McSame just blamed Freddie Mac and Fannie Mae for making bad loans

[Virginian]

The bad loans responsible for our economic problems today.

Can someone please explain this to me?

It was my understanding that the purpose of these two is to make loans to BANKS for mortgages so that banks can make more mortgage money available for first time home buyers.

They do not loan money to people, just to banks.

I thought a lot of the problem was with speculators and investment properties which wouldn't come under Freddie and Fannie because these people were not buying homes for the first time.

As for the mortgages that DID come under Freddie and Fannie, weren't the BANKS the ones making the bad decisions on giving Mortgages to people who really couldn't afford them? :shrug:

Can someone please explain this so I know why these two are at fault?

(edited to attempt to correct spelling in title)

[ingac70]

1. They aren't...

McCain is an idiot.

http://www.fanniemae.com/aboutfm/index.jhtml

[Virginian]

2. It isn't just first time buyers, I was incorrect on that part

I picked this up from their website.
http://www.freddiemac.com/corporate/company_profile/actions_mortgage_crisis.html
... And it looks like congress sets rules for them.

About Freddie Mac
Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac raises capital on Wall Street and throughout the world's capital markets to finance mortgages for families across America. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.
<snip>
Supporting Sustainable Homeownership
Freddie Mac continues to employ policies that help families afford – and keep – their homes. Our delinquency rates are a fraction of the industry average and far below those of most other credit investors.
We're using a two-fold approach to supporting the mortgage market and managing credit and pricing for risk.
Stringent underwriting principles: We say "no" to certain lending practices that set up borrowers for failure, such as loans with too many high-risk factors.
Use of risk-based pricing so we can support a broader range of loans without taking on excessive risk.
Helping Homeowners in Financial Difficulty Avoid Foreclosure
At this critical time for the market and homeowners, we are vigorously enhancing our longstanding commitment to help Freddie Mac borrowers in financial difficulty avoid foreclosure and stay in their homes. We have a long track record of leadership in foreclosure prevention. Our best-in-class practices include:
<snip>
We support other nonprofit, government and industry efforts to assist the industry in helping homeowners in default that do not have Freddie Mac mortgages.
<more>.

[Warpy]

3. Fannie and Freddie only bought traditional 15 and 30 year mortgages

and Countrywide was forced to set up Indy Mac to take on all their creative loans like the liar loans, the jumbo "interest only" loans with balloon payments, and all the other shit banks used to pull on us before the Depression and the creation of Fannie Mae to convince banks that the 30 year fixed mortgage was a good deal.

The bad loans are defaulting and that is creating an oversupply of housing on the market and, in the classic market model, that in turn is driving down the value of all housing.

Fannie and Freddie bought good loans. In a deflationary period, though, those loans are putting borrowers into upside down loan positions, and some of those are now starting to default. The problem was hardly started by Fannie and Freddie. They were damaged by an inflationary bubble market on a vital commodity that has now burst.

The problems at those two banks are institutional problems created over the years due to their privatization, not problems of "taking on bad loans."

[Virginian]

4. Neo-cons want to undo New Deal.

Too bad that people here are listening to the GOP talking points. Without these companies, middle class Americans couldn't afford to be home owners.

I read on the Freddie website how they have programs that are aggresively trying to prevent foreclosures for their homeowners and also for homeowners whose mortgages are held by other companies.

[redqueen]

5. People everywhere are listening to GOP talking points, cause that's just about all the news conveys.

*sigh*

[northernlights]

6. that's nothing. McLame's also blamed the whole freakin' mess on Obama

Seriously. I heard him on the Lehrer Report tonight blaming Obama for the whole stinkin' mess. Unfuckingbelievable!

[gravity]

7. They took out too much leverage and risk

While the loans they bought were good, they underestimated the risk and relied on the government implicit guarantee. The default rates increased, and Fannie and Freddie didn't have the cash to cover all the loans it made.