“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.”
“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 [current Obama advisor?], 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.’ ”
“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.”
of this damning tale:
1999 NY Times Article Revealed True Cause of Current Fannie Mae Crises
Barney Frank's Bankrupt Ideas
Sandra F. Braunstein, Director, Division of Consumer and Community Affairs
The Community Reinvestment Act
Before the Committee on Financial Services, U.S. House of Representatives
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(and all the rest).