No, I don't care to muddle a discussion of economics with the issues related to abortion. You can start your own thread on that - but don't expect me to read it or post there.
Sorry… I know that’s hard to justify. However, I’m still a little confused on where you stand on the cause of all of this so let’s get back on message with something closer to your strike zone. Can you spin us some comments on the following two articles?
Thanks again,
V/R, Batch
Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES
Published: September 30, 1999
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is 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 government rescue similar to that of the savings and loan industry in the 1980's.
''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.
Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.
In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.
Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.
In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.
The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.
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Public funds to pay for private debt
Houston aims to clear balances so some can buy homes
By CAROLYN FEIBEL Copyright 2009 Houston Chronicle
Feb. 23, 2009, 10:19PM
Houston taxpayers could start footing the bill to help first-time homebuyers pay off debts and improve their credit scores, under a proposal before City Council this week.
The “Credit Score Enhancement Program” will give up to $3,000 in grants to individuals who are trying to qualify for mortgages through the city’s homebuyers assistance program. City officials say some applicants fall short of eligibility by only 10 or 20 points on their credit scores, and paying off some debt balances can quickly improve their numbers.The proposal has aroused critics who say the city should not use public funds to help people pay down car loans, credit card balances, or other debts — even if the slight credit bump would help them realize the dream of home- ownership.
“We just can’t give away government money to help people with their credit scores,” Councilman Mike Sullivan said Monday. “You’re giving them other taxpayers’ money to pay off the bills.”
Councilwoman Anne Clutterbuck called the program well intentioned but said it would go too far.
“If this credit crisis has taught us anything, we need to focus on paying off our debts and saving more,” she said. “Using government money to help someone pay off their debts is not the same as asking them to pay off their debts themselves.”
The $444,000 for the program is leftover money from a $1.5 million appropriation the city made for emergency home and roof repairs after Hurricane Ike.
The city has three programs that provide grants for down payments and closing costs for qualified homebuyers. The most generous one offers a $37,500 grant to buy a home that costs $135,000 or less, but only in certain disadvantaged Houston neighborhoods the city is trying to revitalize. Participants cannot earn more than 80 percent of the Houston median income.
Affordable housing advocates were cautiously optimistic about the proposal Monday. The tightening credit market has made it harder for previously qualified families to get mortgages, said Stephan Fairfield, president of Covenant Community Capital Corp., a Houston nonprofit that helps low-income families build assets.
Some banks previously had accepted credit scores of 580 or 600 as a qualifying threshold, but most are now requiring 620, Fairfield said.
“New tools are needed to help families move forward towards home ownership,” he said. “If there are lenders that are offering loan approvals subject to retiring the outstanding payables, or if there is something that can help them get over the credit score threshold, it certainly makes sense.”
John Henneberger, co-director of the Texas Low-Income Housing Information Service, called the Houston plan “a very aggressive approach” to housing assistance. He said he needed to know more details but ventured that it could work if the city provided a good pre-purchase homebuyer education program. The city requires all applicants to complete an educational program.
Henneberger said the subprime meltdown and global financial crisis has made housing advocates take a “more conservative tack.”
“We’ve certainly learned that we don’t do low-income people a whole lot of favors when we get them overly extended on credit.”
‘A bad idea’
Anti-tax activists also cited the harsh lessons of the housing crash and recession.
“I just don’t see any way someone could justify this with everything that has gone on in the credit market,” said Michael Quinn Sullivan, president of Texans for Fiscal Responsibility. “This is precisely what got us into it, with the playing fast and loose with the credit score.”
“One would think from the federal problem we’ve just had, the city of Houston officials would have learned from that,” said Peggy Venable, state director of Americans for Prosperity, a limited government advocacy group. “It’s a bad idea.”
Program backers defended the proposal, saying it certainly is not for people with poor or damaged credit.
“We don’t talk to them about this unless their credit score is pretty close,” said Brian Stoker, community banking manager for Amegy Bank. The bank is one of the lenders the city uses for its affordable-housing programs.
“For somebody who really qualifies and should have a home, it doesn’t take much to help them get there,” Stoker said. “I think it would be a really innovative and good program. And, of course, it’s not for everybody.”
The city made 130 grants to homebuyers last year and hopes to raise that to 540 in 2009, according to Juan Chavez, manager of the city’s Homebuyers Assistance Program.
“What we’ve seen is that $3,000 will increase a credit score significantly and relatively fast,” Chavez said.
Not every applicant will need that much, and the eligibility will be very strict, he added. “We wanted to be conservative in this case and concentrate only on those folks who have overextended as opposed to somebody who needed a lot of hand-holding to repair their credit.”
carolyn.feibel@chron.com
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