5% too high a downpayment for Dems

[Pliny]

Interesting that Democrats voted to keep the downpayment requirement for homeownership at 3.5%. It used to be 20% and 10% was considered risky.

Of course, when the Democrats took the House in 2006 they encouraged 0% down payment for home ownership. Golly gosh!

I heard a rumour that Chris Dodd even said, "A 5% down payment will restrict homeownership to only those who can afford it."

He didn't say that but he may as well have.

Here's what he actually said:

Factcheck

"Dodd said one reason he opposed the measure is that it would have disadvantaged homebuyers with good credit and income, but without the cash to make a 5 percent down payment. But Corker’s amendment also would have stripped out a requirement that mortgage packagers keep a financial interest in the mortgage securities that they sell to others — an idea Dodd said was aimed at discouraging lenders from making loans to people who can’t repay them."

Is there any wonder why the housing crisis occurred in the US. On the one hand he doesn't want to disadvantage homebuyers whom he thinks can repay them and on the other wants to discourage lenders from making loans to people whom he thinks will not repay them.

I think raising the down payment requirement would go far to ensure ensure both but even 5% is low.

The 3.5% requirement now if raised to 5% would reduce Federal Housing Administration loans by 40%.

Investors

"The Federal Housing Administration requires only a 3.5% down payment. FHA officials told Congress in March that raising the minimum to 5% would reduce FHA-backed loans by 40%."

Rep. Maxine Waters (D) praised the CEO of Fannie Mae and Freddie Mac (Raines) in 2006 for financing mortgages 100%.

Housing prices dropped catastrophically in 2009 in quite few areas

and even if you had put 10 or 20% down it would have been better to mail your keys in to the mortgage company than to hold onto that now large mortgage.

[Bitsy]

Of course, when the Democrats took the House in 2006 they encouraged 0% down payment for home ownership. Golly gosh!

Pliny, your statement is incorrect; George Bush and the Republicans gave us our Zero Down Payment.

State of the Union 2004:

"The pace of economic growth in the third quarter of 2003 was the fastest in nearly 20 years; new home construction, the highest in almost 20 years; homeownership rates, the highest ever. Manufacturing activity is increasing. Inflation is low. Interest rates are low. Exports are growing. Productivity is high, and jobs are on the rise."

(A month later, President Bush passed the Zero Down Payment Initiative. "To build an ownership society, we'll help even more Americans to buy homes," Bush told a group of homebuilders in 2004. "Some families are more than able to pay a mortgage but just don't have the savings to put money down." By the end of 2005, the National Association of Realtors said that more than four out of every 10 first-time homebuyers put no money down.

http://www.portfolio.com/news-markets/top-5/2008/07/23/Bush-Wall-Street-Got-Drunk/

He was cautioned of the costs but he forged ahead.

http://www.boston.com/business/articles/2004/10/05/zero_down_mortgage_initiative_by_bush_is_hit/

[bush_cheney2004]

Pliny, your statement is incorrect; George Bush and the Republicans gave us our Zero Down Payment.

Correct in this narrow context, but "Zero Down" has existed for decades in the United States through government backed VA loans for active duty military, and more recently, all reservists and national guard members.

[Bitsy]

Correct in this narrow context, but "Zero Down" has existed for decades in the United States through government backed VA loans for active duty military, and more recently, all reservists and national guard members.

Without those loans and the other benefits, health and education, the government gave the 16 million Americans returning from WWII, our economy would have sunk back into the depression era. Those VA loans and the homeownership that followed helped fuel our prosperity for decades. We owe nothing less to our veterans.

[punked]

Yah I remember Bush's "Home for every American" policy apparently Pliny was asleep when that happened. Good for the Dems fixing his and Republicans mistakes.

[kingrebels]

blah blah blah

[Shady]

Democrats caused the housing problem, and now they wanna take the country back to the same failed policies.

Zero down mortgages aren't necessarily the problem. It's who you give them too. Unfortunately, Democrats pushed banks to give them to people who shouldn't have qualified. And thus the housing market was engineered to collapse. All for their so-called good intentions.

I'll let the former HUD speaker explain it for himself.

And then when Bush proposed reform of Fannie Mae and Freddie Mac, what did the Dems say?

And when one examines The New York Times from 1999. We find this...

Fannie Mae Eases Credit To Aid Mortgage Lending

WASHINGTON, Sept. 29— 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.

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.

The New York Times

In fact, Republicans tried to fix the problem TWICE. But Democrats filibustered. The blood is on their hands.

New Agency Proposed to Oversee Freddie Mac and Fannie Mae

WASHINGTON, Sept. 10— The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The New York Times

And what was the Democrats response back in 2003?

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said.

The New York Times

Yep. And reform was proposed again, in 2005.

Federal Housing Enterprise Regulatory Reform Act of 2005

John McCain: "I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole."

"I urge my colleagues to support swift action on this GSE reform legislation."

Link

[Shady]

And what was the Democrat response again?

"Those who argue, that housing prices are at the point of a bubble, are missing an important point. We're talking about an entity, home ownership, where there is not the degree of leverage we have seen else where."

Wow. Dead wrong.

[punked]

Shady wants you to believe it isn't a 0 down payment mortgages which is the problem but that is the people you give them to! Let me ask you guys this, WHY WOULD ANYONE WHO MAKES ENOUGH MONEY TO PAY A MORTGAGE NOT BE ABLE TO SAVE A DOWN PAYMENT? It is the stupidest statement of the day. Congrats Shady you get the title again.

BTW remember in 2004 Bush gave his famous speech a house for every American speech where he talked about giving loans to every Americans as well. Shady forgets that.

Bush in 2006

"If houses get too expensive, people will stop buying them... Economies should cycle."

Oh and tell me more about Dems pushing those loans.

http://georgewbush-whitehouse.archives.gov/news/releases/2002/06/20020617-2.html

BTW that link is a speech Bush gave in 2002 when he and a REPUBLICAN congress promised to give 6 million poor Americans 0 down payment house loans. Poor Poor Shady knowing nothing about nothing.

Edited September 27, 2010 by punked

[Pliny]

Pliny, your statement is incorrect; George Bush and the Republicans gave us our Zero Down Payment.

My statement is correct. I said the Dems "encouraged" 0% down payments.

George Bush gave us 0% down payments perhaps but Dems went wild with it in 2006 despite warnings about Fannie and Freddie.

Eventually we'll get to the truth. Clinton revitalized the Community Reinvesment Act (CRA) that guess who initially enacted it - Franklin Delano Roosevelt.

Arthurdale

In the end, Eleanor Roosevelt's dream of covering America with Arthurdales came true — from sea to shining sea, federally funded housing projects are not hard to find. For better or for worse, in them we have Arthurdale's legacy.

http://www.portfolio.com/news-markets/top-5/2008/07/23/Bush-Wall-Street-Got-Drunk/

He was cautioned of the costs but he forged ahead.

http://www.boston.com/business/articles/2004/10/05/zero_down_mortgage_initiative_by_bush_is_hit/

From this article we learn - an important thing.

But the Department of Housing and Urban Development thinks the program could be run on a break-even basis.

What is the business of the Department of Housing and Urban Development?

Someone sold this to Bush and it being an election year goodies were being lined up to sell to the American public. Do I blame Bush? Somewhat - he wasn't the smartest President to have lived but the socialist ideology is really to blame.

Another great Democrat gave us the Department of Housing and Urban Development and wanted to create the "Great Society". That was LBJ. He didn't learn from the failures of the Great Depression but took lessons from it.

The big question is can we allow government to make the decisions for homebuyers and lenders or should homebuyers decide whether or not they can afford to buy and lenders decide if they are going to lend.

[Pliny]

Yah I remember Bush's "Home for every American" policy apparently Pliny was asleep when that happened. Good for the Dems fixing his and Republicans mistakes.

Bush's "home for every American". That sure sounds like a democrat idea and should be considered by Dems a bright spot in the Bush's presidency. It's so warm and fuzzy. Of course, what happens when you play the same game as the Democrats? How did those neo-cons in the Bush Administration ever come up with the idea that they should make it easy for every American to own their own home?

Somehow the idea filtered down to ACORN and other community activist groups and they were picketing banks who wouldn't make ninja loans. Bush certainly opened a Pandora's box with that one.

[Pliny]

Shady wants you to believe it isn't a 0 down payment mortgages which is the problem but that is the people you give them to! Let me ask you guys this, WHY WOULD ANYONE WHO MAKES ENOUGH MONEY TO PAY A MORTGAGE NOT BE ABLE TO SAVE A DOWN PAYMENT? It is the stupidest statement of the day. Congrats Shady you get the title again.

It eventually became a practice to give everyone a loan with no qualifications. So yes it is the people you give the mortgage to that is the problem.

Why would anyone who makes enough money to pay a mortgage not be able to save a down payment?

There are many reasons.

[punked]

Bush's "home for every American". That sure sounds like a democrat idea and should be considered by Dems a bright spot in the Bush's presidency. It's so warm and fuzzy. Of course, what happens when you play the same game as the Democrats? How did those neo-cons in the Bush Administration ever come up with the idea that they should make it easy for every American to own their own home?

Somehow the idea filtered down to ACORN and other community activist groups and they were picketing banks who wouldn't make ninja loans. Bush certainly opened a Pandora's box with that one.

But it wasn't a dem idea. The Dems didn't announce in 2002 billions in loans for 6 million poor Americans. The Republicans did that. Sorry you can't rewrite history.

[Pliny]

But it wasn't a dem idea. The Dems didn't announce in 2002 billions in loans for 6 million poor Americans. The Republicans did that. Sorry you can't rewrite history.

The idea of government providing easy credit for home-ownership originated with the Democrats aided by the Federal Reserve. Clinton revitalized the Community reinvestment act during his presidency. The 2000 Y2K bubble bursting, coupled with 9/11 got Greenspan recommending getting people out there shopping and the next bubble started in the housing industry. The Democrats really ran amok after 2006 with promoting that.

Bush didn't really concentrate too much on domestic economic policy, he was busy working on Homeland security, the wars in Iraq and Afghanistan and some African aid - which rarely gets any mention.

All in all I don't think Bush was much of an economist and let Greenspan just keep on pumping up the housing bubble. Is Bush responsible? He was the President. He should have curtailed the Dems "irrational exuberance" but he didn't. He owns it now.

You can't tell me Dem's tried to stop Bush's irrational exuberance by reining in Fannie and Freddie, and keeping Americans from living the American dream of owning their own home - that would be so unlike the Democrats. The mean Republicans would have to take that initiative. Why didn't they? The take over of the Senate and Congress in 2006 pretty much took all the wind out of the Republicans sail. The Reid/Pelosi machine ignored any economic red flags and steamrolled ahead - Greenspan noddingly approving their irrational exuberance.

Of course Bush is entirely responsible for permissively allowing little kids to run around loose without any restraints. The first thing the Democrats did though was blame Wall Street and Bush's deregulation. They totally did nothing at all during the Bush administration according to them. Really, that was a fault of Bush in his last two years - he did nothing.

[punked]

Sorry Bush is the one who did it. Sorry you are wrong it is a Bush policy enacted by Bush and a Republican congress. You don't get to blame Dems because you feel they pushed the issue because Republicans are the ones who did it. Until you address that you are wrong. If you love the idea and want to back Republicans on it great. However don't come here and talk to me about dems when I know and you know Republicans are the ones who passed the law.

[dre]

The idea of government providing easy credit for home-ownership originated with the Democrats aided by the Federal Reserve. Clinton revitalized the Community reinvestment act during his presidency. The 2000 Y2K bubble bursting, coupled with 9/11 got Greenspan recommending getting people out there shopping and the next bubble started in the housing industry. The Democrats really ran amok after 2006 with promoting that.

Youre ignoring the biggest part of the problem.

In a cash rich environment its inevitable that lending standards would get relaxed. Its simple supply and demand. The shadow banking system allowed investors and funds from all around the world to bid up housing prices by buying derivitives - mortgage backed securities. This created overly favorable credit conditions, like a glut of money being injected into ANY credit system ALWAYS will.

Of course lenders relaxed their standards! Why not, as long as there was a market for securities with sub prime loans bundled into them? And the vast majority of sub prime loans were made by companies that the community re-investment act doesnt even apply to.

Why did they do it? BECAUSE THEY WERE MAKING A MOUNTAIN OF MONEY DOING IT. Not because the government (either the dems or repubs) was forcing them to. They did it because whether these loans were overly risky or not there was a market for the derivitives these loans were being bundled into.

If we want to stop this from happening again we need to look at the way mortgages are securitized, and probably regulate the shadow banking system.

[dre]

Sorry Bush is the one who did it. Sorry you are wrong it is a Bush policy enacted by Bush and a Republican congress. You don't get to blame Dems because you feel they pushed the issue because Republicans are the ones who did it. Until you address that you are wrong. If you love the idea and want to back Republicans on it great. However don't come here and talk to me about dems when I know and you know Republicans are the ones who passed the law.

Neither BUSH or Obama or Clinton "DID IT". The vast majority of sub prime loans had nothing at all to do with the CRA. They were the result of a glut of cash being dumped into the US housing markets caused by investors all around the world purchasing derivitives.

Basically you had a psychological disposition that spread across the entire financial system. There was a ton of money around, interest rates were low, and lenders (and securities buyers) felt that increasing housing prices partially offset the risk of these loans.

[Pliny]

Youre ignoring the biggest part of the problem.

In a cash rich environment its inevitable that lending standards would get relaxed. Its simple supply and demand. The shadow banking system allowed investors and funds from all around the world to bid up housing prices by buying derivitives - mortgage backed securities. This created overly favorable credit conditions, like a glut of money being injected into ANY credit system ALWAYS will.

Of course lenders relaxed their standards! Why not, as long as there was a market for securities with sub prime loans bundled into them? And the vast majority of sub prime loans were made by companies that the community re-investment act doesnt even apply to.

Why did they do it? BECAUSE THEY WERE MAKING A MOUNTAIN OF MONEY DOING IT. Not because the government (either the dems or repubs) was forcing them to. They did it because whether these loans were overly risky or not there was a market for the derivitives these loans were being bundled into.

If we want to stop this from happening again we need to look at the way mortgages are securitized, and probably regulate the shadow banking system.

So you think that making a mountain of money is the reason behind the derivatives debacle?

A lot of the failed Wall street companies had been around for quite a while, some a century. Was it irrational exuberance? If so, how does that happen?

So the question is not "why" the irrational exuberance but what created the irrational exuberance.

Wall Street was not filled with schoolboys who had no experience in financial markets. What made them all abandon their prudence all at once? One has to look at the risks they saw. Obviously, the risks had been minimized somehow and the push from government was to see the less advantaged able to purchase housing. The derivatives on mortgages is not that risky until you get into "risky" mortgages. Of course the risky mortgages downgraded the quality of the derivatives and they eventually ended up at the level of junk. Well, Fannie and Freddie would buy them.

Wall street has always made a pile of money, they are in business to make money, so making a mountain of money isn't the "why" for their abandonment of sound principles that would place them in such jeopardy. What were the key words that got them to jump on board? Was it "guarantees" or "assurances" from someone or some government agency?

You can bet that it was someone that Wall Street listens to, someone that can make assurances.

The only other possibility is a conspiracy to destroy some of the players on Wall Street and buy up assets at fire sale prices. I'm not willing to entertain that concept.