Remembering the Root of the Fannie Mae and Freddie Mac Problems

By
Real Estate Sales Representative with Realty Executives Gulf Coast

My Broker/owner, Randy McKinney shared some information with me. I had forgotten this, and perhaps many people don't even know this. The information was from a New York Times article dated September 30, 1999. This is when the regulations were changed to increase home ownership to low income consumers. This was to encourage banks to extend home mortgages whose credit is generally not good enought to qualify for conventional loans - all while pressuring stock holders to maintain its phenominal growth in profits. The article went on to say that Fannie Mae would be 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 goverment rescue similar to the savings and loan industry in the 1980's. I quote from the article, "If they fail, the government will have to step up and bail them out the way it bailed out the thrift industry."

"The Fannie Mae and Freddie Mac crisis has its roots in the Community Redevelopment Act signed into law during the Carter Administration. President Clinton, influenced by multiculturalism, encouraged it further by dictating where mortgage lenders could lend. Tough new regulations required that lenders increase their lending in high-risk areas where they had no choice but to lower lending standards to make loans that sound business practices had previously rejected. And again, Freddie Mae and Freddie Mac bought these loans, which means taxpayers were ultimately responsible if these loans failed." This from the New York Times - Sept. 11, 2003

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Rainer
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Steve Hewson
KW Commercial Real Estate, LLC - Denver - Denver, CO
Denver Metro Comnulll Real Estate

Lacie, You are so correct.  Our state was one of the early ones to lead the pack in foreclosures two years ago.  When my clients or friends ask me what happened this is what I was telling them was the cause.  It was the Carter and Clinton efforts to make housing available to people who couldn't otherwise qualifty for loans.  They did it under the guise of "low income" to avoid the charge as you say of "multiculturalism."  In my opinion, the conservative media has been afraid until the last week to address it for fears of being politically incorrect.  And of course the liberal media was in favor of it all along.  I hope everyone reads your articles.  This is another one of those feel good programs that cost the taxpayers billions of dollars and ended up with unintended consequences of millions of people losing their homes. Steve

Oct 02, 2008 12:12 AM #1
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Fred Griffin, on leave of absence from ActiveRain
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

Hi, Lacie

   We invite you back to ActiveRain.  Log in, leave some comments, write a blog post!

Nov 19, 2017 04:24 PM #2
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Rainer
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Lacie Maynard

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