[quote=NYCTrader]

[quote=san fran broker]The real estate market bubble formed for four reasons
1. The mortgage interest tax deduction
2. The growth of Fannie Mae and Freddie Mac, continually pushing down interest rates with their “moral obligation of the US government” credit rating while purchasing mortgages to riskier and riskier borrowers.
3. The Community Reinvestment Act pushing lenders to extend credit to people who were poor credit risks
4. Everybody wants a bigger and nicer house than they can afford.

The Democrats, through the US government were responsible for the first three and the last is human nature. The Republicans screamed about Fannie and Freddie (so far the biggest sources of our losses in the credit crisis, only ahead of Detroit) for years and virtually every Democrat supported Fannie and Freddie to the very end. Any criticism of the exploding size of these companies was treated as a direct assault against minority home ownership.

I am a Democrat and I supported Fannie and Freddie too. I think it’s a great thing to help make housing more affordable to poor people and kids just starting a family. But what went terribly wrong was the decision to not just help the virtuous poor, but anyone who could get 3% down.

[/quote]

You are overlooking the securitization of mortgages, which in my opinion, played the biggest part in the RE bubble.  As MBS became more prevalent, loan standards went out the window.  Since mortgage originators weren’t keeping these mortgages on their books (instead selling them to the banks who in turn chopped them up and sold them to investors), there was no incentive to ensure the buyer would be able to pay back the loan. Instead, the incentive became to originate as many mortgage loans as possible as quickly as possible since the banks were happy to buy them take on all the risk (since they were securitizing them, rendering them “AAA investments,” and then selling them for nice fat fee).  Then, the buck got passed to the investor who bought AAA MBS as a safe income producing investment and we all know how that ended.    
[/quote]

I agree, I would just include that with Fannie and Freddie, which pretty much created the MBS and were the largest securitizers.

[quote=NYCTrader] [quote=san fran broker]The real estate market bubble formed for four reasons
1. The mortgage interest tax deduction
2. The growth of Fannie Mae and Freddie Mac, continually pushing down interest rates with their “moral obligation of the US government” credit rating while purchasing mortgages to riskier and riskier borrowers.
3. The Community Reinvestment Act pushing lenders to extend credit to people who were poor credit risks
4. Everybody wants a bigger and nicer house than they can afford.

The Democrats, through the US government were responsible for the first three and the last is human nature. The Republicans screamed about Fannie and Freddie (so far the biggest sources of our losses in the credit crisis, only ahead of Detroit) for years and virtually every Democrat supported Fannie and Freddie to the very end. Any criticism of the exploding size of these companies was treated as a direct assault against minority home ownership.

I am a Democrat and I supported Fannie and Freddie too. I think it’s a great thing to help make housing more affordable to poor people and kids just starting a family. But what went terribly wrong was the decision to not just help the virtuous poor, but anyone who could get 3% down.
[/quote]

You are overlooking the securitization of mortgages, which in my opinion, played the biggest part in the RE bubble.  As MBS became more prevalent, loan standards went out the window.  Since mortgage originators weren’t keeping these mortgages on their books (instead selling them to the banks who in turn chopped them up and sold them to investors), there was no incentive to ensure the buyer would be able to pay back the loan. Instead, the incentive became to originate as many mortgage loans as possible as quickly as possible since the banks were happy to buy them take on all the risk (since they were securitizing them, rendering them “AAA investments,” and then selling them for nice fat fee).  Then, the buck got passed to the investor who bought AAA MBS as a safe income producing investment and we all know how that ended.    
[/quote]

I agree, I would just include that with Fannie and Freddie, which pretty much created the MBS and were the largest securitizers.

[quote=san fran broker] [quote=NYCTrader] [quote=san fran broker]The real estate market bubble formed for four reasons
1. The mortgage interest tax deduction
2. The growth of Fannie Mae and Freddie Mac, continually pushing down interest rates with their “moral obligation of the US government” credit rating while purchasing mortgages to riskier and riskier borrowers.
3. The Community Reinvestment Act pushing lenders to extend credit to people who were poor credit risks
4. Everybody wants a bigger and nicer house than they can afford.

The Democrats, through the US government were responsible for the first three and the last is human nature. The Republicans screamed about Fannie and Freddie (so far the biggest sources of our losses in the credit crisis, only ahead of Detroit) for years and virtually every Democrat supported Fannie and Freddie to the very end. Any criticism of the exploding size of these companies was treated as a direct assault against minority home ownership.

I am a Democrat and I supported Fannie and Freddie too. I think it’s a great thing to help make housing more affordable to poor people and kids just starting a family. But what went terribly wrong was the decision to not just help the virtuous poor, but anyone who could get 3% down.
[/quote]

You are overlooking the securitization of mortgages, which in my opinion, played the biggest part in the RE bubble.  As MBS became more prevalent, loan standards went out the window.  Since mortgage originators weren’t keeping these mortgages on their books (instead selling them to the banks who in turn chopped them up and sold them to investors), there was no incentive to ensure the buyer would be able to pay back the loan. Instead, the incentive became to originate as many mortgage loans as possible as quickly as possible since the banks were happy to buy them take on all the risk (since they were securitizing them, rendering them “AAA investments,” and then selling them for nice fat fee).  Then, the buck got passed to the investor who bought AAA MBS as a safe income producing investment and we all know how that ended.    
[/quote]

I agree, I would just include that with Fannie and Freddie, which pretty much created the MBS and were the largest securitizers.

[quote=joelv72][quote=san fran broker] [quote=NYCTrader] [quote=san fran broker]The real estate market bubble formed for four reasons
1. The mortgage interest tax deduction
2. The growth of Fannie Mae and Freddie Mac, continually pushing down interest rates with their “moral obligation of the US government” credit rating while purchasing mortgages to riskier and riskier borrowers.
3. The Community Reinvestment Act pushing lenders to extend credit to people who were poor credit risks
4. Everybody wants a bigger and nicer house than they can afford.

The Democrats, through the US government were responsible for the first three and the last is human nature. The Republicans screamed about Fannie and Freddie (so far the biggest sources of our losses in the credit crisis, only ahead of Detroit) for years and virtually every Democrat supported Fannie and Freddie to the very end. Any criticism of the exploding size of these companies was treated as a direct assault against minority home ownership.

I am a Democrat and I supported Fannie and Freddie too. I think it’s a great thing to help make housing more affordable to poor people and kids just starting a family. But what went terribly wrong was the decision to not just help the virtuous poor, but anyone who could get 3% down.
[/quote]

You are overlooking the securitization of mortgages, which in my opinion, played the biggest part in the RE bubble.  As MBS became more prevalent, loan standards went out the window.  Since mortgage originators weren’t keeping these mortgages on their books (instead selling them to the banks who in turn chopped them up and sold them to investors), there was no incentive to ensure the buyer would be able to pay back the loan. Instead, the incentive became to originate as many mortgage loans as possible as quickly as possible since the banks were happy to buy them take on all the risk (since they were securitizing them, rendering them “AAA investments,” and then selling them for nice fat fee).  Then, the buck got passed to the investor who bought AAA MBS as a safe income producing investment and we all know how that ended.    
[/quote]

I agree, I would just include that with Fannie and Freddie, which pretty much created the MBS and were the largest securitizers.

It’s interesting that nobody wants to discuss mortgage banks. Are they the way that we’ll replace Fan/Fred when they eventually get put on the Federal Govt’s balance sheet?