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Who's is REALLY responsible for the sub-prime real estate crisis?

Submitted by bigmacha on Sun, 10/19/2008 - 12:29
in

Hey, I hope you all will get off of this ACORN kick, and blaming Fannie and Freddie alone for the current mess - let's get right to the root of the problem and his name is W.

Following is from a White House, August 2004 press release (and here's the link) - 

http://www.whitehouse.gov/news/releases/2004/08/20040809-9.html


  • Expanding Homeownership. The President believes that homeownership is the cornerstone of America's vibrant communities and benefits individual families by building stability and long-term financial security. In June 2002, President Bush issued America's Homeownership Challenge to the real estate and mortgage finance industries to encourage them to join the effort to close the gap that exists between the homeownership rates of minorities and non-minorities. The President also announced the goal of increasing the number of minority homeowners by at least 5.5 million families before the end of the decade. Under his leadership, the overallU.S. homeownership rate in the second quarter of 2004 was at an all time high of 69.2 percent. Minority homeownership set a new record of 51 percent in the second quarter, up 0.2 percentage point from the first quarter and up 2.1 percentage points from a year ago. President Bush's initiative to dismantle the barriers to homeownership includes:
    • American Dream Downpayment Initiative, which provides down payment assistance to approximately 40,000 low-income families;
    • Affordable Housing. The President has proposed the Single-Family Affordable Housing Tax Credit, which would increase the supply of affordable homes;
    • Helping Families Help Themselves. The President has proposed increasing support for the Self-Help Homeownership Opportunities Program; and
    • Simplifying Homebuying and Increasing Education. The President and HUD want to empower homebuyers by simplifying the home buying process so consumers can better understand and benefit from cost savings. The President also wants to expand financial education efforts so that families can understand what they need to do to become homeowners.

 

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Can you show how any of that contributed to the crisis?

Submitted by sweatingbanshee on Sun, 10/19/2008 - 17:52.

This initiative looks to me to be a counterpoint to the CRA/Fannie & Freddie effect.

1.  It actually was meant to encourage people to save money for a downpayment so that they'd have equity in a home and be less likely to simply stop paying for it.

2.  It was targeted at increasing the supply of affordable housing rather than targeted at putting unqualified buyers in unafforable housing.

3.  "SHOP develops new, decent, safe and sanitary, non-luxury dwellings for low-income families and persons who would otherwise be unable to afford to purchase a dwelling. To achieve this purpose, the program requires homeowners to contribute a significant amount of sweat equity toward the construction of the new dwellings."

Can you give evidence that these homes were commonly foreclosed upon?  Were people likely to abandon homes that they helped build?

4.  Financial education is usually good, unless you're simply educating people about how to get together in groups and shake down banks.

 

Now, obviously every program has unintended consequences, so this could be part of the problem.  But can you in any way link this initiative to sub-prime lending?  And then can you link it to decline of the housing market?  Or is it possible that the homes purchased and built under this program have weathered the storm better than the more risky loans?

 

It's amusing that you somehow want to ignore ACORN and Fannie and Freddie and then pin Bush to the root of this problem when the housing bubble started in the mid-90s and you seem to think that this entire thing started during the Bush administration.  So, please, detail how much this contributed to the problem, and then admit that it's obviously not the "root" of the problem.