[flacaltenn]

Wait... Let me clearer about this, because this is a persistent sticky point on this board..

Fannie/Freddy Ring Master or Victim of Subprime?? From the NY Times (for crying out loud)..
http://www.nytimes.com/1999/09/30/bu...o-aid-mortgage

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.

The action, which will begin as a pilot program involving 24 banks in 15 markets
-- including the New York metropolitan region -- will encourage those banks to
extend home mortgages to individuals whose credit is generally not good enough to
qualify for conventional loans. Fannie Mae officials say they hope to make it a
nationwide program by next spring.

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.

In fact -- not only were the politicians pushing for lower standards and for Fannie/Freddy to scoop up more, but they gave them TAX INCENTIVES to do so..

http://en.wikipedia.org/wiki/Subprime_mortgage_crisis

In 1995, the GSEs like Fannie Mae began receiving government tax incentives for purchasing mortgage backed securities which included loans to low income
borrowers. Thus began the involvement of the Fannie Mae and Freddie Mac with the
subprime market.[117] In 1996, HUD set a goal for Fannie Mae and Freddie Mac that
at least 42% of the mortgages they purchase be issued to borrowers whose household
income was below the median in their area. This target was increased to 50% in
2000 and 52% in 2005.[118] From 2002 to 2006, as the U.S. subprime market grew
292% over previous years, Fannie Mae and Freddie Mac combined purchases of
subprime securities rose from $38 billion to around $175 billion per year before
dropping to $90 billion per year, which included $350 billion of Alt-A securities.

Fannie Mae had stopped buying Alt-A products in the early 1990s because of the
high risk of default.

AND -- they had enough morons stupid enough to do this waaay until the bust..

http://www.washingtonpost.com/wp-dyn...08081802111.ht

Discussing the company's successes, Mudd said one of Fannie Mae's achievements in 2006 was expanding its involvement in the market for subprime and other nontraditional mortgages. He called it a step "toward optimizing our business."

Internal documents show that even late in the housing bubble, Fannie Mae was drawn
to risky loans by a variety of temptations, including the desire to increase its
market share and fulfill government quotas for the support of low-income borrowers.

"By entering new markets -- especially Alt-A and subprime -- and guaranteeing more
of our customers' products at market prices, we met our goal of increasing market
share from 22 to 25 percent," Mudd wrote in a 2006 year-end report to the Fannie
Mae board dated Jan. 3, 2007.

In other internal documents, there was a common refrain: One of Fannie Mae's
objectives for 2006 was to "increase our penetration into subprime."

Buying Alt-A and subprime mortgages was part of Fannie Mae's effort to meet the
challenge. Fannie Mae sought to reap the rewards and protect itself from the
downside of the investments through a feat of financial engineering it called its
"Risk Transformation Facility," which was meant to transfer the riskiest elements
to other investors. {{{flacaltenn -- doesn't it make you proud that this is a GOVERMENT SPONSORED ENTERPRISE???}}}


"We engaged in the subprime market, for the first time closing deals to guarantee
and securitize subprime loans, with help from the new facility that allows us to
sell off the riskiest layers," Mudd wrote. By October, the company had signed $3
billion of such deals.

By March 2007, when Mudd sent the board an update, major subprime lenders were
failing, delinquency rates were climbing, and the emerging crisis was impossible
to ignore. The subprime sector "is in partial meltdown," Mudd wrote. He reported to directors that Fannie Mae's investment in subprime mortgage assets totaled about $55
billion. Mudd told the board that Fannie Mae had run its subprime portfolio through a
stress test to determine the losses in a hypothetical scenario that involved a
two-percentage-pointrise in interest rates and two years of 5 percent declines in
home prices. The resulting prediction: "zero credit losses net of earnings."

Yeah -- no problem there.

In short -- Fannie/Freddy weren't the only bundlers out there. But they do take in more than 1/2 of all single dwelling residential mortgages in the US. And because they were pressured by CRA requirements and pestered by the "social engineers" and offered tax bribes to back the crap --- They were the vacuum cleaner that sucked enough to create the whole frenzy..

Remember that Mudd said they had $55Bil of toxic crap on hand in 2007, they had already bundled and pass-off about 10 times that much since the late 90's. Banks didn't jump into this risky edge of the business until much later.

The way that the govt-ass-kissers can claim that Fannie/Freddy were innocent victims is due to an OFFICIAL govt cover-up (I mean report) from a hurridly organized Congressional Committee that of course absolved themselves and the GSEs from any and all responsibility.