The Risky Loan Types that Brought us to the Current Housing and Economy Crisis »
Posted By altnrg 9 months, 2 weeks ago in NewsOur financial industry is facing unprecedented financial challenges. One of the primary root causes is that non traditional variable rate mortgages were being made to people that did not understand them. As the payments on these loans increased beyond the buyer's ability to repay the loans, the default rates skyrocketed.
Here is a list and a brief description (and commentary) of some of the riskiest non traditional types of loans.
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Endoscopy9 months, 2 weeks ago
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Poor willie can't understand CRA.
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A lot of the loans mentioned here fall under the CRA rules.
1. NINJA Loan
2. Balloon Loan CRA version just starts principle payments a few years later.
3. Piggyback Loan CRA version is just 0% down
5. Teaser Loan CRA version is Low starting ARM
6. Stretch Loan
So willie boy while not mentioned they were there.
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Will13139 months, 2 weeks ago
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IN FACT FOR THE LIARS ENDOSCOPY AND WOLFIE...SOME SERIOUS EVIDENCE THAT YOU ARE STUPID OR YOU JUST PLAIN LIE...
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San Francisco Federal Reserve Bank Governor Randall Kroszner has stated that the claim that "the law pushed banking institutions to undertake high-risk mortgage lending" was contrary to their experience, and that no empirical evidence had been presented to support the claim.[56] In a Bank for International Settlements (BIS) working paper, economist Luci Ellis concluded that "there is no evidence that the Community Reinvestment Act was responsible for encouraging the subprime lending boom and subsequent housing bust," relying partly on evidence that the housing bust has been a largely exurban event.[61] Others have also concluded that the CRA did not contribute to the financial crisis, for example, FDIC Chairman Sheila Bair,[62] Comptroller of the Currency John C. Dugan,[63] Tim Westrich of the Center for American Progress,[64] Robert Gordon of the American Prospect,[65] Daniel Gross of Slate, and Aaron Pressman from BusinessWeek.[66]
Some legal and financial experts note that CRA regulated loans tend to be safe and profitable, and that subprime excesses came mainly from institutions not regulated by the CRA. In the February 2008 House hearing, law professor Michael S. Barr, a Treasury Department official under President Clinton,[67][34] stated that a Federal Reserve survey showed that affected institutions considered CRA loans profitable and not overly risky. He noted that approximately 50% of the subprime loans were made by independent mortgage companies that were not regulated by the CRA, and another 25% to 30% came from only partially CRA regulated bank subsidiaries and affiliates. Barr noted that institutions fully regulated by CRA made "perhaps one in four" sub-prime loans, and that "the worst and most widespread abuses occurred in the institutions with the least federal oversight".[68] According to Janet L. Yellen, President of the Federal Reserve Bank of San Francisco, independent mortgage companies made risky "high-priced loans" at more than twice the rate of the banks and thrifts; most CRA loans were responsibly made, and were not the higher-priced loans that have contributed to the current crisis.[69] A 2008 study by Traiger & Hinckley LLP, a law firm that counsels financial institutions on CRA compliance, found that CRA regulated institutions were less likely to make subprime loans, and when they did the interest rates were lower. CRA banks were also half as likely to resell the loans.[70] Emre Ergungor of the Federal Reserve Bank of Cleveland found that there was no statistical difference in foreclosure rates between regulated and less-regulated banks, although a local bank presence resulted in fewer foreclosures -
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Will13139 months, 2 weeks ago
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San Francisco Federal Reserve Bank Governor Randall Kroszner has stated that the claim that "the law pushed banking institutions to undertake high-risk mortgage lending" was contrary to their experience, and that no empirical evidence had been presented to support the claim.[56] In a Bank for International Settlements (BIS) working paper, economist Luci Ellis concluded that "there is no evidence that the Community Reinvestment Act was responsible for encouraging the subprime lending boom and subsequent housing bust," relying partly on evidence that the housing bust has been a largely exurban event.[61] Others have also concluded that the CRA did not contribute to the financial crisis, for example, FDIC Chairman Sheila Bair,[62] Comptroller of the Currency John C. Dugan,[63] Tim Westrich of the Center for American Progress,[64] Robert Gordon of the American Prospect,[65] Daniel Gross of Slate, and Aaron Pressman from BusinessWeek.[66]
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Will13139 months, 2 weeks ago
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Our analysis of the loan data found that about 60 percent of higher-priced loan originations went to middle- or higher-income borrowers or neighborhoods. Such borrowers are not the populations targeted by the CRA. In addition, more than 20 percent of the higher-priced loans were extended to lower-income borrowers or borrowers in lower-income areas by independent nonbank institutions--that is, institutions not covered by the CRA.6
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Putting together these facts provides a striking result: Only 6 percent of all the higher-priced loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas, the local geographies that are the primary focus for CRA evaluation purposes. This result undermines the assertion by critics of the potential for a substantial role for the CRA in the subprime crisis. In other words, the very small share of all higher-priced loan originations that can reasonably be attributed to the CRA makes it hard to imagine how this law could have contributed in any meaningful way to the current subprime crisis.
Of course, loan originations are only one path that banking institutions can follow to meet their CRA obligations. They can also purchase loans from lenders not covered by the CRA, and in this way encourage more of this type of lending. The data also suggest that these types of transactions have not been a significant factor in the current crisis. Specifically, less than 2 percent of the higher-priced and CRA-credit-eligible mortgage originations sold by independent mortgage companies were purchased by CRA-covered institutions.
http://www.federalreserve.gov/newsevents/speech/kr...
FROM THE FEDERAL RESERVE... CERTAINLY WAY MORE OF AN AUTHORITY THAN ENDOSCOPY OR WOLFIE....
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