But the truth of the problem began in 1999 when Fannie Mae and Freddie Mac loosened the regulations to allow people with bad credit to buy homes ( homes that they could not afford by traditional means, 30 year fixed loans. )
Minorities African-American and Latin-American( full disclosure: I am African American / Latino; Dad, is African-American and Mom is Afro-Panamanian [ now naturalized American ])leaders in congress demanded policy to be change to increase minority home ownership(the same leaders who got sweetheart deals from companies Fannie Mae and Freddie Mac in the way of donations including Democratic presidential nominee US Senator Barack Obama). Many minorities felt they were discriminated against by banks by was redlining of minorities neighborhoods. Blacks and Latino were paying higher interest rates or denied of financing because of bad credit.
Congress forced through Fannie Mae and Freddie Mac provisions to lower standards and allowed people with bad credit to buy homes with no income verification, no money down zero percent financing to by the dwellings ( taking a page from the Auto industry.) If the bank didn’t comply the could by punished by disallowing merger and acquisitions, tax and other benefits from the Federal Government.
Democrat senators Christopher Dodd of Connecticut and Kent Conrad of North Dakota got sweetheart deals ( from being top leader in bank committees in congress)from Countrywide Corp the former number 1 home mortgage company which was bought by Bank or America late last year.) Democrats and Republicans got money from Fannie and Freddie, including Arizona Senator John McCain Republican Nominee for President got a paltry some from Fannie and Freddie.
Greed by the mortgage industry, hedge funds and banks happened because they got involved they thought the mortgage backed securities would continued rise as well as housing prices continue to rise. (every one forgets the axiom of physics what goes up, must come down. )Housing prices fell the mortgage securities began to disintegrate hedge fund bets were being called in and credit began to tighten. Companies like mortgage companies started to go out of business and being investigated by the FBI and other state and federal agencies to find out wrong doing by the industry.
A New York Times article with an interview with researchers form the American Enterprise Institute warned not to do this but this admonishment was not heeded by our leaders. Read this http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&pagewanted=print Which cause the collapse.
A second report by Columnist Roger Kimball who wrote on his blog Roger’s Rules describe the law which was used to provide the loans to low and moderate also minorities to revitalize these communities.
”The Community Reinvestment Act” (see here for more).
* The original Community Reinvestment Act was signed into law in 1977 by Jimmy Carter. Its purpose, in a nutshell, was to require banks to provide credit to “under-served populations,” i.e., those with poor credit.
* In 1995, Bill Clinton’s administration made various changes to the CRA, increasing “access to mortgage credit for inner city and distressed rural communities,” i.e., it provided for the securitization, i.e. public underwriting, of what everyone now calls “sub-prime mortgages.” (Hat tip to Glenn Reynolds http://pajamasmedia.com/instapundit/ )
While this in my opinion was worth while at first give hope and opportunity to minorities to have own the home ( full disclosure I am Black) saw this as way improve the outlook of the communities but I knew that that I could not buy a house without a good paying job and very good credit. I wish to buy a house but until get rid of debt, save money for a down payment and as well have a good pay job I would be only a renter for some time; Its not racisim it’s common sense.
But is was easier to blame white folks because minorities had these issues and it seemed that whites got their way because their race. Many African-Americans and Latinos struggle versus white and Asians. Studies as well as anecdotal evidence show that Blacks and Latinos were red lined. Minority pols hearing of this try to change the system make it easier. But it wasn’t successful until the passage CRA and the 1995 update to the CRA plus the changes of the rules at Fannie Mae and Freddie Mac brought us here.
This video From Fox News via You Tube shows the GOP trying to prevent the Fannie Mae and Freddie Mac nightmere and Democrats blocked reformes
Now the leaders of the Black and Hispanic communities blame Republicans for this but the truth my frormer party Democrats did this and refuse to to take ownership of this. And by the way American people are trusting the Democrats to get us out of this when they created this mess. Unbeliveable!!! Freaking Unbeliveable!!!!! As the late George Putnam states “We are living in the age of insanity” and he was right. God Help us all!!!!!!!