Fannie, Freddie and Bill.

An interesting article from 1999.

Archive for Monday, May 31, 1999
Minorities’ Home Ownership Booms Under Clinton but Still Lags Whites’
By Ronald Brownstein
May 31, 1999 in print edition A-5

It’s one of the hidden success stories of the Clinton era. In the great housing boom of the 1990s, black and Latino homeownership has surged to the highest level ever recorded. The number of African Americans owning their own home is now increasing nearly three times as fast as the number of whites; the number of Latino homeowners is growing nearly five times as fast as that of whites.

These numbers are dramatic enough to deserve more detail. When President Clinton took office in 1993, 42% of African Americans and 39% of Latinos owned their own home. By this spring, those figures had jumped to 46.9% of blacks and 46.2% of Latinos.

That’s a lot of new picket fences. Since 1994, when the numbers really took off, the number of black and Latino homeowners has increased by 2 million. In all, the minority homeownership rate is on track to increase more in the 1990s than in any decade this century except the 1940s, when minorities joined in the wartime surge out of the Depression.

This trend is good news on many fronts. Homeownership stabilizes neighborhoods and even families. Housing scholar William C. Apgar, now an assistant secretary of Housing and Urban Development, says that research shows homeowners are more likely than renters to participate in their community. The children of homeowners even tend to perform better in school. Most significantly, increased homeownership allows minority families, who have accumulated far less wealth than whites, to amass assets and transmit them to future generations.

What explains the surge? The answer starts with the economy. Historically low rates of minority unemployment have created a larger pool of qualified buyers. And the lowest interest rates in years have made homes more affordable for white and minority buyers alike.

But the economy isn’t the whole story. As HUD Secretary Andrew Cuomo says: “There have been points in the past when the economy has done well but minority homeownership has not increased proportionally.” Case in point: Despite generally good times in the 1980s, homeownership among blacks and Latinos actually declined slightly, while rising slightly among whites.

All of this suggests that Clinton’s efforts to increase minority access to loans and capital also have spurred this decade’s gains. Under Clinton, bank regulators have breathed the first real life into enforcement of the Community Reinvestment Act, a 20-year-old statute meant to combat “redlining” by requiring banks to serve their low-income communities. The administration also has sent a clear message by stiffening enforcement of the fair housing and fair lending laws. The bottom line: Between 1993 and 1997, home loans grew by 72% to blacks and by 45% to Latinos, far faster than the total growth rate.

Lenders also have opened the door wider to minorities because of new initiatives at Fannie Mae and Freddie Mac–the giant federally chartered corporations that play critical, if obscure, roles in the home finance system. Fannie Mae and Freddie Mac buy mortgages from lenders and bundle them into securities; that provides lenders the funds to lend more.

In 1992, Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains. It has aimed extensive advertising campaigns at minorities that explain how to buy a home and opened three dozen local offices to encourage lenders to serve these markets. Most importantly, Fannie Mae has agreed to buy more loans with very low down payments–or with mortgage payments that represent an unusually high percentage of a buyer’s income. That’s made banks willing to lend to lower-income families they once might have rejected.

But for all that progress, the black and Latino homeownership rates, at about 46%, still significantly trail the white rate, which is nearing 73%. Much of that difference represents structural social disparities–in education levels, wealth and the percentage of single-parent families–that will only change slowly. Still, Apgar says, HUD’s analysis suggests there are enough qualified buyers to move the minority homeownership rate into the mid-50% range.

The market itself will probably produce some of that progress. For many builders and lenders, serving minority buyers is now less a social obligation than a business opportunity. Because blacks and Latinos, as groups, are younger than whites, many experts believe they will continue to lead the housing market for years.

But with discrimination in the banking system not yet eradicated, maintaining the momentum of the 1990s will also require a continuing nudge from Washington. One key is to defend the Community Reinvestment Act, which the Senate shortsightedly voted to retrench recently. Clinton has threatened a veto if the House concurs.

The top priority may be to ask more of Fannie Mae and Freddie Mac. The two companies are now required to devote 42% of their portfolios to loans for low- and moderate-income borrowers; HUD, which has the authority to set the targets, is poised to propose an increase this summer.

Although Fannie Mae actually has exceeded its target since 1994, it is resisting any hike. It argues that a higher target would only produce more loan defaults by pressuring banks to accept unsafe borrowers. HUD says Fannie Mae is resisting more low-income loans because they are less profitable.

Barry Zigas, who heads Fannie Mae’s low-income efforts, is undoubtedly correct when he argues, “There is obviously a limit beyond which [we] can’t push [the banks] to produce.” But with the housing market still sizzling, minority unemployment down and Fannie Mae enjoying record profits (over $3.4 billion last year), it doesn’t appear that the limit has been reached.

All signs point toward a high-velocity collision this summer between two strong-willed protagonists: HUD’s Cuomo and Fannie Mae CEO Franklin D. Raines, the first African American to hold the post. Better they reach a reasonable agreement that provides more fuel for the extraordinary boom transforming millions of minority families from renters into owners.

source

Yep you and Stephanie have nailed it.

Clinton's fault.

In 1992, Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains. It has aimed extensive advertising campaigns at minorities that explain how to buy a home and opened three dozen local offices to encourage lenders to serve these markets. Most importantly, Fannie Mae has agreed to buy more loans with very low down payments–or with mortgage payments that represent an unusually high percentage of a buyer’s income. That’s made banks willing to lend to lower-income families they once might have rejected.

No bank was forced to make sub-prime loans. The legislation only said the banks must review such applications on a more regular basis.

Much of the problem came from banks sub-contracting to mortgage brokers that sold the notes and assured the banks that everything was O.K. This was a direct result of deregulation.

You can blame Klinton but you had better also point some fingers at the deregulators.

Now who is the party of "free markets"?

Well Aaron riddle me this.

If Clinton is to blame for loaning money for minorities and working people to buy houses they could not afford, then how have they made their pmts. up to now.?

Ten or twelve years later.

Why did they wait till Bush had been in office for several years?

Perhaps because they had good jobs when the Dems were running things?

Things were going great with the economy till your guys took over.

Yep. You have nailed it.

Boosh's fault.

Well OC can you explain how all these so-called bad loans passed out under Clinton have kept payments current for ten years?

I dont claim to be an expert but that just jumps out at me when you guys insist on blaming Clinton. (and even Carter for pity's sake)

Well if everyone quits blaming Clinton I will quit blaming President Bush.

But it is still a good question why all these so-called bad loans were kept current for ten years. Why now?

Work with me here.

Also I give President Bush kudos for being willing to compromise and work with the majority.

While many in his own party will not.

It isn't the failure of these loans that's caused this. It's even more mercurial than that. The perception is that a line was crossed and too many bad loans were let and then sold. The crisis is one of confidence and the participants have a herd mentality. The human element is the weak point in the market.

What majority? If there was a majority, why not call for a vote and be done with it?

I meant the majority party.

And I think they want it to be bi-partisan so if it would crash and burn there is blame for everyone.

If republicans oppose the final bill en masse they will have a vested interest in seeing it fail.

Besides Democrats tend to be kinder and gentler as opposed to the republicans who just ram things through when they are in the majority.

http://www.washingtonpost.com/wp-dyn/content/article/2008/03/17/AR2008031702423.html

I have to get on a conference call. I'm sorry but I don't know what to make of you sometimes.

OK keep us posted...

I did. I posted a newspaper article from 1999. What happened to it Stephanie?

Edited:

My bad, I thought this was page 1 and the article had been deleted. Disregard this post.

TerryRC wrote:
In 1992, Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains. It has aimed extensive advertising campaigns at minorities that explain how to buy a home and opened three dozen local offices to encourage lenders to serve these markets. Most importantly, Fannie Mae has agreed to buy more loans with very low down payments–or with mortgage payments that represent an unusually high percentage of a buyer’s income. That’s made banks willing to lend to lower-income families they once might have rejected.

No bank was forced to make sub-prime loans. The legislation only said the banks must review such applications on a more regular basis.

Much of the problem came from banks sub-contracting to mortgage brokers that sold the notes and assured the banks that everything was O.K. This was a direct result of deregulation.

You can blame Klinton but you had better also point some fingers at the deregulators.

Now who is the party of "free markets"?

It was a direct result of rules issued by Andrew Cuomo on behalf of Bill Clinton. YSP's, relaxed income verification, increased in borrowing limits....all done by Cuomo during Clinton's second term. If it were truly a "free market", the banks never would have issued many of these loans to begin with.

sodbuster wrote:Perhaps because they had good jobs when the Dems were running things?

Things were going great with the economy till your guys took over.

From 1994 on, Newt ran the country while Clinton got blowjobs. On the rare occasions Clinton intervened, it was for stuff like this.

And for the record, I agree with Terry, regulation would have stopped a lot of these problems. But who's going to do the regluating, the Senate Banking commitee which is owned by the ones they are supposed to be regulating?

Well you and Steph need to get on the same page.

She claims he was directly responsible for these guys defaulting on their mortgages ten years later.

But she has yet to explain how these so-called bad mortgages seem to have got paid all these years till right now.

I offered one possible explanation but none of you guys seem to have an explanation.

Just this unsubstantiated theory that it was somehow Clinton's fault.

Where are all the defaulters? Do you know any?

It isn't an "unsubstantiated theory". Cuomo did these things, it is all there in black and white.

This has been building for a long time. The loans weren't all granted 10 years ago and they didn't all go into foreclosure in the past 6 months. This administration and Congress have allowed it to go unchecked for over 7 years.

Bailing out Fannie Mae & Freddie Mac aren't going to help the families in foreclosure. Bailing out Fannie Mae & Freddie Mac is going to help the bankers and the banking executives. Why not go after the likes of Raines and Gorelick and so many others who used lied about their profits and used them as personal slush funds?

This American taxpayer can't take any more.

If this bailout is approved I think there will very likely be widespread protest and not all of it will be peaceful. Enough is enough already.

No, I don't need to get on the same page as Stephanie. I don't speak for her and she doesn't speak for me and regardless of what you think, everyone that disagrees with you is not all the same.

There is no party and very few members of Congress that don't share blame in this, all the way back to FDR and his congress that chartered Fannie Mae. It's a long, drawn out problem that was created by government intervention into our financial markets and the only solution is to return to a sound monetary policy and get the government out of the market.

You see them as the solution. I see them as the problem and believe the only role they have is oversight and they've failed miserably in that aspect.

There was a congressman from AL on TV this morning with a letter from 200 of the leading economist who all say the same thing; this bailout will do nothing but makes things worse. If they post a copy of the letter, I'll post it.

Well I* wish you would post it.

Do you know if Paul supports that position?

Is he working in cahoots with the renegade republicans?

Don't know, don't really care. I'm not a RP fan or supporter. I happen to agree with him on some things, including this.

Any particular reason you're carrying RP to multiple threads?