Big

WASHINGTON — Until the boom in subprime mortgages turned into a national nightmare this summer, the few people who tried to warn federal banking officials might as well have been talking to themselves.



An examination of regulatory decisions shows that the Federal Reserve and other agencies waited until it was too late before trying to tame the industry’s excesses. Both the Fed and the Bush administration placed a higher priority on promoting “financial innovation” and what President Bush has called the “ownership society.”

http://www.nytimes.com/2007/12/18/bu...hp&oref=slogin

Flop The Nuts

Yes, the Fed could take much of the blame for the bubble. But, the Fed doesn't answer to the President. Greenspan and the Board of Governors operate independently of the Prez.

skipster

Big, grow a brain please! The article nowhere near blames Bush -- it blames the Fed for not protecting people from themselves!! It assumes that you and I are not smart enough to handle our own finances and should have prevented lenders from offering products that may not be the best for us (kind of like blaming fast food restaurants for offering food that may not be the best for us). Just to show you how far off your subject line is, the name "Bush" is only mentioned once -- and the article doesn't say that he did or did not do ANYTHING!!! You have definitely communicated to us that you don't like this guy, but you have also shown us that you can't make rational conclusions from what you read.

One very telling line from the article is this:

It is an action that people like Mr. Gramlich and Ms. Bair advocated for years with little success. But it will have little impact on many existing subprime lenders, because most have either gone out of business or stopped making subprime loans months ago.

It tells us that the market is taking care of itself. Government does not need to regulate sub-prime lending -- these businesses have seen that they made bad decisions and they are now going out of business or just not offering those products anymore. You don't seem to liek sub-prime mortgages, and now the lenders don't, either. They see they are not benefitting from it. That is something you said wouldn't happen.

Crdit Suisse published a report in March of 2007 that stated that subprime loan originations accounted for 20% of the total mortgage market in 2006. That report can be read here:

http://www.recharts.com/reports/CSHB...CSHB031207.pdf

The Mortgage Bankers Association reported that 12.6% of that 20% were delinquent (not in foreclosure, just delinquent) by the end of 2006. That means that 2.52% of all mortgages in the US are delinquent sub-primes. That's not a lot. It's not nearly as bad as what the article makes it out to be.

skipster

I was waiting for a snappy comeback form the anti-lending crowd. I guess the numbers speak for themselves. Only 2.52% of all US mortgages are delinquent sub-primes -- a lesser number are sub-primes in foreclosure. 2.52% does not seem to be a disaster to me.

matclone

The article is about Treasury too (which does report to the President). It doesn't just focus on the FRB.

LkwdSteve

The percentage is much higher in some areas. Plus 2.52 does seem like a big number to me.

hardcore

This article from the end of '06 shows much higher numbers then 2.52%.

Mortgage delinquencies jump
Foreclosures inch higher in 3Q; subprime loans biggest culprit
By Steve Kerch, MarketWatch
Last update: 1:05 p.m. EST Dec. 13, 2006
CHICAGO (MarketWatch) -- U.S. homeowners had a harder time keeping up with their mortgage payments in the third quarter, the Mortgage Bankers Association said Wednesday, with the delinquency rate rising to 4.67% from 4.39% in the second quarter. A year ago, 4.44% of mortgage holders were 90 days or more past due on their loans.
The foreclosure rate inched higher in the third quarter, with 1.05% of mortgages in the foreclosure process vs. 0.99% in the second quarter, the MBA said. While delinquency rates on all types of loans rose in the third quarter, it was the subprime category -- loans made to less creditworthy borrowers, that shot up the most to 12.56% from 10.76% a year ago.

Flop The Nuts

Subprime loans are generally loans made to a riskier pool of borrowers. It's predictable that a higher percentage of those loans will result in foreclosures and delinquencies.

skipster

While delinquency rates on all types of loans rose in the third quarter, it was the subprime category -- loans made to less creditworthy borrowers, that shot up the most to 12.56% from 10.76% a year ago

This is nearly verbatim what I posted, which was 12.6% of sub-prime mortgage loans were delinquent. But, we have to keep this in perspective. Sub-prime loans do not make up the majority of the mortgage industry -- in fact, they only make up 20% of the industry. Because 12.6% of 20% is 2.52%, only 2.52% of the loans of the entire US mortgage industry were delinquent sub-prime loans. Keep in mind that that number is all reported delinquencies -- not all of which will result in foreclosures. That number includes people who forgot payments, people whose payments are late, held up in the mail, etc., etc.

2.52% of total mortgages being delinquent really puts things into perspective. People are getting really bent out of shape for 2-3 out of 100. I would imagine that more than that percentage of automobile drivers get traffic tickets in a month's time. Perhaps we should institute traffic ticket help, too.

But, the best thing about the original article is that it tells us that the market is taking care of itself. Government does not need to regulate sub-prime lending -- these businesses have seen that they made bad decisions and they are now going out of business or just not offering those products anymore. You don't seem to like sub-prime mortgages, and now the lenders don't, either. They see they are not benefitting from it.

The market will not continue unprofitable practices. They have seen that lending to unqualified applicants is a poor business decision. So, things will now have to go back to the way they were. Those who bought houses with sub-prime loans and can't repay them will have to vacate those houses, perhaps to return to the rental world. Those who make loans will make mortgage loans only to those qualified applicants.