Yet another piece in the NY Times predicting mortgage problems because of the Government

Here is an article from October 3, 2004 in the NY Times:

Still, the most damaging legacy of Fannie Mae's years of unchecked growth may not be evident until the next significant economic slump. Only then, argued Josh Rosner, an analyst at Medley Global Advisors in New York, will the effects of Fannie Mae's relaxed mortgage underwriting standards be felt. A result could be a more pronounced downturn in the real estate market and more stress on the consumer.

"The move to push homeownership on people that historically would not have had the finances or credit to qualify could conceivably and ultimately turn Fannie Mae's American dream of homeownership into the American nightmare of homeownership where people are trapped in their homes," Mr. Rosner said. "If incomes don't rise or home values don't keep rising, or if interest rates rose considerably, you could quickly end up with significantly more people underwater with their mortgages and unable to pay."

SO far, Fannie Mae's rarefied status as a government-sponsored enterprise has certainly helped holders of its debt stay calm. But life for the company is surely about to change. The biggest difference will be in Fannie Mae's growth. For years, its regulator, the Office of Federal Housing Enterprise Oversight, has allowed the company to expand its business and portfolio to the max. Thanks in large part to Fannie Mae's torrid growth, the market for mortgage securities now surpasses that for Treasury securities. . . .

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Blogger David said...

In another vioctory for the dem rewriters of history, I heard on CNN this morning that a majority of people blame the mortgage market mess on the republicans.

9/23/2008 3:45 PM  
Blogger nobailoutswithoutjailtime said...

Mr. Rosner who is quoted in the Times article has had a number of important things to say about the subprime meltdown:


But I think the larger problem is actually the fraud by the borrower. It's been estimated that, you know, about 50 percent of stated income loans are overstated by about 50 percent. And, in fact, there was one study last year which stated that 90 percent of stated income low-doc, no-doc loans were overstated income by at least 5 percent.

So I think that part of it is that the lenders made loans to people without appropriate verification of income, and it's coming home to roost.


Rosner: The housing market woes in the US will not be over before 2010, regardless of what legislative initiatives come out of Washington. The fundamental reason why we are having these problems in the US is that real wages and incomes have not kept pace with home prices since the 1960s and that's what drove demand for these affordability products. Unless the Congress wakes up and let's home prices correct so that we restore some balance between wages and affordability, this problem will remain for years to come.


“This is far more dramatic than what led to Sarbanes-Oxley,” he added, referring to the legislation that followed the WorldCom and Enron scandals, “both in conflicts and in terms of absolute economic impact.”


"It's pathetic, but it's almost impossible to find out, which is no good for the system or anyone really," Josh Rosner, a managing director at research firm Graham Fisher & Co., said. "On the CDO side we know even less and regulators know even less because there aren't very clear reporting requirements."

9/23/2008 10:57 PM  

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