How many people on welfare did Fannie Mae and Freddie Mac force banks to lend to?
I am really curious if they really got away with actually making home loans to people on welfare.
Tagged with: home loans • welfare
Filed under: Freddie Mac Questions
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No, that wasn’t the purpose, the purpose was to give low income people the ability to buy low cost homes in their neighborhoods.
So a nurse could buy a home near her hospital.
You still needed income, you still needed to prove it, what the banks couldn’t do was say no because of the homes location. A practice called red lining.
It was never meant to be creative financing with no money down, no interest, no payments for a year etc. Those loans didn’t go to welfare recipients either, they went to middle and lower middle income people so they could get in over their heads when the teaser rates went down, and then rewrite their mortgages for even more profit to the banks.
But the bubble burst. Even with creative mortgages, there are only so many people who can afford three and four hundred thousand dollar homes. And if one of them loses their job, the balance breaks and the homes get forclosed. Don’t forget, for several years the homeowner has paid that mortgage. So the income to be able to pay had to be there.
I live in the UK but have been reading about the US Communities Reinvestment Act and related legislation and would not be surprised if this had happened somewhere along the way.I realise there is an argument about whether it is the source of the current crisis but it seems obvious to most people what "sub-prime" is.
http://www.ibdeditorials.com/IMAGES/smllookpic091908.jpg
Caption for above photo read – "In view of the mortgage meltdown that led to the current financial crisis, we couldn’t resist rerunning this 2004 photo from the Associated Press that appeared in this spot April 3. It was taken after Bank of America agreed to a $6 billion affordable housing program pushed by the Neighborhood Assistance Corp. of America (NACA). The program was designed to provide mortgages to low-income homebuyers without requiring a down payment or charging closing costs and fees. The expressions on the faces of CEOs Kenneth Lewis of BofA, left, and Chad Gifford of FleetBoston as they listen to NACA’s Bruce Marks say it all."
The Community Reinvestment Act, DID in fact force banks to give mortgages to those who couldn’t afford them.
http://www.youtube.com/watch?v=ASvqtD6g8PU
Banks were never forced to make any loans.
I do not know about welfare but I have seen stories with people making like 13 dollars an hour and getting 300,000 ++ dollar houses.
More voters for the Democrats – you vote for us and I’ll give you things (but shhh, forget about it ruining the economy in the future – you’ll get yours and we’ll blame it on the rich).
I would hope none.