<p>How can cra be such a large part of the residential real estate loan origination…when it isn’t?</p>
<p>Bizarre… </p>
<p>Are small business loans included in the cra numbers? What does that have to do with residential loans? </p>
<p>Bizzare…</p>
<p>And why would the study in post 88 try incorrectly to include every cra loan ever made? Some of these loans would have been paid
back…refinanced…etc…</p>
<p>Chuck Schumer! I had a misfortune of sharing airplane seats when he was running first time and overhearing their conversation about campaigns, entire flight. I just don’t know how a sleazy fellow like him became a prominent senator. No wonder we had a financial crisis. It wouldn’t surprise me if it happens again even if we fix all the problems you are debating here, CRA, CDS, all the other things that I don’t plan to understand, as long as our politicians stay lacking the leadership. Greed will find a way to game if allowed. And they are very allowed. Why shouldn’t they? Their job is to make money. It’s politicians’ job to ensure their way of making money is also increasing public wealth. Our poilitians failed at it miserably and weasle out every time blaming others. We are helping them weasle out by argueing over who’s to balme CRA or CDS? Both and neither!</p>
<p>My firm originated but did not underwrite mortgages. Most of the underwriters as I recall were subject to the CRA. Those subject to the CRA (and many other regulatory requirements) usually had the worst rates to offer even though they were usually bigger than the other underwriters. If you originate a loan and it gets rejected, it is embarrassing for the client and the originator and no commission is paid. I never originated anything that I thought would get rejected.</p>
<p>Mortgage underwriters subject to the CRA often put pressure to find clients in bad neighborhoods to lend to. I ignored this since we would have originated to anyone in any part of the state who had money.</p>
<p>Plenty, but we are looking with hindsight. If the credit agencies are presented with mortgages showing certain credit ratings and properties with appraisals to back the purchase, it is not the role of the credit agencies to ignore that and make a macro economic prediction is it?</p>
<p>Razorsharp, you memtioned hindsight. While the bubble was occuring, what was the attitude of your clients? The clients did not want to miss the up move?</p>
<p>I was out of the business before 2005 so I don’t know what clients were thinking.</p>
<p>I bought an expensive house in 2005. I did so after listening to someone I respect say we were in a housing bubble. I missed the bubble. I recognized however that the Fed was raising rates too high and it would affect the economy. I was right about that but wrong as to the depth of the damage because I did not see the bubble.</p>
<p>So in your eyes the government failed because of CRA but the private sector did not fail even though they submitted faulty appraisals, inaccurate credit ratings, financial institutions that overleveraged,aggressive lobbying against regulation and purchasing assets they did not understand.</p>
<p>This crises deserves to be laid directly at the door of the financial institutions.</p>
<p>Well… I was long during the 1987 stock market crash and the 1989 mini crash. Definitely did not see the 1989 mini crash coming.</p>
<p>It sucks being long during the crashes but it happens.</p>
<p>I thought there was a real estate bubble. My wife worked for a real estate developer and I looked at the numbers. The numbers didn’t work. I am a big believer in numbers. Lol</p>
<p>Anyway, the vastness of the real estate bubble is amazing. We lost a lot of money when real estate crashed. What were we suppposed to do? Sell our residence? I guess we could have but we liked where we lived at that time. Money is not the only motivator.</p>
<p>Just as in the stock mkt most losses were paper only-just had to wait until the rebound. Pepole who sold out low look so stupid now. Selling low is dumb unless you live in some awful place with no future. Same for stocks. Just hang around and it will be fine.</p>
<p>Razorsharp, what you say may have been true in the 90’s. But the bubble happened in the 2000’s. And mortgage initiators didn’t have to worry about meeting the FNMA standards during the bubble years because by 2006 most mortgage loans weren’t being resold to Freddy and Fannie, but to the private sector, as I posted before. In particular, by far the majority of the subprime and Alt-A loans - those NINJA loans we all recall - “No Income No Job or Assets” - were not FNMA loans.</p>
<p>I understand that CRA and Freddy/Fannie make convenient targets for a deflection of the blame from where it really lies onto the convenient safegoats - government and poor people - but the facts just don’t fit.</p>
<p>it is definitely within someone’s right to walk away, if that is the decision they want to make. There should be some consequences like taking big credit rating hits, but as we’ve seen, credit ratings are pretty uhhh… made up.</p>
<p>well, sure… the guys that got the bailouts were lending money to make themselves richer, and they got caught. But they didn’t really get caught, b/c their government buddies bailed them out. The revolving door to Wall St and all. Obama claimed he would be different in this regard, but obviously he isn’t.</p>
<p>As for grad school, I am done, except for my thesis (it’s almost done). My graduate degree is basically in Security Studies (a subset of International Relations), and I work in the national security field (sitting in a cubicle in DC). I know not many people have a dream job of working for the govt, but I am doing what I’ve known I wanted to do since I watched 9/11 happen. I like to think each day I am making my own tiny difference to help the country be safer =)</p>
<p>Fannie and Freddie went under because of the financial crises and all the bad loans they purchased for packing. I have purchased in 2011 several properties from Fannie at about 45 percent of their 2008 price. Fannie ate the loss.</p>
<p>Fnm and fre went under… All the major financial institutions were going to go under if the govt didn’t step in.</p>
<p>All of them. Major commercial and investment banks… Bye bye.</p>
<p>When you buy puts, razorsharp, how do you get paid when you sell them? There is a clearing house that makes sure you get paid.
You don’t really get paid by the guy who sold you the puts. </p>
<p>Well… These large financial firms were relying on each other. There wasn’t a clearing house for all this off balance sheet stuff. All the major firms were tied together. There was going to be the biggest domino effect of all time if the govt didn’t step in…</p>
<p>Yeah, that’s a very good basic way to explain it, dstark. Exactly. No clearing house, no market, no balance sheet, no way to know what anything was or was not worth. It was like making markets out of thin air.</p>
<p>I wonder about that. Nothing has ever made me feel as if money was not a real thing in the same way as that did. And, yet, still, it required bailouts with real money.</p>
<p>^ and this is precisely why we continue to have “too big to fail” and investment firms that are bigger now than they were pre-2008. Part of the state and federal governments’ work to contain the economic collapse was to run around behind the scenes getting financial institutions which were less exposed to take over financial institutions which were on the verge of going down. A lot of people in this country just don’t realize how close we came to a total and catastrophic collapse of the entire financial system.</p>