We wrote about the federal government bail out relating to the housing industry in a prior section. Now let’s take a look at two of the main players. It’s obvious that Fannie Mae and Freddie Mac were bailed out of their subprime meltdown by the American taxpayers. However, they continue to buy subprime junk, according to Bruce Marks, CEO of the non-profit Neighborhood Assistance Corporation of America (NACA). In this regard, Marks told the Corporate Crime Reporter:
They (Fannie Mae and Freddie Mac) continue to purchase interest only, ARM resets and other problematic loan products. Fannie and Freddie should be prohibited from buying this stuff. But I have evidence from the borrowers that Fannie and Freddie are still buying these products. They buy 50% of all mortgages. So, it might not be a huge chunk. But it is still significant.
In September 2000, Marks went before a House committee and predicted that the government would be forced to bailout Fannie and Freddie because of their involvement in the subprime market. And earlier this year, he opposed the bailout bill, saying that it would provide virtually no benefit to at-risk homeowners. In this regard, Marks says:
The beneficiaries of the bailout bill will be Fannie and Freddie. And it may cost the taxpayer $800 billion or more. It rewards these companies for their past failures.
NACA is a mortgage broker in the business of providing low-interest, fixed-rate 30-year mortgages. Over the past five years, its business has stagnated, because it refused to get involved in the subprime market and couldn’t compete. But Marks says that now, homeowners facing foreclosure because of the meltdown, are flocking to NACA to get their mortgages restructured.
Marks wants criminal prosecutions of the top Wall Street firms and their executives for engaging in the predatory lending that caused the mortgage meltdown and the resulting housing crisis. He made some very interesting comments concerning the evils of subprime lending:
We should not be doing subprime lending. We should go back to the traditional lending. Fannie and Freddie should expand their pool for prime loans. We are not talking about the loan shark on the corner who says – if you don’t make your payments in three months, I’m going to break your legs. We are talking about the most well established, most well known financial institutions, and “respected” institutions, not just in this country, but in the world. GMAC, Wells Fargo, Countrywide, Bank of America, Washington Mutual, Citigroup – engaging in predatory lending. You are talking about institutions that are well known and supposedly respected worldwide.
Citigroup is engaging in predatory lending. If you are a homeowner and someone says to you – you can purchase a home in a neighborhood where you don’t have to be afraid of your children’s safety, where you can have your children go to a good school, where you can have a house that you could never even have dreamed of. And this is not some loan shark giving you an outrageous loan. These are some of the most respected financial institutions in this country and in this world. And what they were saying is – trust us, you can refinance after two years. Trust us, you can afford that. You tell me the homeowners who are going to turn that down? Who never ever even dreamed of such an opportunity? You cannot blame the homeowner. You put the responsibility where it lies. On predators. On lenders. On Wall Street.
If NACA spotted the problem I have to wonder why it took the governmental regulators so long to realize things were going badly for the mortgage industry.
Source: Corporate Crime Reporter
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