BF2S Forums It doesn't get any more obvious than this.

SGT_Dicklewicz wrote:

Combination of Lack of Common sense and irresponsible greed led us here.
A Moral shift is needed for this whole economy to work.
So that would mean that you would have to start trusting Politicians and Banks.
Any takers?

Spearhead wrote:

SGT_Dicklewicz wrote:

Combination of Lack of Common sense and irresponsible greed led us here.
A Moral shift is needed for this whole economy to work.
So that would mean that you would have to start trusting Politicians and Banks.
Any takers?

redo the system with less emphasis on money.

The "campaign seasons" are more like giant marketing ads..... tacky and stupid.  But unfortunately the tacky and stupid people will pay attention to the ads and vote based on that.

One of the great shibboleths of the Republicans is that the Community Reinvestment Act, which requires banks that receive FDIC guarantees must actually address the credit needs of the communities they are chartered to serve, is the cause of our great foreclosure mess. The line goes that in order to comply with the CRA, those banks, against their better judgment, had to make all sorts of bad high risk subprime loans to people who really weren’t qualified, and ultimately defaulted.

Obviously there are a number of flaws in this whole line of reasoning, including an ignorance of the history of the act and how it works; the continuing problem of steering and the high percentage of people who actually qualified for a conventional loan but were placed into a subprime loan by the broker who stood to make more through the yield-spread premium kickbacks.

But the biggest flaw of all is that it is simply not true. While there are bits and pieces here and there which repudiate the claim, a study by  Traiger & Hinckley LLP of 2006 mortgage loan data suggests that the CRA may very likely have lessened the problem because it actually deterred banks from engaging in the kinds of risky lending practices that are provoking the foreclosure crisis and by forcing banks to make loans in their communities, kept a number of borrowers out of the hands of predatory subprime lenders.

Compared to other lenders in their communities (read as subprime lenders and brokers not covered by the CRA), banks making loans in their CRA assessment areas  were less likely to make a subprime loan, charged less for the subprime loans they did make, and were more likely to retain the loans in portfolio. Foreclosure rates were also lower in metropolitan areas with proportionately greater numbers of bank branches.

Basically because the CRA requires banks to actually make loans in their communities, loans which that bank keeps in its own portfolio and therefore have a long term economic interest in, they are more concerned with making sure that the loans are good loans and that the remain good neighbors so they don’t make predatory junk loans.

Contrary to the line that the CRA is the cause of the problem, it is actually the lack of applicability of the CRA to all lenders that is the problem. In his testimony before the Committee on Financial Services, U.S. House of Representatives on September 20, 2007, Federal Reserve Board ChairmanBen S. Bernanke placed the blame where it rightfully belongs, the mortgage brokers, non CRA lenders, and the whole mortgage securitization process:

    The originate-to-distribute model seems to have contributed to the loosening of underwriting standards in 2005 and 2006.  When an originator sells a mortgage and its servicing rights, depending on the terms of the sale, much or all of the risks are passed on to the loan purchaser.  Thus, originators who sell loans may have less incentive to undertake careful underwriting than if they kept the loans. Moreover, for some originators, fees tied to loan volume made loan sales a higher priority than loan quality.  This misalignment of incentives, together with strong investor demand for securities with high yields, contributed to the weakening of underwriting standards.

So the truth is forcing banks to loan money to their community out of the money that community has deposited in the bank makes for better safer loans, than letting some “lender” whose only interest is making a fast buck on a piece of paper that he will immediately bundled up and pass off to someone who knows nothing more about the loan than the numbers type on a securitization prospectus.

Last edited by topal63 (2008-09-29 11:49:23)

Last edited by topal63 (2008-09-29 11:53:31)

Kmarion wrote:

topal63 wrote:

Where Were Foreclosures Most Concentrated: Countering CRA as the Cause of the Mortgage Meltdown
http://theeprovocateur.blogspot.com/200 … -most.html

The Community Reinvestment Act: A Welcome Anomaly
http://www.traigerlaw.com/publications/ … 1-7-08.pdf

You do know that Fannie and Freddie buy and sell all types of loans don't you? Not just CRA's.

Last edited by topal63 (2008-09-29 12:03:48)

Last edited by CameronPoe (2008-09-29 12:04:19)

ATG wrote:

Assuming dragging these bankers from their palaces and politicians from their offices to douse them with gasoline is not an option I honestly don't know what we can do to stop this.

PureFodder wrote:

Kmarion wrote:

PureFodder wrote:

You can try and blame the Clinton admin primarily (and they certainly do have a major responsability for this), but this wasn't the expected result of the legislation that passed. For the last 8 years, the Republicans have been in power and sat back watching a $5 trillion dollar housing bubble grow and chose to ignore all the warnings and do nothing to stop it. That's far worse.

The Dems may be stupid for not fully realizing the consequences of their legislation, but the Reps DID know what was happening and didn't do anything about it.

They (most of them) did try more than once. I can only assume you didn't watch the second video.  We have layers of checks and balances. The majority does not simply have full run of the house. If that were the case the Dems would have surely passed the bailout today. I suggest you do a little research and learn more about our system of government.

So by that logic, the Dems can't be fully responsable for setting up the problem in the first place?