Financial crisis...How we got here...yes we were warned
I’ve been purging through 25 years of paperwork. I just came across a note I made while listening to a radio program about an article in Mother Jones from 2000.
The title is “HOME CHEAT HOME”.
First the notes I made: Cuomo, HUD...Mortgage bankers lobby....changes in 1994 to lending voted in by the democrats....realtor and lender often the same....low income limit mortgage loan $220,000.00......6 to 8 billion per year on defaults......FBI Investigating.......
And yesterday we heard the ‘FBI is investigating”...again???
July/August 2000 Issue Mother Jones
[snip]Evans is among tens of thousands of low-income homeowners victimized by a scam called “flipping” that is being repeated every day in inner-city neighborhoods from Syracuse to Los Angeles. To resurrect blighted urban areas, the government sells abandoned houses to real estate investors for renovation. But some speculators simply slap on cosmetic repairs and “flip” the properties, reselling them for many times their true value. Because the FHA co-signs the loans, it gets stuck with the bill when homeowners can’t pay the inflated mortgages. Last year the agency spent $6.5 billion to bail out 78,890 home loans that went bad-up 30 percent in three years. The foreclosed homes are seized, boarded up, and put back on the market, and the cycle starts all over again.
“We have found flipping scams in every city we’ve investigated,” says an official with the Department of Housing and Urban Development, which recently indicted 41 Realtors, lenders, and appraisers in California. “What has me shaking is that we have these kinds of numbers on defaults and we are in a bull market.”
Federal investigators call flipping more lucrative than bank robbery but it was mortgage bankers who lobbied to make the scheme possible. Historically, the FHA assigned independent appraisers to inspect houses and set a fair value. But lenders wanted to select their own appraisers. They claimed it would streamline the process. But it would also make it easier to find someone who would ignore shoddy repairs and approve jacked-up prices.
The industry certainly had plenty of clout on Capitol Hill. From 1991 to 1994, lenders handed out $2.3 million in campaign contributions, and the investment paid off. At a meeting of the Mortgage Bankers Association in 1993, the FHA unveiled a “lender select” policy allowing bankers to choose appraisers. The news was greeted by a standing ovation.
Because the FHA supports low-income home buyers with shaky credit, defaults on agency loans have always been above the industry average. But since lenders have been allowed to handpick their own appraisers, investigators say, foreclosures have skyrocketed.”
Here is a quick look into 3 former Fannie Mae executives who have with the Democrats in Congress, brought down Wall Street.
Franklin Raines was a Chairman and Chief Executive Officer at Fannie Mae. Raines was forced to retire from his position with Fannie Mae when auditing discovered severe irregulaties in Fannie Mae’s accounting activities.
Raines left with a “golden parachute valued at $240 Million in benefits. The Government filed suit against Raines when the depth of the accounting scandal became clear.
The Government noted, “The 101 charges reveal how the individuals improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls, misapplying over twenty accounting principles and misleading the regulator and the public.
Tim Howard - Was the Chief Financial Officer of Fannie Mae. Howard “was a strong internal proponent of using accounting strategies that would ensure a “stable pattern of earnings” at Fannie. In everyday English - he was cooking the books. The Government Investigation determined that, “Chief Financial Officer, Tim Howard, failed to provide adequate oversight to key control and reporting functions within Fannie Mae,”
Raines and Howard resigned under pressure in late 2004.
Howard’s Golden Parachute was estimated at $20 Million!
Jim Johnson - A former executive at Lehman Brothers and who was later forced from his position as Fannie Mae CEO.
A look at the Office of Federal Housing Enterprise Oversight’s May 2006 report on mismanagement and corruption inside Fannie Mae, and you’ll see some interesting things about Johnson. Investigators found that Fannie Mae had hidden a substantial amount of Johnson’s 1998 compensation from the public, reporting that it was between $6 million and $7 million when it fact it was $21 million.”
Johnson’s Golden Parachute was estimated at $28 Million.
WHERE ARE THEY NOW?
FRANKLIN RAINES? Raines works for the Obama Campaign as Chief Economic Advisor
TIM HOWARD? Howard is also a Chief Economic Advisor to Obama
JIM JOHNSON? Johnson hired as a Senior Obama Finance Advisor and was selected to run Obama’s Vice Presidential Search Committee
IF OBAMA PLANS ON CLEANING UP THE MESS - HIS ADVISORS HAVE THE EXPERTISE - THEY MADE THE MESS IN THE FIRST PLACE.
Would you trust the men who tore Wall Street down to build the New Wall Street?