The Sun Dollar

Thanks to a colleague of mine who tipped me off by providing this article written by The New York Times back in 1999 titled "Fannie Mae Eases Credit To Aid Mortgage Lending" which basically gives us a great insight on the mess we have now.

This article sure gives us a greater understanding as to how economic decisions we make now may and will come back and bite us in the fanny. Along with that, it also spreads a different light on our beloved and praised ex-president, Bill Clinton.

According to this article, "Fannie Mae, the nations 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 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...if they fail, the government will have to step up and bail them out..."

Their intentions were honest, sorta.... it was intended to "extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans."

This meaning that it was a "move that could help increase home ownership rates among minorities and low-income consumers..."

"By 2001, 50% of Fannie Mae's and Freddie Mac's portfolio was made up of loans to low and moderate income borrowers. " Obviously they were making tons of money but not worrying about the long term effects it could have.

"Despite these gains (that of more minorities purchasing homes) 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."

So there you go, it has been almost 10 years since this decision was made; but, there have been many more contributing factors that have put us in this economic trough. This is just one piece of the pie.

Nonetheless; it is, how it is.

(Jacky)