How ACORN destroyed the housing market | Washington Examiner »
Posted By RTHTGakaRoland 1 month, 1 week ago in Political OpinionOver at the Wall Street Journal, there's a very interesting article that connects the dots between ACORN, the mortgage-lending-standard-destroying Community Reinvestment Act legislation, Fannie Mae and the eventual inflation and collapse of the housing bubble in last decade:
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.
And rather than fight the attempt to force them into making obviously risky loans, Fannie Mae rolled over because they saw an opportunity to protect their own corrupt hide:
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.
Liberal commentators have been twisting themselves into pretzels ever since the housing collapse. They refuse to believe liberal activist groups' well-intentioned attempt to extend huge taxpayer-subsidized mortgage loans to those who can't afford them did not contribute to the collapse of housing market and Government Sponsored Entity bailout fiasco and blame either simple greed, Wall Street antics or some combination thereof. (To be fair, there were a number of contributing factors to the housing bubble but the problems of politically-motivated attempts to undercut mortgage standards shouldn't be underestimated. Further, while liberals and Democrats favorite housing scapegoat is Wall Street, they rarely acknowledge that the haphazard slicing and dicing of mortgage securities was an attempt to to cover the risk brought on after lending standards were gutted by congress.) But the narrative laid out in today's Wall Street Journal is pretty clear and convincing, especially since it was authored by Edward Pinto, a former chief credit officer at Fannie Mae.
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RTHTGakaRoland
“…man is not free unless government is limited. There's a clear cause and effect here that is as neat and predictable as a law ...
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RTHTGakaRoland1 month, 1 week ago
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The WSJ article upon which this author based his commentary has more "nuts & bolts" information for those interested:
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Acorn and the Housing Bubble
The liberal pressure group helped Congress write the affordable housing rules that got us into trouble.
http://online.wsj.com/article/SB100014240527487032... -
RTHTGakaRolandComment removed: Spam
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RTHTGakaRoland1 month, 1 week ago
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If the already heinous mutual dependence and corruption among Democrat politicians, ACORN, and affiliated organizations like WFP and SEIU was enough to be a principal contributory factor to the housing crash and our current deep recession; what will be the disasters fulminated by the "hand in glove" relationship among 0bama and these same groups.
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"Former ACORN fund raiser gets Obama judicial nomination. Yes, you read that right | Washington Examiner"
http://www.propeller.com/story/2009/11/13/former-a...-
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RTHTGakaRoland1 month, 1 week ago
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"ACORN-The LA Story, Part II: 'We knew we were gonna put in Obama.'
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http://biggovernment.com/2009/11/13/acorn-the-la-s...
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fiftynineComment removed: Hard Banned
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Progressive1 month, 1 week ago
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ACORN was the first to warn about predatory lending:
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http://www.videosift.com/video/Maddow-The-Truth-Ab... -
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frctm51 month, 1 week ago
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So, in other words, the economy under Bush was so effing bad because of Republican incompetence that the only thing that was propping it up was home loans to low income families. If what this article says is true, there is no other possible conclusion you can come to. You see, if the economy were truly strong in its fundamentals, bad loans to poor people would not have brought down the entire world. It would have to have really sucked big time due to Bush's economic policies for the only thing to have kept it going to have been loans to poor home owners. I guess Bush was a failure on all fronts.
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Tumultuous1 month ago
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The Community Reinvestment Act or CRA, is a United States federal law designed to encourage commercial banks and savings associations to meet the needs of borrowers in all segments of their communities, including low and moderate income neighborhoods. Congress passed the Act in 1977 to reduce discriminatory credit practices against low-income neighborhoods, a practice known as redlining.
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The law, however, emphasizes that an institution's CRA activities should be undertaken in a safe and sound manner, and does not require institutions to make high-risk loans that may bring losses to the institution. An institution's CRA compliance record is taken into account by the banking regulatory agencies when the institution seeks to expand through merger, acquisition or branching. The law does not mandate any other penalties for non-compliance with the CRA.
Subprime lending in finance means making loans that are in the riskiest category of consumer loans and are typically sold in a market from prime loans. The standards for determining risk categories refer to the size of the loan, "traditional" or "nontraditional" structure of the loan, borrower credit rating, ratio of borrower debt to income or assets, ratio of loan to value or collateral, documentation provided on those loans which do not meet Fannie Mae or Freddie Mac underwriting guidelines for prime mortgages and are considered "non-conforming".
Because subprime loans were so profitable, that they were aggressively marketed in low-and moderate-income communities even over the objections and warnings of housing advocacy groups like ACORN.
FTA:
"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."
Really? Community activist Gale Cincotta of National People's Action in Chicago, had led the national fight to pass, and later to enforce the CRA, not ACORN. The National People's Action community group was not "informally deputized". That is pure fabrication.
This article claims ACORN's insinuated support of subprime loans destroyed the housing market. Prove it. The Washington Examiner certainly doesn't.
This article doesn't stand up to validation when fact checking the information being presented. The Washington Examiner apparently didn't verify the accurracy of its claims and is obviously functioning as an extension of the Republican propaganda machine.
Yet another example of debunked right-wing disinformation.
http://en.wikipedia.org/wiki/Community_Reinvestmen... -
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Tasine1 month ago
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Probably no one has lower esteem for ACORN than I. That said, let me propose as I always have, that the housing market would not have been destroyed by ACORN or by builders, or by bankers, or by speculators - if Congress had not provided the means. CONGRESS, particularly, Barney Frank, Chris Dodd, and a few others, provided the means for the destruction. Any educated 3rd grader would have known better than to order banks to lend to people they knew could not repay the loans.
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