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SoWal Insider
Apr 30, 2008
Right here!
I used to think you were unduly pessimistic, now I am thinking you are unduly optimistic. I will be very happy if there is a thing like "cash and good credit" and I have any of it. If there isn't, I am going to club you on the head with a cow's leg bone and make you my valet. How are you at tanning hides and drying seaweed?:wave:

I'm currently taking the online course as a fall back position. :clap:


SoWal Insider
Apr 30, 2008
Right here!
Wow, I thought my Sowal account had been hijacked until I saw the post date!

Amazing how many people can see this problem coming (both candidates claimed they tried to stop it during the debates) yet NOONE actually did anything to prevent it or cushion the blow!

I remember a year or so ago when I was reading Roubini and thinking.. major bank and investment failures? A great depression? Yeah right! I'm not so sure anymore. Hopefully though that old rule of thumb comes into play - when everyone is convinced something is coming, it's probably already passed.


Beach Fanatic
Jan 2, 2006
New York Times article - check the date

Fannie Mae Eases Credit To Aid Mortgage Lending
Published: September 30, 1999
In a move that could help increase home ownership rates among minorities and low-income consumers, theFannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
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.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescuesimilar to that of the savings and loan industry in the 1980's.
''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.
Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University 's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.
In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.
Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.
In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.
The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.


SoWal Expert
May 8, 2007
Despite people posting this article on Sowal multiple times, it has been determined that increasing loans to minorities/the poor are NOT the reason for the current crisis.

If all of the loans were being paid back at the default rate of these scapegoats, we wouldn't have a crisis to discuss. :roll:


Beach Fanatic
Feb 9, 2007
I no longer stay in Dune Allen
LOL, I used to think Capricious was overbearingly pessimistic. Never mind. :wave:
Capricious will be the one to go to for sure. If I remember right he hasn't been spending his money on frivolous things like cable, landscaping, fresh food, haircuts, and regular dental visits (;-) just joshing you). He may be the "SHELLY" of how to survive after the total Systemic Collapse! hits as he has been living it for some time now.


Beach Fanatic
Jul 11, 2005
Capricious will be the one to go to for sure. If I remember right he hasn't been spending his money on frivolous things like cable, landscaping, fresh food, haircuts, and regular dental visits (;-) just joshing you). He may be the "SHELLY" of how to survive after the total Systemic Collapse! hits as he has been living it for some time now.

Welcome to the present, for those who did not see it
when it was still the future.


Dusty: "Jo, Bill, it's coming! It's headed right for us! "
Bill: " It's already here! "


Miss Kitty

Jun 10, 2005
I see the unemployment line getting longer after November. :roll:
Think Again

It's really interesting how this whole thing feeds in on itself - a housing downturn leads to a credit crunch, which leads to a contraction of business and unemployment, which leads to more downturn in housing, which leads to a bigger credit crunch, which leads to more contraction in business and unemployment... and so on and so on.

At some point we have to bottom out. All the real-estate loans for people who couldn't pay them go bad, Wall Street finally writes off the last of these bad assets freeing capital, the last bank that can't survive fails and gets bought up, and housing prices finally crater to a point where people with cash and good credit start buying.

The question is, how long will this take? I'd estimate about two years.

Did you read what the CIA has on our Financial Balance and Rank?

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