountable, no real regulatory reform that would break up the banks or separate Wall Street from "Main Street" banking.
We did have fixes that had the effect of making it harder for people of limited means, the young and the self employed to buy a home.
The last part of your post I 100% agree with, and it gets at the big problem: the sewer pipe of easy money corrupting the process from one end to the other.