More on that "free market" stuff going on at Freddie and Fannie
Once again, proof that it wasn't free markets at play!
Andrukonis and others expressed concern about another type of mortgage Freddie was buying, where neither income nor assets were stated on the loan application. Andrukonis said these were popular with Hispanic borrowers, but the delinquency rates of 8 to 13 percent were much higher than on conventional loans. People familiar with the matter said Freddie was being pushed by advocacy groups to come up with new loan products to offer to low-income and minority borrowers.
Emphasis mine.
Anyone want to place bets on which "advocacy groups" were applying the pressure?
And for those who keep claiming "it was the banks!" I say that's like arguing whether the chicken or the egg came first!
Despite these concerns, Fannie continued to push into this new market. A business presentation in 2005 expressed concern that unless it didn't, Fannie could be relegated to a "niche" player in the industry. Mudd later reported in a presentation that Fannie moved into this market "to maintain relevance" with big customers who wanted to do more business with Fannie, including Countrywide, Lehman Brothers, IndyMac and Washington Mutual.
Emphasis mine. Notice anything in common among those four companies?
And they were taking their cues from Freddie and Fannie!
The documents suggest than Fannie and Freddie knew they were playing a role in shaping the market for some types of risky mortgages. An e-mail to Mudd in September 2007 from a top deputy reported that banks were modeling their subprime mortgages to what Fannie was buying.
Nothing like a horrible business model combined with competition to see who can implement it on a larger scale!
Andrukonis and others expressed concern about another type of mortgage Freddie was buying, where neither income nor assets were stated on the loan application. Andrukonis said these were popular with Hispanic borrowers, but the delinquency rates of 8 to 13 percent were much higher than on conventional loans. People familiar with the matter said Freddie was being pushed by advocacy groups to come up with new loan products to offer to low-income and minority borrowers.
Emphasis mine.
Anyone want to place bets on which "advocacy groups" were applying the pressure?
And for those who keep claiming "it was the banks!" I say that's like arguing whether the chicken or the egg came first!
Despite these concerns, Fannie continued to push into this new market. A business presentation in 2005 expressed concern that unless it didn't, Fannie could be relegated to a "niche" player in the industry. Mudd later reported in a presentation that Fannie moved into this market "to maintain relevance" with big customers who wanted to do more business with Fannie, including Countrywide, Lehman Brothers, IndyMac and Washington Mutual.
Emphasis mine. Notice anything in common among those four companies?
And they were taking their cues from Freddie and Fannie!
The documents suggest than Fannie and Freddie knew they were playing a role in shaping the market for some types of risky mortgages. An e-mail to Mudd in September 2007 from a top deputy reported that banks were modeling their subprime mortgages to what Fannie was buying.
Nothing like a horrible business model combined with competition to see who can implement it on a larger scale!