Saturday, October 11, 2008

My First and ONLY Public Thoughts on Sub-Prime

Alright folks, I have been notably silent over the last few weeks. Quite frankly, all of this global economic instability, combined with our pathetic and downright disastrous choices for President, have effectively stepped on my quan and curbed my narcissistic inspiration. What a shame.
Click here for the urban dictionary if you are not sure about my "quan."

I am also employed at the present and the feeling of hope always has a way of interfering with cynicism. You might say that I have been biting my tongue! Here’s why. Whenever the topic of our current economic situation is discussed, a subsequent unleashing of the history of subprime mortgages quickly ensues. Well, as you may know, I used to be one of those big, evil, predatory lenders that would concoct ways of extorting signatures from ignorant Americans. Sort of like ACORN, except those folks will later receive money from the government that they are not expected to re-pay so long as they are successful in touching the right name on the voting screen. By the way, I predict the next step is to have a color picture of the candidate on the screen just so no one is confused about the guy that looks different from those guys on the U.S. currency. That should prove helpful for the starting lineup of the Dallas Cowboys when they show up in Vegas to vote. Ooops. Got off track there on another rant….maybe my quan is back after all. Until now, I have chosen to not rant or publish my thoughts on the subprime issue. There are several reasons for my rare and oft-ignored flash of wisdom. First of all, I am far from unbiased. Second, everyone in America has already become an expert on something they don’t even understand so why would they listen to me? Lastly, and most important, I am immeasurably worn out on the topic. Just for perspective, I would rather be subjected to the continuous loop of that film clip of Britney Spears on a stretcher getting her happy butt rolled to an ambulance over a 30 second clip of some idiot pontificating about the subprime issue. This includes, but is not limited to Barney Frank, Nancy Pelosi, Harry Reid, and Chris Dodd (I have a humorous clip of Harry Reid to share once I am done with this rant). In this post, I will offer just a few, shallow, biased, and mildly tame thoughts. Afterwards, I will be done for good and back to watching that Britney Spears clip.

Anyway, I stumbled across an article from the New York Times published in 1999 that is quite interesting. I will leave it at that and you can cast your own opinion. I will only add that the New York Times is not exactly known for its’ conservative viewpoints. In fact, this almost reads like a victory dance for Liberals in the article that is called “Fannie Mae Eases Credit to Aid Mortgage Lending.” Keep in mind folks, this is not a true and blue business that competes with other businesses in the free marketplace. During the Clinton administration, Fannie and Freddie were granted permission to hold only 2.5% of capital to back their investments. Of course, banks were still required to hold 10%, but what the heck. When you are backed by taxpayer money, who cares?

Here are the first three paragraphs of the article:
(click here for the entire article)
“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.”

See folks, once upon a time, mortgage companies and banks did not lend money to people who they thought might not pay it back. Unfortunately, minorities comprised a disproportionate piece of this denial pool. As is usually the case, the government ignored the fact that most mortgage applications are taken over the phone and that credit reports do not show a person's race. Instead, they concluded that minorities are entitled to the dream of home ownership (not the opportunity at home ownership) and mandated…yes mandated that lenders provide loans to individuals with a track record of not paying bills. Unfortunately, this also forced lenders to give the same opportunity to non-minorities that did not pay their bills also. Numerically, this is a far larger population pool than minorities with bad credit. This started the ball rolling. The rest of this historical disaster is a discussion about the evolution of collateralized mortgage obligations, special purpose entities, bond rating agencies, and good old fashioned greed (Liberals only can talk about the greed part since they believe it is synonymous with capitalism…a concept they want to destroy). Go ahead and do your research on the Community Reinvestment Act (CRA) during the Carter administration and also how it was greatly expanded during the Clinton administration. During this time, if lenders did not give enough money to people with bad credit, they were penalized. Once the money started flowing, the government accused them of being “Predatory Lenders.” That’s the government folks! You can’t win for losing.

The very regulations that are allegedly aimed at protecting people from their own stupidity actually serve to confuse them. Don’t believe me? Apply for a mortgage loan and see what shows up in the mail about 4 days later. Read through that 1-2 inch thick set of Federal and State required regulatory disclosures. If you are sharp, you will be able to glean out your loan amount, interest rate (if you can understand the difference between interest rate and APR), and maybe your payment and loan term. The layers of Government intervention that the real estate and mortgage industry faces even at the local level is what creates the complicated process that confuses most consumers and drives up fees. Plan on buying a home in Louisville, Kentucky? You better make sure the home has upgraded smoke detectors (not those with a 9 volt battery). If you don’t sign the affidavit swearing to it, you don’t get the home. Don’t know if the home has the right smoke detectors? You better be sure or you will pay a fine. Okay, maybe this is not the best example, but for some reason it just burns me up :-) Yeah, that was bad wasn’t it?

Now for some real fun. Speaking of painful video clips and Senator Harry Reid; Just watch this interview with Harry (a.k.a. “Dirty Harry”) trying to say that paying taxes is voluntary. Folks….this man is the Senate Majority Leader. Oh, by the way, the Liberal media won’t tell you that Dirty Harry is Mormon, which is somehow a headline story if you are a Republican and want to run for President. Truthfully, I am thankful this idiot is a Mormon and not Baptist. Jimmy Carter is embarrassment enough.
Click here to see Dirty Harry in action
By the way, I cannot stand behind anything on the website that published this interview. I have never heard of them. At a glance, they appear to be an offshoot of some Libertarians, but way more nutty.

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