“Fannie and Freddie should be held accountable for (1) failing to check whether the loans were in fact viable, in conformity with GSE requirements and industry standards for underwriting (2) failing to check whether the loans were properly transferred by the actual owner of the obligation and (3) failing to provide easy access to the loan and trust information so that Banks, auditors, regulators and borrowers would be able to determine whether a particular loan was claimed as an asset of the pool (trust) was in fact present.” Neil Garfield, livinglies.me
FANNIE AND FREDDIE DIDN’T MAKE OR CALL FOR LOANS
EDITOR’S ANALYSIS: Fannie and Freddie were not responsible for the housing bubble, nor were they pressuring the Banks to issue more loans, subprime loans or any kind of loans. Contrary to ideological dogma these government sponsored entities didn’t make any loans. They were neither depository nor lending institutions. They merely served as conduits through which the Banks securitized the loans using Fannie and Freddie as a Master Trustee of pools that were supposed to be Trusts holding pools of loans.
As we have seen, the pools were largely empty because the documents of transfer referred to defective or even non-existent loans and the Assignor frequently didn’t own the loan it said it was transferring into these GSE trusts. But Fannie and Freddie should be held accountable for (1) failing to check whether the loans were in fact viable, in conformity with GSE requirements and industry standards for underwriting (2) failing to check whether the loans were properly transferred by the actual owner of the obligation and (3) failing to provide easy access to the loan and trust information so that Banks, auditors, regulators and borrowers would be able to determine whether a particular loan was claimed as an asset of the pool (trust) was in fact present.
This last item, information access should be a no-brainer, but the GSE’s are like a brick Wall when we do our securitization analysis causing much confusion and irritation amongst analysts and borrowers. This information should be totally transparent but it isn’t. When you get to Fannie or Freddie, you are met with an entry on their website that says nothing about any of the questions raised above and which will make the OCC Review process that much more difficult. Either they have the information or they don’t. If they don’t, the entry shouldn’t be made on their website because they don’t actually know anything about particular loan or loan transaction.
“Fannie owns it” is a statement that many are making when not even the agency itself knows if that is true. And in the effort to prove the location of the loan, Borrowers are repeatedly making the same mistake: proving their opponent’s case for them. The burden of proof after any serious question regarding title or loan ownership is raised, shifts to the would-be forecloser. Beau Biden, Delaware AG who just filed suit against MERS, says that at the very least, 25% of the time the Banks are getting it wrong just because of the use of MERS. Add in other reasons and the numbers go sharply up.
I would say to the lawyers who are litigating these issues: don’t get caught in the trap of assuming the burden of the other side. Proving that the loan IS in a pool defeats part of your case. Later you are going to present evidence that they didn’t execute transfer documents properly. How do you expect a Judge to take that seriously when you have already admitted that the loan is in the pool? SUBPOENA THE RECORDS.
Today in doing securitisation research a loan may be discovered on the Fannie and Freddie websites. but this provides little help to the auditor or analyst. The entry onto the website indicates that these now government nationalised entities might be involved and not that the loan documents or mortgage was perfected as a lien, not that a transfer of the loan ever occurred and not whether the GSE’s are or ever were creditors since at no point in time did their charters permit them to act as lenders. It is this Wall of Silence that keeps us from knowing what we really went on.
If Fannie and Freddie show the loan their website the most that can be said about it is that they accepted the filings of the Banks without checking the paperwork, they assisted in the securitisation of the loan but won’t tell the average researcher anything about the name of the trust into which the loan was supposedly placed and they MAY have a guarantee liability to buy or pay off the loans. They demand money to give you any information beyond the website and then they don’t give you enough information.
The entire Fannie and Freddie myth is a Bank spin on private sector loans. The real data shows that it was the private sector Banks who originated ALL the loans — and then those same Banks supplanted the function of then GSE’s by going directly to the secondary Market and no doubt mixing in the GSE trust pools with the private pools so they could claim to investors that their investment into bogus mortgage bonds was guaranteed by the Federal government — a classic sales trick to make the bonds more appealing by reducing the appearance of any risk of loss.
The MO (method operations) was then same one they used in the creation of MERS wherein they privatised the recording system present in all states. By replacing the public system with their own non-secure data they could play with the data and claims and force us into accepting the representations of counsel as to the status of the loan.
Despite the very active PR machine, the Banks have been shown to have co-opted the role of government in tracking and diminished the assurance from a title record that Buyers of anything are actually getting to legal title to whatever they bought — whether it is real or personal property. THE BANKS WANT TO FORCE THE BORROWERS INTO ACCEPTING THE LOSSES CREATED BY MASSIVE FRAUD AND SCREW-UPS BY THE BANKS. But the borrowers had the least information about the transactions they were tricked into signing and clearly have the least amount resources to pay for the crisis.So the creative spin machine managed to convince our government but not our citizenry that the people as taxpayers should pay if the people as borrowers could not pay on deals that nobody could pay.
If you want to do something, then send a barrage of letters to Fannie, Freddie, and your congressmen about opening up that information on Freddie and Fannie. If they have the information let them say so and then make it available like any other public records request. If they don’t have the information let them explain why they show the loan on their website.
McClatchy Washington Bureau
Private sector loans, not Fannie or Freddie, triggered crisis
David Goldstein and Kevin G. Hall | McClatchy Newspapers
WASHINGTON — As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.
Commentators say that’s what triggered the stock market meltdown and the freeze on credit. They’ve specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie’s and Freddie’s financial problems.
Federal housing data reveal that the charges aren’t true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.
Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height from 2004 to 2006.
Federal Reserve Board data show that:
- More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
- Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
- Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that’s being lambasted by conservative critics.
The “turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007,” the President’s Working Group on Financial Markets reported Friday. [Editor’s note: A weakening standard caused by the fact that Wall Street wanted weak loans because the worse the loan the more money they made in the spread between what was advanced by the investor for funding mortgages and what the amount actually funded in loans to borrowers.]
Conservative critics claim that the Clinton administration pushed Fannie Mae and Freddie Mac to make home ownership more available to riskier borrowers with little concern for their ability to pay the mortgages.
“I don’t remember a clarion call that said Fannie and Freddie are a disaster. Loaning to minorities and risky folks is a disaster,” said Neil Cavuto of Fox News.
Fannie, the Federal National Mortgage Association, and Freddie, the Federal Home Loan Mortgage Corp., don’t lend money, to minorities or anyone else, however. They purchase loans from the private lenders who actually underwrite the loans.
It’s a process called securitization, and by passing on the loans, banks have more capital on hand so they can lend even more.
This much is true. In an effort to promote affordable home ownership for minorities and rural whites, the Department of Housing and Urban Development set targets for Fannie and Freddie in 1992 to purchase low-income loans for sale into the secondary market that eventually reached this number: 52 percent of loans given to low-to moderate-income families.
To be sure, encouraging lower-income Americans to become homeowners gave unsophisticated borrowers and unscrupulous lenders and mortgage brokers more chances to turn dreams of homeownership in nightmares.
But these loans, and those to low- and moderate-income families represent a small portion of overall lending. And at the height of the housing boom in 2005 and 2006, Republicans and their party’s standard bearer, President Bush, didn’t criticize any sort of lending, frequently boasting that they were presiding over the highest-ever rates of U.S. homeownership.
Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.
During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data.
In 1999, the year many critics charge that the Clinton administration pressured Fannie and Freddie, the private sector sold into the secondary market just 18 percent of all mortgages.
Fueled by low interest rates and cheap credit, home prices between 2001 and 2007 galloped beyond anything ever seen, and that fueled demand for mortgage-backed securities, the technical term for mortgages that are sold to a company, usually an investment bank, which then pools and sells them into the secondary mortgage market.
About 70 percent of all U.S. mortgages are in this secondary mortgage market, according to the Federal Reserve.
Conservative critics also blame the subprime lending mess on the Community Reinvestment Act, a 31-year-old law aimed at freeing credit for underserved neighborhoods.
Congress created the CRA in 1977 to reverse years of redlining and other restrictive banking practices that locked the poor, and especially minorities, out of homeownership and the tax breaks and wealth creation it affords. The CRA requires federally regulated and insured financial institutions to show that they’re lending and investing in their communities.
Conservative columnist Charles Krauthammer wrote recently that while the goal of the CRA was admirable, “it led to tremendous pressure on Fannie Mae and Freddie Mac — who in turn pressured banks and other lenders — to extend mortgages to people who were borrowing over their heads. That’s called subprime lending. It lies at the root of our current calamity.”
Fannie and Freddie, however, didn’t pressure lenders to sell them more loans; they struggled to keep pace with their private sector competitors. In fact, their regulator, the Office of Federal Housing Enterprise Oversight, imposed new restrictions in 2006 that led to Fannie and Freddie losing even more market share in the booming subprime market.
What’s more, only commercial banks and thrifts must follow CRA rules. The investment banks don’t, nor did the now-bankrupt non-bank lenders such as New Century Financial Corp. and Ameriquest that underwrote most of the subprime loans.
These private non-bank lenders enjoyed a regulatory gap, allowing them to be regulated by 50 different state banking supervisors instead of the federal government. And mortgage brokers, who also weren’t subject to federal regulation or the CRA, originated most of the subprime loans.
In a speech last March, Janet Yellen, the president of the Federal Reserve Bank of San Francisco, debunked the notion that the push for affordable housing created today’s problems.
“Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans,” she said. “The CRA has increased the volume of responsible lending to low- and moderate-income households.”
In a book on the sub-prime lending collapse published in June 2007, the late Federal Reserve Governor Ed Gramlich wrote that only one-third of all CRA loans had interest rates high enough to be considered sub-prime and that to the pleasant surprise of commercial banks there were low default rates. Banks that participated in CRA lending had found, he wrote, “that this new lending is good business.”
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: bankruptcy, borrower, countrywide, David Goldstein, disclosure, Fannie, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, Freddie, information, Kevin G. Hall, LOAN MODIFICATION, McClatchy Newspapers, modification, quiet title, rescission, RESPA, securitization, subprime, TILA audit, trustee, WEISBAND |