http://www.youtube.com/watch?v=H5tZc8oH--oClinton Administration Changes of 1995
These revisions[5] with an effective starting date of January 31, 1995 were credited with substantially increasing the number and aggregate amount of loans to small businesses and to low- and moderate-income borrowers for home loans. These changes were very controversial and as a result, the regulators agreed to revisit the rule after it had been fully implemented for seven years. Thus in 2002, the regulators opened up the regulation for review and potential revision.[citation needed]
Part of the increase in home loans was due to increased efficiency and the genesis of lenders, like Countrywide, that do not mitigate loan risk with savings deposits as do traditional banks using the new subprime authorization. This is known as the secondary market for mortgage loans. The revisions allowed the securitization of CRA loans containing subprime mortgages. The first public securitization of CRA loans started in 1997 by Bear Stearns. [6] The number of CRA mortgage loans increased by 39 percent between 1993 and 1998, while other loans increased by only 17 percent. [7] [8]
Other rule changes gave Fannie and Freddie extraordinary leverage, allowing them to hold just 2.5% of capital to back their investments, vs. 10% for banks. By 2007, Fannie and Freddie owned or guaranteed nearly half of the $12 trillion U.S. mortgage market. [9]
George W. Bush Administration Proposed Changes of 2003
In 2003, the Bush Administration recommended what the NY Times called "the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago." [10] This change was to move governmental supervision of two of the primary agents guaranteeing subprime loans, Fannie Mae and Freddie Mac under a new agency created within the Department of the Treasury. However, it did not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enabled them to issue debt at significantly lower rates than their competitors. The changes were generally opposed along Party lines and eventually failed to happen. Representative Barney Frank (D-MA) claimed of the thrifts "These two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." Representative Mel Watt (D-NC) added "I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing."[11]
The Democrats Added Massive New Provisions
"Part of the increse in home loans was due to...lenders like Countrywide...using the new subprime authorization..
The revisiions allowed the securitization of CRA loans containing subprime mortgages."
Subprime mortgages tripled in 1998 and 1999, REMEMBER THAT?
Fannie Mae and Freddie Mac sold those bad mortgages to Wall Street.
2004 Fannie Mae subprime loans - 92% were ARMs!
2005 91% were ARMs!
Before the Community Reinvestment Act Expansion of the Clintons (1995) housing values tracked with inflation.
After the CRA expansion [1995 and beyond], home prices became unhinged from inflation.
In 2003 the Bush Administration tried to overhaul the housing finance industry, by supervising Fannie Mae and Freddie Mac. The Democrats stopped any attempts at regualating Fannie and Freddie.
In 2005 John McCain warned about the inevitable collapse of Fannie and Freddie. The Housing Enterprise Regulatory act of 2005.
http://www.govtrack.us/congress/bill.xpd?bill=s109-190Democrats killed the bill. Why? Too much regulation... and the Democrats killed the same bill in 2007!
Barrack Obama received 4 times more money from Fannie Mae per year than any other Senator over the last 20 years! 49 times more money than John McCain!
As a lawyer, Obama sued Citibank for redlining, the remedy being lending money to people with bad credit - African Americans.
http://www.youtube.com/watch?v=H5tZc8oH--o