Is it Freddie, Fannie, or I?

This is not “tongue-in-cheek.”

Why is it that I–not highly educated, and not an economist–can see how foolish it is to give home loans in amounts that the borrowers cannot afford, and subsequently will not be able to repay?

Within my family, a while back, I observed a young relative buy a house whose value was clearly above what he could afford.

Now, a couple of years later, he says he is losing his house.

Why did our government mandate such loans in the name of affirmative action?

The Heritage Foundation says this today:

Campaigning in Colorado yesterday Barack Obama blamed the financial crisis on “a culture of deregulation.” No, we don’t know what this means either. Pressed for specifics, some on the left manage to identify the 1999 Gramm-Leach-Bliley law as the deregulation source for all our problems. But as we have detailed before, Gramm-Leach-Bliley is not to blame for the current crisis. In fact, it has actually been key in helping the federal government manage financial institution failures.

The financial crisis we are experiencing today is not the cause of too little government interference in markets. It is the cause of too much. The simple fact is that for the past 30 years or so, the United States has not had a free market in residential real estate. Instead, a massive government duopoly, made up of the government entities Freddie Mac and Fannie Mae, control more than half of home loans in the United States. For almost two decades , conservatives have been warning about the systemic risk Fannie and Freddie pose to the U.S. financial system. But conservative efforts to cut Fannie and Freddie off from their government advantages have always been stymied by the left.

To this day, the left’s leaders in Congress still deny the integral role Freddie Mac and Fannie Mae played in the housing bubble and the resulting financial crisis. The facts say otherwise. Since 1995, Fannie and Freddie have been buying subprime securities to help meet government-directed affordable housing goals. At first they started at slow, but by 2004 Fannie and Freddie bought 44% of the entire subprime market. Their biggest customer was Countrywide Financial , which is now infamous for failing to perform due diligence before issuing the loans the subprime securities were based on. Even when states like Georgia tried to tighten mortgage lending standards, Fannie Mae and Freddie Mac threatened to stop doing business in the state and turn Georgia into “a financial pariah.”

While I fault the government for its negligence and its role in bringing us to this day, I also fault individuals for buying houses (and anything else) they cannot afford. We must stop this nonsense.

8 thoughts on “Is it Freddie, Fannie, or I?

  1. Sister Buxton:

    A few years ago we went to a realtor to enquire about buying a house. They told us that I was not making enough money to buy a house so we made our home in a trailor We lived in the trailor for quite a while.

    Later we staid in my mother’s house with her and took care of her until she passed away. After the estate was settled we had enough money to pay down on a duplex. Our monthly payments are $437 per month. I am on a fixed income and my wife is working part time. Along with that we are renting the front apartment and we are living in the back near the garage where I do my wood working and wood carving. We are living within our means and paying our bills on time.
    Brother Webb

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  2. Jana M

    I agree with Jana A. that everyone deserves a home. It does not, however, HAVE to be a house. Years ago, Mark and I decided that instead of “throwing away” money on monthly leases, we would look into purchasing a home. Our decision for me to be able to be home with the children kept us from having enough income to purchase a house. So, we looked into a mobile home. We bought the mobile for $12,000, paid it off in a little over 4 years, and have lived here for 11 1/2 years. We can do whatever we want to the interior, have some minor restrictions for the exterior, and have a space rent and utility bill that runs under $800 a month.
    Would we like a house? Sure! However, when we looked into purchasing one 6 years ago, right on the cusp of the downward slope that lead to our current crises, we still felt that a mortgage would be too restrictive. We were offered some of the loan types that are now identified as part of the problem. Thank God we did not give in to the urging of the realtors and banks. We still have our own home, it just may seem less “acceptable or appealing” to some. May not be a the house that Helen feels we all deserve but is definitely a home!

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  3. HELEN, I haven’t read or heard of anyone “blaming the poor people who don’t have money to buy homes” for the economic disaster that has befallen us.

    JANA, I agree with you. I have seen families create homes in tiny, scraggly places; I have seen others in a constant struggle to pay for their accumulation of “bling,” finer houses, and newer cars. Their family lives suffer.

    J-WILDER, yes, as far as this issue is concerned, we are way past the point of trying to fix blame. No matter who brought us here, we must find a solution that will help dig us out of the mess.

    The value in attempting to ascertain the cause of this economic collapse, is of course to avoid a repetition. I’m convinced a big part of the solution is to SPEND LESS…both on a personal and on a governmental level. We just cannot keep up this imprudence.

    It appears that we may not have a choice: we will be spending less.

    DEAN, for years within the church I have heard it said that perhaps America’s affluence is a curse. Could this be so? Have we become such a greedy people that we are imploding?

    EVE, I was shocked a few weeks ago in my Sunday school class as I announced Friend Day and spoke of the prizes we would be giving. An IPod was one.

    “What kind is it?” one little girl asked me.

    “Yeah, does it have a screen?” another chimed in.

    Their obvious familiarity with IPods led me to ask: “Do some of you have IPods already?”

    Three of them out of a group of seven already owned one, and get this, they were all from financially strapped families! It amazed me.

    God help us, Eve, and I mean this sincerely, not in a flip, casual way. We need God to help us regain our footing, so that again the American people are generous, frugal, modest, and God-fearing people.

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  4. Shirley, I think we have a culture of greed that lacks generosity. Even gradeschool children must have brand names and iPods.

    Common sense remains common sense. I’m glad you posted about this. If we had more people like you advising folks, we’d be better off!

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  5. dean

    Greed?? There is a word not voiced by many today. My uncle Hershel used to say…
    “If your income is less than your outgo… Your uprising will be your downfall!” I think this is true today!

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  6. I agree with Jana. Though as contentious as ever, the line between the political parties is as skewed and blurred than it ever has been. Everyone has fault here. No one wants to admit it in fear of it being exploited and them losing their career job. Maybe that’s the problem….

    Blame is all around. This wrong idea that a “home is a right” owed to all Americans, affirmative action politics, regulating the wrong processes and deregulating the processes that should be less-restricted… the government created a housing boom. The boom was lucrative for all – and the greed of everyone has created a further mess. Both loan officers and lenders who saw their commission checks paying for an early retirement, homeowners who now envisioned their 5,000 square foot house as a reality, instead of living within their means, and government officials trying to accept kudos for “creating the American Dream”, meanwhile transfering wealth to half the members of the Finance committee (Dodd, Franks, etc). It’s a mess. A huge mess. None of us did anything to stop it.

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  7. I would have to disagree somewhat with Helen. Not everyone needs a “house,” but everyone needs a “home.” A home can be in a nice, low-income apartment for those who cannot afford a house. A home can be in a mobile home that fits a lesser income.

    I don’t know the answer to this economic downfall, but I do believe there has been poor decisions made from both Republicans and Democrats. They need to lay aside their party and join forces to solve this dire situation.

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  8. No wonder people don’t know what ““a culture of deregulation” is: It means, people are busy blaming the poor people who don’t have money to buy homes. But people seem unwilling to see, everyone needs a house.

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