ACORN Caused The Housing Crisis! Democrats To Blame For Mortgage Meltdown! Bank Industry Didn’t See This Coming!
Those and other, similar headlines are total bull shit. ACORN may be a lot of things, but a community service organization, no matter how large and nefarious, simply cannot generate trillions of dollars worth of debt. Democrats do deserve a share of the blame for the whole mess, they’re just as guilty as the Republicans, the only difference being the modus operandi of the criminals, not the level of criminality itself. And, if the bank industry didn’t see this coming, they are some lousy bankers.
Let’s say all of the things that have been alleged in all the viral videos and indignant blogs are true. You’re still missing the bigger picture. The housing market was flooded with product at the same time that product was being over-valued and massive loans were extended based on that inflated valuation, across the board. USA Today reported in July about the problem in Miami:
Yet, even seen in the most favorable light, the Miami area is still suffering from the rampant speculation that triggered overdevelopment and galloping home prices, followed by a collapse of the mortgage market. What followed was a surge of foreclosures and short sales, in which owners, with a lender’s agreement, sell a home for less than the value of the mortgage and thereby avoid foreclosure.
Therefore, gazillions of dollars worth of second and third mortgages, and renegotiated mortgages were extended based on nothing. If a home is worth 100,000 dollars, but appraised at 200,000 dollars, 100% financing means that somebody just took out a loan for 100,000 dollars worth of air. And everybody, from the realtors, to the mortgage holders and all the other credit rapists in between, knew it.
The housing boom that began in 2000 and lasted a full five years looked certain to set up homeowners for a better retirement. Median home values rose dramatically and millions of Americans felt much wealthier because of it.
The problem was that for many their newfound wealth was only on paper. Only homeowners who got the money out by selling their homes actually built wealth.
From USA Today, 7/27/05:
Sharply rising home prices are making a risky housing market even riskier. Six hot markets now face a greater than 50% chance of price declines the next two years, says a study to be released today by PMI Mortgage Insurance.Rapid price escalation has outpaced income gains and rent increases, making homes less affordable and increasing the odds of a price correction, PMI found.
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“Certain markets … are getting riskier,” says Mark Milner, PMI’s chief risk officer. “Prices can’t keep going up at the current rates of appreciation. It doesn’t have to end badly, but it is pretty clear there will be a flattening out.”
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PMI economist Marco Van Akkeren says the use of exotic mortgages, such as interest-only loans and those that allow borrowers to pay lower monthly payments for an initial period, is creating greater risks for buyers and inadvertently pushing prices even higher. If interest rates rise, “Affordability is going to be much more of an issue,” he says.
The Washington Post, September 27, 2005:
U.S. home sales and prices surged again last month, an industry group reported yesterday, as Federal Reserve Chairman Alan Greenspan warned that the growing use of riskier new mortgages could result in “significant losses” for lenders and borrowers if the market cools.
And some cooling is likely, Greenspan suggested in remarks delivered via satellite to the American Bankers Association convention in Palm Desert, Calif., repeating his view that “home prices seem to have risen to unsustainable levels” in certain local markets.
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One driver behind price appreciation, Greenspan said, is the popularity of new types of mortgages that enable many borrowers to buy houses at prices they could otherwise not afford — and that may be hard for some borrowers to repay if interest rates rise and home prices stabilize or fall. He mentioned as examples interest-only mortgages, 40-year mortgages and “option ARMS” — adjustable-rate mortgages that permit borrowers to decide how much to pay, how long the loan term should be, and when they can convert between a fixed rate and a variable rate.
“These products could be cause for some concern both because they expose borrowers to more interest-rate and house-price risk than the standard 30-year, fixed-rate mortgage and because they are seen as vehicles that enable marginally qualified, highly leveraged borrowers to purchase homes at inflated prices,” Greenspan said.
The article goes on to warn about the consequences of issuing so many “exotic” loans (approx. 1 in 5) at inflated prices, but doesn’t mention ACORN, the Community Reinvestment Act or Fannie Mae and Freddie Mac at all. In fact, another analyst, U. S. Comptroller of the Currency, John C. Dugan, speaking directly to the banking industry, echoed Greenspan’s concern:
Dugan reinforced Greenspan’s message to the banking industry, expressing concern that “looser underwriting standards and the more widespread penetration of riskier mortgage products have raised questions about how these loans will fare in the event of a rise in interest rates or a softening in house prices.”
The banking industry, in concert with the real estate industry, deliberately took advantage of the public for fun and profit. Period. Now that the debt has come due, the bankers are resorting to extorting the government to cover their asses, and everybody else wants to point fingers and assign blame away from the guilty guys who grease the wheels on their gravy train. And the gullible public gets screwed again. By everybody.
h/t: Uppity Woman
[...] culpable bunch of lying thieves, that’s why. In October 2, I wrote a post called “Bailout, Misdirection and Lies,” one of a series claiming that anybody with access to Home and Garden TV should have seen [...]
Unfortunately a LOT of PUMAs are misquoting and misrepresenting the ACORN business–and other things. I wish they would stop and take a deep breath. Some of them sound just like the Obama supporters, except with different talking points.
I hear you, Sister.
The monetary share of bad loans in the lower class sector just isn’t big enough to be responsible for the mess we’re in. That greed went all the way up the chain. ACORN may be corrupt, but the CRA loans aren’t responsible for people buying unaffordable McMansions.$50-100K homes being foreclosed just don’t have that much impact.
ACORN’s small potatoes in all this. If you guys want to focus on them, fine. I’ll save my scorn for the candidate who doesn’t have to take money from lobbyists because the CEOs of all the companies lobbyists represent are all on his finance team. Those same CEOs just happen to be the biggest beneficiaries of the bailout plan since they not only get paid, and get to restructure the entire industry in their favor, if their candidate is elected, they get to set all future policy from the inside. So keep watching ACORN while the bankers keep stealing you blind. Just like they want you to do.
No, the lending institution found a way to make some great lemonade out of legal lemons.
WE…the taxpayer are the victims because we don’t get that same opportunity.
The important thing at this point is to ENSURE that the cycle isn’t perpetuated and is stopped cold. Now.
I am very much against this bailout that they now call rescue. I frankly am sick of listening to special interests whine like children having a tantrum till we give them candy. All of them. On both sides.
Uppity, like I said, nobody is excusing ACORN, but the truth is, the lenders saw the opening ACORN gave them as an opportunity, not a hardship. If they had been handcuffed by ACORN in any way, we would have heard about it years ago. An analogy: say a kid rips her jeans up the seat, then a rapist comes along and rapes her through it. Even though the little girl might have been behaving irresponsibly when she tore her pants, the bad guy is the one who seized the opportunity to traumatize her. The lending industry is not a victim here.
What Sugar said. Plus….
Cinie, the lenders were following the Law set forth by the Feds. Basically the Law said nothing short of you have to give people loans, even if they have no ability to pay Even welfare was considered in the mix as “income”. People who had Zero credit were given homes. People with previous un-released bankruptcies were given loans. ACORN terrorized lenders into giving out bad mortgages. The lenders were believing that Fannie would guarantee these loans and Fannie, unregulated, was drastically underfunded–even without all the fraud that was rampant in the place. In addition, the lenders, being preyed upon, found ways to Prey upon the responsible buyers as well. They found a way to use variable rates to stick to Plenty of people who had the ability to pay until the variable kicked in. After all, somebody has to Pay the Piperr, right? But then again, are you responsible for my stupidity? If I am signing a contract, I read it first. And if I don’t understand it, i find somebody else who does–before I sign.
If the picnic basket hadn’t been left there unguarded, the Fox wouldn’t have grabbed the food. The Law was the picnic basket and ACORN was the Fox.
The bottom line here is,you can’t “buy” what you can’t pay for.
Sugar, I’m not trying to exonerate ACORN, but two things. One, if ACORN was as responsible for this mess as people are trying to make them, don’t you think the banks would have been screaming bloody murder about reigning them in a long time ago?
Two, it wasn’t just poor people and minorities who got risky loans. Everybody was encouraged to purchase “as much house as they could afford” which was considerably more than they could actually afford when they didn’t have to make down payments or could get other loan incentives. People who should have bought $100,000 homes bought 200,000 dollar homes. People who bought million dollar plus homes probably should have settled for $750,000 dollar homes. Add that to the fact that housing prices are based on what other houses in the vicinity have sold for, not what they cost to build and you have people paying too much for houses that are priced too high because they were told they should.
There were plans to give ACORN billions of dollars in the first iteration the “bailout” bill. You don’t even consider giving that kind of money to an entity unless they are a major player that holds some big cards. ACORN is just as implicit in this madness as the banks. It’s not the on the ground ACORN members who are the problem. It’s the ACORN kingpins–the “executives” who sent out their minions to push and bully lawmakers to make banks give up those risky mortgages that Greenspan spoke of. Everybody’s hands are grimey in this madness.