The definition of insanity? Obama administration pushes banks to make home loans to people with weaker credit

  1. You have chosen to ignore posts from ComingLiberalCrackup. Show ComingLiberalCrackup's posts

    The definition of insanity? Obama administration pushes banks to make home loans to people with weaker credit

    http://www.washingtonpost.com/business/economy/obama-administration-pushes-banks-to-make-home-loans-to-people-with-weaker-credit/2013/04/02/a8b4370c-9aef-11e2-a941-a19bce7af755_story.html

    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. [ya think?]

    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.

    In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.

    "Taxpayer backed" ...that means those who were credit worthy and paid their mortgage, who will now and forever bailout out those who didnt pay......

    Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

    [Why might banks be ,um, "cautious"? Remember the housing meltdown? ...Banks who were forced  by Government to make risky loans, years later were sued by the Government for making risky loans. ]

    "Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan and are seeking to make it easier for people who owe more than their properties are worth to refinance at today’s low interest rates, among other steps."

    "Obama pledged in his State of the Union address to do more to make sure more Americans can enjoy the benefits of the housing recovery, but critics say encouraging banks to lend as broadly as the administration hopes will sow the seeds of another housing disaster and endanger taxpayer dollars."

    [Yes, "enjoy the benefits" of free stuff!]

    "Deciding which borrowers get loans might seem like something that should be left up to the private market. But since the financial crisis in 2008, the government has shaped most of the housing market, insuring between 80 percent and 90 percent of all new loans, according to the industry publication Inside Mortgage Finance. It has done so primarily through the Federal Housing Administration, which is part of the executive branch, and taxpayer-backed mortgage giants Fannie Mae and Freddie Mac, run by an independent regulator."

    Insanity. Banks are no longer independent private sector businesses, but government agencies, just tools of socialist bureaucrats...

     
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  4. You have chosen to ignore posts from ComingLiberalCrackup. Show ComingLiberalCrackup's posts

    Re: The definition of insanity? Obama administration pushes banks to make home loans to people with weaker credit

    In response to WhatDoYouWantNow's comment:

     

    In response to GreginMeffa's comment:

    Nice dodge.



    No point in complaining about getting more Obama if your party refuses to nominate someone that independents who, like me, sometimes vote for the R but usually vote for the D could support.

     

     

    Bullcrap.

    Romney won Independents by five points. That’s better than George W. Bush in 2004 by six net points. … Romney was the first national candidate in exit polling history to decisively win Independents and lose the election.

    McCain in 2008 and Romney in 2012 were both relatively moderate. The overly-hyped liberal icon Huntsman would have gained independents but likely lost the election, too, because he wouldnt have promised enough free stuff.

     

     

     
  5. You have chosen to ignore posts from DamainAllen. Show DamainAllen's posts

    Re: The definition of insanity? Obama administration pushes banks to make home loans to people with weaker credit

    The housing bubble and its subsequent burst was not caused by banks orginating loans to people with weak credit.  Programs like CRA have existed for decades prior to the housing crisis and the default rate for the people with morgages via those programs was actually quite small in and line with the national rate for default for all morgagee's. 


    The problem was the thrifts like countrywide and beneficial (not subject to banking laws and hence CRA) dropped all standards and were orginating loans with no documentation required, no income, etc.  Why?  Because they were selling the loans up the chain to investment banks who had concocted securitization schemes that further incentivised the thrifts to write loans not to people with weak credit but to people with no credit, and who would not otherwise have been approved for a morgage.  Because the originators had no skin in the game (they sold the loans) their risk was nonexistent, thus no real need for due diligence.  This was a mechanism of greed, not government intervention.  The free market saw an opportunity to make gobs of cash on these worthless securities (rated AAA by the ratings agencies) and off we went down the rabbit hole.  Add in the insurance scheme by AIG via CDO's and the house of cards which was premised on the idea that real estate would NEVER go down fell.


    Institutions can lend responsibily to people with lower credit scores in the course of their normal due diligence.  They have always done so because applicants that have lower credit scores can't secure the lowest rates and therefore the transactions are a financial boon for the morgage lenders who make more money off of the person with the lower credit score than the person with pristine credit. 

     
  6. You have chosen to ignore posts from macnh1. Show macnh1's posts

    Re: The definition of insanity? Obama administration pushes banks to make home loans to people with weaker credit

    extending credit to people who can't pay it back is fun for a little while but long term always ends in disaster.....

    history is on my side....again...

     
  7. You have chosen to ignore posts from DamainAllen. Show DamainAllen's posts

    Re: The definition of insanity? Obama administration pushes banks to make home loans to people with weaker credit

    In response to WhatDoYouWantNow's comment:

    In response to DamainAllen's comment:

     

    The housing bubble and its subsequent burst was not caused by banks orginating loans to people with weak credit.  Programs like CRA have existed for decades prior to the housing crisis and the default rate for the people with morgages via those programs was actually quite small in and line with the national rate for default for all morgagee's. 


    The problem was the thrifts like countrywide and beneficial (not subject to banking laws and hence CRA) dropped all standards and were orginating loans with no documentation required, no income, etc.  Why?  Because they were selling the loans up the chain to investment banks who had concocted securitization schemes that further incentivised the thrifts to write loans not to people with weak credit but to people with no credit, and who would not otherwise have been approved for a morgage.  Because the originators had no skin in the game (they sold the loans) their risk was nonexistent, thus no real need for due diligence.  This was a mechanism of greed, not government intervention.  The free market saw an opportunity to make gobs of cash on these worthless securities (rated AAA by the ratings agencies) and off we went down the rabbit hole.  Add in the insurance scheme by AIG via CDO's and the house of cards which was premised on the idea that real estate would NEVER go down fell.


    Institutions can lend responsibily to people with lower credit scores in the course of their normal due diligence.  They have always done so because applicants that have lower credit scores can't secure the lowest rates and therefore the transactions are a financial boon for the morgage lenders who make more money off of the person with the lower credit score than the person with pristine credit. 

     



    The trouble I see is that if there is a way for them to make the same "mistakes" to generate profit, they'll do it again regardless of recreating a bubble.

     

     

     




    I would argue that it is difficult to inflate a bubble when

    1. proper due diligence and lending standards are enforced and

    2. lenders aren't writing subprime adjustable rate morgages almost exclusively. 

    With proper standards qualified buyers are given loans and unqualified buyers are not, as a result the demand for NINJA loans or interest only loans with teaser rates are the exception rather than the norm.  A person with a good work history, income, and is paying rent of 1500 dollars a month is going to be a good candidate for a home with a 1500 morgage if the lender can determine they have adequate credit.  The issue with the housing bubble was people who could afford a 1500 dollar morgage were given loans for homes with 3000 dollar morgages and the person could afford the home while it was interest only or on a teaser rate, once the rate adjusted they were screwed.  Its the wave of defaults that happened to those types of loans that triggered clauses in the securities contracts that made them lose value and put companies like AIG in a position where they had to post collateral on the insurance they sold to protect companies like Goldman if the securities built on shoddy morgages went in the toilet.  Of course companies like Goldman knew the securities would fail because they built them with subprime garbage morgages and they knew after 1 or 2 years when the teaser rates expired defaults would soar.  This is why AIG nearly imploded. 

    None of this means that people with less than stellar credit will be crowded out of the marketplace.  Maintaining standards doesn't mean those people can't get approved, but it does mean their approval will be for lower amounts and that they will have to prove their credit worthiness.  The system has worked that way for years.  Its the perversion of the securitization model that drove the bubble.

     
  8. You have chosen to ignore posts from MattyScornD. Show MattyScornD's posts

    Re: The definition of insanity? Obama administration pushes banks to make home loans to people with weaker credit

    In response to ComingLiberalCrackup's comment:

    In response to WhatDoYouWantNow's comment:

     

    In response to GreginMeffa's comment:

    Nice dodge.



    No point in complaining about getting more Obama if your party refuses to nominate someone that independents who, like me, sometimes vote for the R but usually vote for the D could support.

     

     

    Bullcrap.

    Romney won Independents by five points. That’s better than George W. Bush in 2004 by six net points. … Romney was the first national candidate in exit polling history to decisively win Independents and lose the election.

     



    Still putting lipstick on that pig, eh...?

     

    LOLAY,NWY...!!

     

     

     
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  10. You have chosen to ignore posts from bald-predictions. Show bald-predictions's posts

    Re: The definition of insanity? Obama administration pushes banks to make home loans to people with weaker credit

    Genius. Do something stupid? Do it again. 
    Somebody check Obama's hands for burn scars. How many times did he touch the hot stove as a kid before he figured it out?
     
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  12. You have chosen to ignore posts from ComingLiberalCrackup. Show ComingLiberalCrackup's posts

    Re: The definition of insanity? Obama administration pushes banks to make home loans to people with weaker credit

    "I would argue that it is difficult to inflate a bubble when

     

    1. proper due diligence and lending standards are enforced and...."

    Typically clueless...the private sector banking industry had standards to determine who(m) to lend large amounts of money to...these standards didnt need to be "enforced". The GOVERNMENT forced banks to lend money without proper due diligence and lending standards!

    As usual, government wasnt the solution, it was the problem!

    And as Newster said, it was a bipartisan rip off.

     

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