Home > Economy, Moonbats, Social Issues > MediaMatters: Living a fantasy.

MediaMatters: Living a fantasy.

MediaMatters continues to deny the facts about the subprime crisis.

A November 13 Wall Street Journal op-ed claimed that loans made “under the pressure of” the Community Reinvestment Act helped to “fuel the greatest housing bubble our nation has ever seen.” The claim that affordable housing initiatives were responsible for the housing crisis is a widely discredited myth.

Widely discredited? By who?

Bernanke: Experience “runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties.” In a November 25, 2008, letter, Federal Reserve chairman Ben Bernanke stated: “Our own experience with CRA over more than 30 years and recent analysis of available data, including data on subprime loan performance, runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties.”

SF Reserve Bank’s Yellen: “[S]tudies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households.” Janet Yellen, president and CEO of the Federal Reserve Bank of San Francisco, stated in a March 2008 speech that “studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households.”

Oh, liberals. Gotcha’.
So Ben Bernanke and Janet Yellen comments constitute a widely discredited claim, apparently. A man who is trying to push trillions of inflated dollars out the door and a woman whose own speech contradicts MediaMatters assertions.

Perhaps the most notable change, however, is that in the last 25 years, consumer credit markets have shifted dramatically, moving from a credit rationing approach to a risk-based pricing system. In other words, today, far fewer applicants are denied credit—rather, they are offered credit at higher prices intended to reflect the greater risk posed by these loans. This shift, coupled with other innovations in the financial markets, has significantly increased access to credit, with both positive and negative effects.

On the positive side, expanded access to credit has greatly increased the ability of low- and moderate-income households of all races and ethnicities to become homeowners. None of us would want to turn back the clock to the days when the prospects of being approved for a loan were more limited in certain neighborhoods and for certain classes of borrowers. But, as has become apparent over the past year with the rise in mortgage delinquencies and foreclosures, the risks associated with the changes in the consumer credit markets were greatly underestimated, and we are now grappling with the consequences.

I guess MediaMatters didn’t want people actually reading the speech which is the reason for the cropped quotes. Maybe they were just hiding something….like the Democrats complete ignorance of all things concerning the subprime crisis.

BARNEY FRANK: “Those who argue that housing prices are now at a point of a bubble seem to me to be missing a very important point. Unlike previous examples we have had when substantial excessive inflation of prices later caused problems we are talking here about an entity, home ownership, homes where there is not the degree of leverage where we have seen elsewhere. This is not the dot-com situation. We had problems with people having invested in business plans of which there was no reality; people building fiber optic cables for which there was no need. Homes that are occupied may see an ebb and flow in the price at a certain percentage level. But you’re not going to see the collapse that you see when people talk about a bubble and so those of us on our committee in particular will continue to push for home ownership.”

OK, so that just proves Barney Frank is an idiot.

Nope…certainly there was nothing wrong with Fannie and Freddie buying billions in bad loans.

Neither Fannie nor Freddie has turned a profit in the past year, accumulating $14.9 billion in combined quarterly losses, largely related to bad subprime and Alt-A mortgage assets.

Yeah, got that MediaMatters? All this is directly tied to the CRA.

On top of that MediaMatters also ignores the fact that Obama and ACORN have repeatedly coerced banks to make bad loans as well and when the loans were defaulted on those same banks were accused of predatory lending.

Obama’s mendacity continues to amaze me in, among other things, his framing of the economic situation and sub-prime mortgage crisis as a failure of Republican policy, neglecting his own involvement as attorney for and subsequent association with ACORN (Association of Community Organizations for Reform Now); the donations he received from Fannie Mae and Freddie Mac; and the sequelae of “affirmative action” credit initiatives by the Carter and Clinton administrations in context of the Community Reinvestment Act, forcing banks to “distribute risk more broadly” by extending high-risk loans to low- and moderate-income borrowers “who would not have gotten credit otherwise”

ACORN: While not all subprime loans are predatory, predatory lending is concentrated in the subprime loan market. There is a place for responsible subprime loans, where somewhat higher interest rates balance the genuinely higher risk of lending to borrowers with past credit problems. Today, however, too many subprime loans include abusive terms or conditions, too many have rates and fees much higher than can reasonably be justified by the credit records of the borrowers, and too many are going to borrowers who could and should qualify for loans at significantly lower rates. A Freddie Mac study suggested that about one third of the borrowers who have received subprime loans could have qualified for prime loans, while Fannie Mae Chairman Franklin Raines estimated that as many as half could have.

What about the rest of those subprime loans? I guess we are to assume they were clean legitimate loans to low risk people.

Sorry MediaMatters, but Edward Pinto’s article was right on target. The part MediaMatters edited out of their cropped quote:

The 1992 GSE Act was the fuse, and the trillions of dollars in subsequent CRA and GSE affordable-housing loans would fuel the greatest housing bubble our nation has ever seen. But who lit the fuse?

The previous year, as Allen Fishbein, currently an adviser for consumer policy at the Federal Reserve, has noted, Acorn and other community groups were informally deputized by then House Banking Chairman Henry Gonzalez to draft statutory language setting the law’s affordable-housing mandates. Interim goals were set at 30% of the single-family mortgages purchased by Fannie and Freddie, and the Department of Housing and Urban Development has increased that percentage over time. The goal of the community groups was to force Fannie and Freddie to loosen their underwriting standards, in order to facilitate the purchase of loans made under the CRA.

Thus a provision was inserted into the law whereby Congress signaled to the GSEs that they should accept down payments of 5% or less, ignore impaired credit if the blot was over one year old, and otherwise loosen their lending guidelines.

The proposals of Acorn and other affordable-housing advocacy groups were acceptable to Fannie. Fannie had been planning to use the carrot of affordable-housing lending to maintain its hold over Congress and stave off its efforts to impose a strong safety and soundness regulator to oversee the company. (It was not until 2008 that a strong regulator was created for Fannie and Freddie. A little over a month later both GSEs were placed into conservatorship; they have requested a combined $112 billion in assistance from the federal government, and much more will be needed over the next few years.)

The result of loosened credit standards and a mandate to facilitate affordable-housing loans was a tsunami of high risk lending that sank the GSEs, overwhelmed the housing finance system, and caused an expected $1 trillion in mortgage loan losses by the GSEs, banks, and other investors and guarantors, and most tragically an expected 10 million or more home foreclosures.

As a result of congressional and regulatory actions, the percentage of conventional first mortgages (not guaranteed by the Federal Housing Administration or the Veteran’s Administration) used to purchase a home with the borrower putting 5% or less down tripled from 9% in 1991 to 27% in 1995, eventually reaching 29% in 2007.

Fannie and Freddie acquired $1.2 trillion of loans from banks and other lenders from 1993 to 2007. This amounted to 62% of all such conventional home purchase loans with a down payment of 5% or less that were originated nationwide over the same period.

Fannie and Freddie also acquired $2.2 trillion in subprime loans and private securities backed by subprime loans from 1997 to 2007. Acorn and the other advocacy groups succeeded at getting Congress to mandate “innovative and flexible” lending practices such as higher debt ratios and creative definitions of income. And the serious delinquency rate on Fannie and Freddie’s $1.5 trillion in high-risk loans was 10.3% as of Sept. 30, 2009.

This is about seven times the delinquency rate on the GSEs’ traditional loans. Fifty percent of the high-risk loans are estimated to be CRA loans, with much of the remainder useful to the GSEs in meeting their affordable-housing goals.

I guess the actual facts and figures weren’t important enough to mention to your readers. All that was necessary was to continue the defense of the embattled ACORN. Priorities, people. Get your head out of Soros’ ass.

  1. November 14, 2009 at 7:04 am

    Videos didn’t embed….they will be there shortly

  2. November 14, 2009 at 8:14 am

    Videos are up now.

  3. gnmk09
    November 15, 2009 at 6:30 pm

    How’s it going man…hope all is well in your world !!

    Check out this link: http://objllc.com/USSA.htm

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