Earlier this week, we reported on a movement gathering momentum in Congress that would enable Fannie Mae and Freddie Mac to force lenders to buy back bad loans to help the mortgage giants recoup some of their combined $354 billion in losses due to delinquent mortgages and bad debt. Now, some members of the House of Representatives (Barney Frank, D-MA, and Paul E. Kanjorski, D-PA) are taking things a step further and calling for the president, both GSE’s and anyone else that they can get their hands on to use “all of [their] power to recover money” from underwriters and issuers of underwater securities that ultimately made their way to Fannie Mae and Freddie Mac [1].
The two representatives claim that Fannie and Freddie have cost taxpayers $150 billion to date, and blame a significant portion of these losses on “deception” on the part of “private companies [that] sold Fannie and Freddie loans or securities based on fraudulent documents.” Now, I am certainly not saying that there was no fraud on the part of any lenders, and we all know that some pretty lousy mortgages made it through the underwriting process in the past decade. But wasn’t this partly because of the lenient and even aggressive policies that not only encouraged but rewarded and even demanded these types of loans? Why should only half of the guilty parties pay the price now, especially when Fannie and Freddie were bailed out specifically to help disperse these losses?
Thank you for reading the Bryan Ellis Real Estate Letter! Your comments and questions are welcomed below.
[1]http://www.dsnews.com/articles/lawmakers-call-for-legal-action-against-lenders-who-saddled-gses-with-losses-2010-08-20
Barney Frank and Chris Dodd got us into this mess during the Clinton Administration, and it carried over into the Bush Administration. As a loan officer, these programs were available. I was required to give the loan if the client qualified, no matter what my “gut” may have told me. If I didn’t, I would have been sued, fired, or they would have gone to another loan officer and he/she would have given them the loan. UW’s underwrote the loans per the guidelines. Think they could predict who would fail and who wouldn’t? No crystal ball or Tarot cards as part of the training? Frank and Dodd are frauds and typical politicians passing the buck on to whoever they can get to take the blame except for where it belongs…in their seat of Congress.
I don’t remember reading anywhere that banks were encouraged by the government to make bad loans.
Really? REALLY? REALLY? That’s telling. — Bryan Ellis
I think you’re another one of those who bashes the administration as a knee jerk reaction to any thing that comes out of Washington.
Cirticism is fine but where is your constructive suggestion?
What would you do if you had the power?
People keep forgettimg this mess originated long before the present White House occupant moved in..
You’re right – this specific problem started several decades ago under Carter and was really advanced by Barney Frank. — Bryan Ellis
tnalrub… it is understandable you maybe did not read anything about the bad loans being forced to made. however what got us into this mess and I lost 1000′s of $$$ because of selling to late. though for a while anyone who might be able to fog a mirror sometime was allowed to get a loan. of the posts I read, nobody was blaming the current illegal president we have. it goes way back to the Clinton days certainly, and the idiots who continued refinancing like an ATM machine. though it sounds from your post you are one of the blind Obama puppets who are so blind you do not see the damage he is doing to our country. he is despicable. the greatest achievement he has made is crowd Jimmy Carter out of the designation as our worst ever president. stop being a sheep and wake the HELL up to reality
Jimmy Carter put CRA on the books
Bill Clinton added teeth to CRA
Barney Frank (scumbag of the decade) mandated these loans be granted,
Bush II lit the fire with stupid “home ownership for everyone” rants
Obama continues to play the sophmoric blame game as spends away our kid’s future like the socialist whore that he is…..and to TNALRUB: put the Kool-Aid down and turn off NBC; Obama is already going down as the worst president in U.S. history (Jimmy pass the peanuts to Barack Hussein will ya?)
Some of the loans didn’t even require being able to fog a mirror.
We should petition Good ole’ Barney to pay it back. And we need
to put some reins on the EPA, they are getting more out of hand.
We would not even be discussing this whole mess if Real Estate Agents, Loan officers and their respective Brokers would have simply put their clients first and not put any of them into these bad deals in the first place. I suppose if they were told to jump off the roof of the Empire State Building they would? Not likely. However, since the damage being done was bore by their clients, they simply jumped on the proverbial bandwagon and chased the higher commissions with total impunity. Not once did any of them take a minute to think about the harm they were certain to cause their clients. As a former DRE Agent, I speak the truth, as I saw this occurring and indeed I did complain to the Brokers and DRE in CA. but all I was told is that this type of market occurs every 7-10 years and what was being done was nothing new.
The loans did NOT have to be made to every borrower an agent brought to the table. But hey, wouldn’t be a party if nobody was willing to drink.
These two Congressmen should have been sanctioned and kicked out of Congress a long time ago. Dodd isn’t even running for re-election as he knows he would get his hind end kicked. As for Frank, this guy is hopeless. Two examples of the worst of the worst although there are others.
It is not just Chris Dodd and Barney Frank who belong in jail, but the folks they hired to run Freddie and Fannie. It is interesting to see that Franklin Raines and Jamie Gorelick who cooked the books and walked out with more than $125 million for their efforts are still working in Washington. I haven’t heard much of Jimmy Johnson. They dropped underwriting standards to no standard at all, and left us with an economy struggling to survive, and blame the problems on the people who used automated underwriting decisions that could not be questioned, and conned the PMI companies into supporting their garbage. It has allowed the “Fed” to take control of the mortgage market as well as the stock market and the insurance business. What’s next?
The heart of the problem, as always, remains the culpable negligence of the typical American voter. Far too large a percentage of the adult citizenry, apparently inclusive of “tnalrub” pay little or no attention to the ebb and flow of politics, the specifics of legislation enacted, or the implications of regulatory mandates handed down by the feds. Result? Miscreants such as Barney Frank, Chris Dodd, and Franklin Raines and their cohorts destroy the housing industry while feathering their own beds. Think hard prison time, think term limits, think dismantling as much of the past two years as possible.
Deregulatuion under Reagon started the snow ball rolling.
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I sincerley do hope someone goes after a lender for something. They packaged the loans, hyped and sold them to homeowners, then sold them off to ‘investors’ and made money with every transaction.
Now they control the whole process still–loan mod or no, short sale or no, deficiency or no, promissory note or no, what price and when and how, return a call or no, and then foreclose and let everyone else ‘eat it.’
They give everyone the finger from start to finish.