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Fannie, Freddie, And The Sinking Housing Market

Will the housing market ever hit bottom? We’ll look at  still-sinking home prices in Seattle and Atlanta, and White House plans to wind down market makers Fannie Mae and Freddie Mac.

House For Sale (AP)

House For Sale (AP)

We’re still getting used to the new realities of life after the panic and crash of ’08. Above all, maybe, in housing.

For decades, it was Americans’ number one investment and dream.

Now, millions have lost their homes, and prices keep falling. Next up is the unplugging of the two giants that have helped keep mortgage loans rolling for years – and were bailed out in the crash: Fannie Mae and Freddie Mac. With them could go the 30-year mortgage and a whole lot more. Then what for housing?

We discuss the future of American housing.

- Tom Ashbrook


Gretchen Morgenson, assistant business and financial editor at the New York Times

Barry Zigas, director of housing policy at the Consumer Federation of America

Susan Wachter, professor of Real Estate and Finance at the Wharton School of the University of Pennsylvania

David Streitfeld, financial reporter covering real estate for the New York Times

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  • Pancake Rankin in NC

    If wages were not so depressed these agencies would not be needed to provide an artificial market bottom for the housing construction and marketing industries. Fannie and Freddie have amounted to a pro-corporate subsidy so wage slaves could have a roof. Housing is not only losing small valuation percentages due to weak demand each month, but every equity is also shrinking with incipient (government denied) inflation. If a ten dollar bill buys less so do the receipts from a house sale. If housing appreciated it would be an inflation hedge but that won’t recur anytime soon because prices were inflated by speculation for many years. Barring a Soviet style collapse and reset with Obama as our Gorbachev it will be at least 75 years before housing values peak again, land scarcity (ha ha ha) be damned. If frozen Freedom Fries packed in China are $20 a bag, and gas is $10 a gallon this means a mighty small population segment will remain prospective home buyers. (Take that real estate course now!) Don’t blame it on some mythical carbon tax that never happened, this is your global corporate government at work, and cost of living raises are off the table. Will you Twitter your life away or hit the streets?

    • Zeno

      How true. The housing prices are linked to unemployment and working wages. The recovery will happen once the median American wage matches median commensurate China wage.

      But this is America where the wealthy create the sun each day and the moon at night…so in keeping with the laws of Reaganomics the wealthy will purchase ALL of the abandoned housing and will maintain and live in them all.

    • Dave in CT

      So were we better off with Freddie and Fannie, government-secured subsidy for homebuyers, or should we have left that tax money for subsidy/program in the economy and just let people who want to buy homes, work and save the old fashioned way. I think we all agree the price bubble was a product of the Fed rates and the Fannie/Freddie model making home ownership appear more possible, increasing demand, increasing prices.

      Point being that the well-meaning (I hope) intervention of the Fed and Government via F&F, did not end up serving the people well in the end, regardless of it being well-meaning. Malinventest following malenticement, instead of an honest market reflecting supply, demand, and ability to pay. It certainly served the bankers and Wall Streeters and the politicians they keep in DC well though……

  • twenty-niner

    Average income hovers around 50K. Using the bubble-nomics-based 3-times multiplier puts the average home price at 150K, 12% lower than the current average of 170K. If you don’t want to be house poor, eating ramen noodles on a bare floor in an unheated mc-mansion, a more realistic multiplier should be 1.5, which means housing prices have a long way to drop.

    Factor in the end of the 30-year bull market for the long bond (read: interest rates are going back up in a big way), and housing prices are being set up for another Wile E. Coyote moment. And it won’t help matters either when banks start to unload their shadow inventory with an estimated 5 years of backlog.

    Brace yourselves for more Pollyanna cheer leading from the guests.

  • Wm. James from Missouri

    Would someone please weigh in on the effect of the baby boomer wave. In loose numbers, it is estimated that 30 million additional people in the US will retire or die in the next 30 plus years. A total of 70 million people ! This phenomena has not been given enough analytical consideration in my opinion. Has any credible group done a full analysis. How could anyone seriously suggest the housing market will sustain anything like past historical price and return trends ?

    Baby boomer children are underpaid, underinvested, underinsured, … and under buffered in almost every meaningful way. What are the realistic options?

    • Yar

      The pictures on TV of retirement sailing away among the whales or holding hands in twin outdoor ocean view bathtubs isn’t real. More realistic is an image of a elderly person pushing a shopping cart full of junk down the street.

      Home ownership has played a important support of our social safety net, Fannie and Freddie made that possible for many people. Home ownership has funded end of life care for many people. The healthcare implications alone of our nations decline in home ownership is scary all by itself.
      What will our nation do with a large population of homeless elderly?
      This story is as old as the fable of the Grasshopper and the Ant.
      Why do we keep making the same mistakes over and over?

      We believed the lie that we could take value out of our homes, invest in the market and live on the interest.

      • Wm. James from Missouri

        Sorry to have to say this so bluntly but the emasculation of the male has contributed to many of our problems, in that, it is no longer sociologically correct to be the outsider, the free thinker, the hard fisted type of man that won’t take gruff from ….. You get the picture.

        My father was one of those types. A hard man. Not afraid to go mono on mono if necessary. I can still remember going to look for homes when I was a youngster. If the seller was asking 50, he would offer them 20, and be willing to argue and * if necessary. Today, buyers walk in to a house, talk about colors, and cuteness, and sign away their future ! Hey, the truth hurts !

        We now know that people suffer from confirmation bias and do not seem to be able to deal with blood and guts reality. America, if Dr. Phil is your guru, you may need to reevaluate.

        • Yar

          I bet he learned from the experience of watching his elders. How much can be lost in a single generation?
          When work and family were intertwined the experience to make business decisions are part of growing up. Many children never know or understand how their parents really put food on the table.
          It takes a lot of experience to read a person in a business situation, youth today are marks for anyone wanting to take advantage of them. You are correct, that few people know how to make a wise choice and if it doesn’t fit, walk away.

      • Wm. James from Missouri

        How did you edit your post at this site ?

        • Yar

          Wm. James from Missouri (unregistered) wrote, in response to Yar:
          How did you edit your post at this site ?
          It is a benefit of membership.
          I registered as a user on the site. The software give you a dashboard
          to see the people who reply, it lets you edit your comments, ( I
          really need that) It can be set to send you an email when a person
          replies to you comment. Please join the community. Create a Disqus
          profile. I noticed PBS is using the DISQUS, I recommended NPR pick up
          the software as well.
          Thanks for asking.
          Membership is free.
          Sent from my email

        • Yar

          Join DISQUS community and it will allow you to edit your comments. I sent a reply from email, it seems that takes longer to post on the site.

          • Yar

            Apparently, when you click delete on the dashboard it simply removes your name from the comment.

  • joan

    Why should something that was artifically inflated considered bad to
    be sinking? When what is really occuring is a normalized of being…..


    • Dave in CT

      We can’t handle the truth.

      Admitting a need for “normalization” would imply the whole government/corporate model for us is a sham.

    • Dave in CT

      and a fear of pitchforks….

  • geffe

    Time to move into a nice shanty in one of the Bush/Obamavilles, or maybe squatting will become the norm.

  • William

    Now is a good time to kill these two agencies once and for all.

  • Anonymous

    This is a worthy topic, but I hope you thoroughly cover the events in Madison, Wis. on the Week in the News.

  • J_smithyy


    • Sean

      Absolutely… GO WORKERS OF WISCONSIN!!! (Sorry, nothing to do with the housing market, but everything to do with economic injustice and American corporate tyranny… that’s right… we have a genuine democratic revolt happening here in the USA… puts the crusty old Tea Party to shame…)

  • Nick from Mass

    Prices for houses were ridiculously inflated and should even go lower. If they don’t, with the diminishing wages, there will not be enough people who can afford a house. We lost the middle class and now we are stuck with plutocracy.

  • EIO Boston

    This is the best time to let the prices fall and we will reset. We should have let all go donw in 2008, but we backstopped it. That was a mistake. Let the market drop to a price that will clear itself. those of us who already own homes will still live in them, but work out something with the banks. Because the government has backstopped this the bond investors are not willing to take any losses, what we have ended up doing is encouraging people to stay in homes that they will never be able to own. We are robbing them of their futures, because what ever little money they make they plow into a home that should never be considered as an “investment”. We should stop telling folks that a home should be their largest inventment. It is their largest purchase!!!!

    High nethworth individulas do not consider their homes an investment.

    • Ellen Dibble

      Agree a house is not an investment; a new home will create jobs for contractors galore, and the banks will rake in lots of (currently deductible) mortgage interest payments. So there is an investment in your society that way.
      But putting your money in a home pulls that money OUT of more productive investments. You are holding your money OUT of all the startup innovative businesses that might otherwise use your money. Just as the corporations are parking their money, waiting to create jobs while the government cooks, so house-rich people are parking their money along with their cars on their own property.
      However, have you tried getting your money into those innovative businesses that actually create jobs?
      Financial types want to get your “fair” share into speculative instruments. I don’t trust the stock market to be much more socially generative than your out-size real estate.

  • Miller

    Geez, we in for another “those pesky poor people wanting to live beyond their mean cause the whole financial downfall” theatrics of the right. Hello folks, banks were counting on leaving FM/FM in the dirt with crappy mortgages they sold to the unsuspecting public. If the loans were so bad, they shouldn’t have written them. Instead they sold the public a bad billl of goods and professed innocence when the house fell down. All started with Bush II’s “ownership society” everybody should buy a house scheme. Worked out so well (for some)

    • Dave in CT

      Thats the line the Dems want you to swallow perhaps, but it more like, knowing that there are always “pesky poor people” or the “middle class” for that matter, ready to be played like fiddles, the unaccountable Federal Reserve, the Banking Wall St elite, and ostensibly well-meaning planners in government collude to flood the market with easy to take debt, fueling asset bubbles that are destined a) to crash one day with generation wide pain for the masses and b) to enrich the financiers of the bubble economy and the colluding capitalists who buy up the rubble. And the masses are saddled with public debt and inflation, to be used to herd us along ad infinitum.

      That playbook is held by Democrats and Republicans alike, pigs at the trough hiding behind both “Good intentions” and “Opportunity” utopian fantasies that they peddle to us year after year.

      We don’t need it!

      The Austrian/Libertarians have talked about this problem, including the militaristic component to the above formula for a loonnng time.

      Oh that crazy Ron Paul! Austrians?? What are they, gnomes?


      • Miller

        If that is the line you want to swallow-fine, but Banks did NOT have to give people loans no matter what they say about being forced into it. They took advantage of the fact that people trust their lenders to help them make sound decisions and, if the numbers don’t add up, the loans shouldn’t have been approved. Instead they sold them interest-only, adjustable-rate god awful mess loans and them dumped them into the system. Someone elses problem, not mine, I got my money, screw the rest of you.

        Why do those making the rules always come out on top while those at the bottom trying to figure out how to have a decent life and a stable home get screwed?

        • Chaff62remove

          Why do those making the rules always come out on top while those at the bottom trying to figure out how to have a decent life and a stable home get screwed?

          According to a Libertarian, that’s natural law. Anything our economic (therefore social and moral) superiors do to reinforce it on K-Street and actually writing legislation in Congressfolks’ offices is naturally bound to happen, and anything we do to fight it is doomed.

          • Zeno

            You are going to get a talking to when Dave gets back from the dentist! LOL

          • TomK in Boston

            Norquist is a class warrior who’s #1 tactic is to cripple and demoralize government and, when the crippled agency screws up, shout “See! We told you that gvt can’t do anything right.”. Then, with gvt out of the picture, the oligarchs take all the wealth. it’s working!

          • Dave in CT

            I obviously do a really bad job making points.

            What you describe in terms of economic superiors, K-street, corrupting government etc all has nothing to do with true Libertarian or Austrian economic ideas.

            Neoconservative Republicans? sure. Corporatist Democrats and Republicans? sure.

            I just don’t think you could explore some of the stuff I’ve linked to, to the consternation of many, and not see the difference, and the core philosophy.

            You often make these comments, but I feel like you are painting your picture of corrupt, elite bankers and their government pals, and then labeling them “Libertarians”, because that is you presumption of what the Liberty stuff is about, but it’s not.

            “According to a Libertarian, that’s natural law. Anything our economic (therefore social and moral) superiors do to reinforce it on K-Street and actually writing legislation in Congressfolks’ offices is naturally bound to happen, and anything we do to fight it is doomed.”

            If you can find somewhere in Libertarian/Austrian ideas that say that, by all means let me know.

            They rail against corporatists all the time. Against Big Banking, against Fed-backed Wall St games, against the Warfare complex.

            I just find alot of those ideas speaking to so much of what is happening these days with Banking Economics and War, and have not seen/heard many other alternatives from the 2 parties, who I really think are corrupted and misguided.

            Obviously my ranting makes it seem like I think it is an easy magic bullet, I don’t. But exploring all this stuff in alot more detail than all my previous assumptions about the 2 parties and being a good Progressive who obviously defends government and is skeptical of markets has left me be being much more skeptical of the whole system.

            For what its worth.

            And my teeth are clean.

        • Dave in CT

          “Banks did NOT have to give people loans no matter what they say about being forced into it.”

          That’s what I mean, the Bank couldn’t resist giving them out, because of the cheap Fed money and knowing they would be bailed out. They didn’t care about the risks they obviously knew, as you point out, they were taking.

          Too big to fail bail out mentality, artificially, debt-based cheap fed money, and an ends-driven Fannie/Freddie predictibly caused this problem.

          If you give the banks, any capitalist with normal profit motive, the incentive to do something, they will do it. We can’t count on people acting out of kindness in business, I think we all know that. So we have laws that lay the groundwork and define what is legal or not and accountability.

          My view is that the legal and accountability framework has been corrupted b/w big banking and big government, and that the Ends-based meddling of an unaccountable Federal Reserve and Fannie/Freddie created the wrong incentives to rational, if sharky and certainly perhaps corrupt, business people, as well as individuals.

        • Dave in CT

          Q: Why do those making the rules always come out on top while those at the bottom trying to figure out how to have a decent life and a stable home get screwed?

          A: “Businessmen or manufacturers can either be genuine free enterprisers or statists; they can either make their way on the free market or seek special government favors and privileges. They choose according to their individual preferences and values. But bankers are inherently inclined toward statism……..”


  • John

    Can the new format be changed so that there is an option to list every post in chronological order by post including responses? Under the old (not broken, let us fix it) format, I could scroll to where I left off reading it and easily read all subsequent posts. I’m not going to scroll through hundreds of posts that I already read to see if there are any new additions. The new format sacrifices content to interactivity. The old format was a flowing conversation. The new leads to several dead branches.

  • NPRjunky

    Fannie and Freddie lacked controls because they are political tools and their managements were poorly incentivized. With politicians’ goal of broadening home ownership, it’s no wonder they went crazy. Banks were only too willing to feed the beast.

    Let them work down their portfolios and gradually reduce their role or remove their government sponsorship. Nothing should be done hastily as the housing market remains terrible. The great home ownership experiment has proven that not everyone should own and government should get out of the business.

  • Anonymous

    The housing market crash has not hit its peak yet. Remember there was a moratorium on foreclosures in late 2010 and there was the failed Making Homes Affordable program that delayed tens of thousands of foreclosures. But both of those things are over and the banks are ready willing and able to foreclose. Unemployment is still through the roof and the only people really succeeding are those at the top of the food chain. Another 3 – 5 years minimum before the market starts to come back. Think about it, govt has a piece of the big 4 banks, big 4 banks are foreclosing and taking real estate back (REO)…The US is just taking back their land.

  • Gregg – Taylorsville, NC

    Carter’s CRA was the beginning of the crisis. The Bush administration tried in 2005 to reign it in. But we got Chris Dodd and Barney Frank in 2006 chairing their respective banking committees and looking the other way. In Dodd’s case he got a sweetheart deal from Countrywide. As head of HUD Andre Cuomo implemented “Affirmative Action” lending.

    It seems the idea was for lenders to judge people by the color of their skin instead of the content of their wallet. Good intentions, crappy results.

    • J_smithyy

      Gregg FAILS!

      Another assumption that has been proposed is that CRA-regulated loans have higher default rates then non CRA-regulated loans. Studies again beg to differ. Firstly, the default rates on subprime and Alt-A loans are nearly the same across all income levels (Kroszner). But to attempt to single out CRA regulated loans, the Fed conducted a study by comparing the default rates in neighborhoods just above and just below the CRA income eligibility threshold and found that there is no significant difference between the two. According to that same study, examinations on foreclosure activity across neighborhoods grouped by income exhibit that most foreclosure filings have occurred in middle-to-higher income neighborhoods, and have actually increased at a faster pace then lower income areas, which are the focus of the CRA.

      • Gregg – Taylorsville, NC

        The CRA was the start but I blame Frank, Dodd and Cuomo much more than Carter.


        • J_smithyy

          Gregg you gullible numbskull.
          (Businessinsider? This guy Carney’s next article was Why Anti-Insider Trading Laws..its a very well crafted bit of sophistry designed to absolve greedy frauds. Much like that swill regarding CRA.)

          CRA made loans for thirty years. There was no start there. There is no there there. see this line of reasoning:
          “BR: Nonsense.

          All that the CRA requires is that banks take deposits from the local neighborhood, and make reasonable attempts to lend the money back to them. No quotas, no hard numbers, no egregious penalties —

          Don’t open a bank in Harlem and suck all of their money out of the neighborhood to loan to the upper East side. Understand how that works?

          Of course, any one who blames the CRA never bothers to explain why it never caused any trouble from 1977 to 2003, or why all those other countries WITHOUT A CRA also had a housing crash.

          • J_smithyy

            Thats Why Anti-Insider Trading Laws …are Insane

    • J_smithyy

      Rich Defaulting on Mortgages At Highest Rate
      “One has to be cautious in invoking cultural stereotypes. However, when the subject of defaults or mortgage mods comes up here and in other forums, almost inevitably some readers will start off on a bit of a rant: “I pay my mortgage/rent, why should these people get a break?” And these discussions often take a personal tone, as in they resent neighbors getting a break, or they claim to know someone who went hog wild spending on their home ATM and have now had their comeuppance (having never met anyone like that, I cannot verify if this pattern is anywhere near as prevalent as it is alleged to be). The problem is that their willingness to see their neighbors suffer, when it really is their neighbors, is cutting off their nose to spite their face, since foreclosures, particularly when homes sit vacant, drag all property values nearby down.

      The perverse part is a New York Times article today indicates that the affluent are far less burdened by consideration of morality in their financial decisions, including their mortgages: “’The rich are different: they are more ruthless,’ said Sam Khater, CoreLogic’s senior economist.”

    • Jim in Omaha

      Anyone (like you) who believes that poor minorities are the root cause of all those empty gated communities of formerly $500,000 homes in Las Vegas, Sacramento, Phoenix, Florida, as well as the development of “liar loans”, securitization of mortgage-backed securities, credit default swaps, and the other “financial innovation” that was really the cause of our current predicament, is an uninformed, brainwashed fool.

      • Gregg – Taylorsville, NC

        Here’s Cuomo saying it himself.

        Did I blame poor minorities? It’s interesting to me that you don’t think minorities live in gated communities too. It’s not a matter of rich or poor it’s a matter of what one can afford. Race has no place in that (or any other) business decision.

        • J_smithyy

          Gregg You Ignorant Tool.
          You’ve been had by faux propaganda.
          The CRA Settlement was to force banks to make loans to people/areas which were redlined not because of risk but because of race. The resultant risk data (irregardless of Cuomo’s error laden projection) have borne that out. They used risk as an excuse not to lend to certain people and then when they had to make the loans they created a scam whereby the securities they created from bundled loans were fraudulently rated as low risk. The mix in the bundle is the key. There were mcmansions and low-cost condos all thrown together by some Wall Street pinhead who’d deem the mix a fungible entity which received a AAA blessing from a ratings agency paid a fat fee to look kindly upon it.

          The resultant data affirms both Acorn and Obama’s work. Lower income people got loans that but for CRA would not have gotten them otherwise.

          “There has been a tendency to conflate the current problems in the subprime market with CRA-motivated lending, or with lending to low-income families in general. I believe it is very important to make a distinction between the two. Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans,16 and studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households.17-JAnet Yellin

          “Some critics of the CRA contend that by encouraging banking institutions to help meet the credit needs of lower-income borrowers and areas, the law pushed banking institutions to undertake high-risk mortgage lending. We have not yet seen empirical evidence to support these claims, nor has it been our experience in implementing the law over the past 30 years that the CRA has contributed to the erosion of safe and sound lending practices.” -Fed Gov Randall Kroszner

          “Let me ask you, where in the CRA does it say to make loans to people who can’t afford to repay? Nowhere.”
          -FDIC Chairman Sheila Bair

          This is just a fraction of the info out there that makes you and your lame fox propaganda look stupid as hell. Turn that garbage off and grow…

          • Gregg – Taylorsville, NC

            Who said anything about Fox? I don’t watch. I don’t get your point. I guess that’s because I’m an “ignorant tool”. Oh well, it’s better than being a pompous ass.

          • J_smithyy

            The video you posted was the end of a Cuomo speech cobbled with a Fox report on CRA. You did watch the video you posted didn’t you? Or are you a willfully ignorant tool?

          • Gregg – Taylorsville, NC

            Yes, I watched the video… on youtube. He said what he said. It is what it is. I’m smart enough to know that.

            Give me your enlightened view as to why one’s race should be factor in lending.

          • J_smithyy

            “Yes, I watched the video… on youtube. He said what he said. It is what it is. I’m smart enough to know that.”

            -A Mind only Breitbart could love.

            “Give me your enlightened view as to why one’s race should be factor in lending.”

            -Sure, after you give me your enlightened view as to why race has always been a factor in lending.

  • Ellen Dibble

    Yar, I am encouraged to see that there is a growth in building of apartments. I think it’s more important for the elderly to have apartments than homes. Personally, I always consider renting to be a form of assisted living. It liberates me to do more of the work I am good at, which is not raking snow and ice off of the roof, for instance. It bothers me that real estate is considered to such an extent an opportunity for quick profits that the idea of actually “working” at being a landlord has become noxious. But retiree communities that are designed as cash cows, luxuries for the wealthy retired, completely ignore the swath of older people who are not in that category, in this day and age are probably still working. Ideally, the young and old would live integrated, not segregated, the young with muscles and mobility, the old with a ready supply of hammers and flashlights and kitchen equipment as well as local networks to draw in. I have NOT noticed developers taking this into account.

    • Yar

      It works for many, but renting is subject to inflation, a mortgage free home is less so. We have a population wave ready to retire full of debt, declining wages with the prospect of very high inflation, do to deficit spending. Home ownership, (not home loan ownership) is at a disturbingly low level. I don’t trust the market to take care of me, my home may not pay a big dividend, but I can live more cheaply than anywhere else. If I am put into a nursing home, the value of my home will keep me alive for a few years. If all I have is debt and a pension, then my future will look pretty bleak. Every month I don’t pay rent, I am getting a dividend from my home. What stocks will give a return like that?

      • Ellen Dibble

        Not looking at the dividend you get by not paying rent, just consider that your money is NOT productive as an investment on behalf of OTHERS. Just yourself.
        Also, there are ways to rent that are indeed less costly than living in a house. There are efficiencies of scale. One basement, one attic, one furnace, one water heater, one connection to the sewer system. Plenty of maintenance matters can be done more effectively “in bulk”; there are people with expertise in these matters. It is true that renters don’t get the mortgage interest deduction, nor do their landlords if they own the building outright.
        By the way, if you sell your home and move to assisted living and find that your live another 20 years in rather frail condition, do you think the sale of your home will underwrite those 20 years? For you, maybe. For others, maybe not. There are always risks. I would prefer my investments to be productive, regardless of whether they go up at the same rate as a home appreciates in value. I don’t care if my retirement savings move at a graceful curve rather than launch, so long as they are doing what this country needs: produce jobs, innovate our way into the new economy. A house doesn’t really do that. It sits there.
        A single-family house will pay more property taxes than an individual renter, supposing the renter is trying to put the money that would otherwise go toward buying a home into savings and is therefore living in a reasonable sort of unit. But the calculations are that the city comes out ahead with renters because, statistically speaking, they are not sending children to the schools. It is the privately owned homes that are sending children to the schools, and therefore on balance a loss to the city.

  • Zeno

    The whole meltdown driven by 40:1 leveraging of exotic financial instruments created by Investment Banking based on junk mortgages is over. So…

    The question is how will the IBs alter the government and their holdings (excess real-estate not real value) to create a win win scenario like the bailouts of the last Wall St. pump and dump?

    I would guess that somehow they will mandate that the taxpayer re-reimburse the IBs for the decaying and worthless real-estate at it original mortgage price. Leaving the government holding ALL of the junk.

    There is another socialize the losses and privatize the gains plan that has not yet been revealed.

  • Dave in CT

    I don’t like this new style at NPR with a headline and then a quick analysis by Jiles Snyder or whoever, trotting out the status quo shtick to explain the headline in a soundbyte. Oh the snowstorms explain our poor economy…..

  • Dave in CT

    I have to go to the dentist… sure many will be pleased. Will someone carry the Libertarian/Austrian/Ron Paul lens for this hour? Have fun…

  • Katie in Iowa

    How was the rage of 2008, targeted correctly at Wall Street corporate greed, turned against Fannie and Freddie, government workers, and low income people?

    • Wavre

      Because the mainstream media works for the corporations and is succeeding in manipulating public opinion. But like in Wisconsin, people are starting to “Egypt” against the system. It may be the beginning of something: the dismantling of a fake system of representative government

    • Dave in CT

      Because 1/2 the people see the problem with the failed Fannie/Freddie-Federal Reserve cheap debt model, and they other 1/2 see the Wall St./Banking greed part.

      Its time we see it all, and understand how it is interconnected so we can really reform the rotten status quo.

  • Lilya @ Wash, DC

    Apart from the housing market, I think we should also look at commercial office buildings…. especially in NYC

    Mr. Ashbrook,
    Can you have a program about why three (not two) high-rise steel framed buildings have chopped themselves into pieces, on the same day, in a similar fashion, at the same spot and all belonging to one guy, Larry Silverstein.

    Likewise, dozens of towering inferno’s in much less developed countries could not create a partial collapse.

    Can you have a program about WTC #7 — pleaaaase!

  • Zeno

    If the US economy were to walk into a doctors office complaining about all of its weakness and ailments…perhaps the doctor would say: Do you want me to continue treating the symptoms alone or should we treat the cause?

    As long as the economy has unregulated banking and government political collusion dragging it ever sicker and closer to death, then there will be no “recovery”.

  • joan

    I am joining the rent is too damn high party . Bring back rent control!!

  • Michael

    Your female guest is full of BS, that the reason she used 2005-2007, both fannie and freddie were a small % of all these sub-prime mortages from the beginning and when things started hitting the fan the big banks(the ones we bailed out) started dropping these mortages on both fannie and freddie.

    Notice the gap of years 2000-2004 before Fannie or Freddie had any large % of the market.

    This women(Gretchen Morgenson) talking is completely dishonest to say the least.

  • http://www.facebook.com/people/Patrick-Ford/664354021 Patrick Ford

    My wife and I are ready to buy our first home (in the Milwaukee, Wisconsin area). We’re both well-employed and have plenty of money saved, but considering the horror stories we hear from our home-owning friends, and that we can afford to stay in our apartment on a month-to-month basis, we’re not going to buy until things bottom out.

    I’m sure we’re not the only ones in this situation – ready but unwilling to buy because of the prevailing opinion that we’re not at the bottom yet. I think that letting the market naturally correct itself is the only way to bring people like my wife and I in.

    • Zeno

      You should feel uncomfortable. Because no regulations were passed to exempt mortgages from being used as financial instruments and being chopped up and being sold over and over again on world markets.

      Mortgages should be exempt from being sold to Investment corporations, and should never leave their state of origin.

    • David in Wellesley, Mass.

      As a nervous homeowner, I can’t blame you for not liking the current conditions. But remember that by the time you’re satisfied that the market has “naturally corrected itself,” house prices will probably be a lot higher than they are now.

  • Kristina S.

    We have to look at where the incentives are and who is driving the course. Changes made in the housing finance industry that altered the benefit from a safe investment for the homeowner to a money making scheme for the rich. The banks, wall street, and investors were willing to take the risk for lending on less regulated practices and now everyone else is suffering the consequences.

    It’s going to take a while for the general public to be able to save enough for a downpayment, especially with the decreasing wages for the middle class compared to cost increases.

    • Ellen Dibble

      Kristina, if substantial downpayments are required, then the rental housing people will be living in while they’re saving up that money won’t be accumulated while they are in the “affordable housing” rental units that have been going up since the 1970s. I don’t know what law it is, chapter and verse, but it provides a tax break to the developer who builds/maintains units whose leases specify that no more than 30 percent of income is taken as rental payment. There are some local property taxes paid, but not “rateable” taxes. There are PILOT payments, “payments in lieu of taxes,” which are not so easy to unearth from city records. This makes the tenants of affordable housing effectively tax BREAKS for the developers, and not taxpayers/voters in quite the same way as others; they might be a voting bloc who effectively vote for their $300-a-month housing as approved by the mayor.
      Because of the tax advantage to the developer, this sort of rental housing has been “sucking the oxygen out” of the rental production market. I sought rental housing in northern Maine, and found plenty where mills had outsourced labor, but the landlords were trying to convert those apartments into “affordable” units, surely to get a tax break. They sure lost me thereby. The 30% lease means you cannot earn another 10 grand without paying $3,000 of it to your landlord, as well as all your other taxes. And The Obama health care bill is going to redouble this effect by applying the same formula to “affordable health care.” Up to about $45,000, you get a health subsidy, but it reduces a lot for every additional bit of money, effectively another say 20% tax on everyone up to about $50,000. You’ll have cheaper health care, but less chance to set aside money to buy that home, to set aside a nest egg, whether in retirement funds or real estate.
      The downpayment idea is getting jeopardized by Affordable Health Care, if it were not already jeopardized by the wide prevalence of “affordable” rental units. If people are looking to save money, they won’t rent “affordable” units. But if developers are looking to reduce their tax burden, that’s what they’ll build.
      I haven’t heard how Fannie and Freddie are involved in the Affordable Housing situation. I believe Barney Franks and the House financial services committee are at the root of it. But the idea of responsible downpayments will depend on rental housing “going up” that is REASONABLE, but not “affordable,” a word that has lost its meaning since about 1974.

  • Ellen Dibble

    What happens if the government doesn’t back a bazillion mortgages, Tom asks. Well, did the government make a bazillion in 30-years’ worth of interest? Nope. I’m not sure I’d prefer the banks to make all that interest either. What about letting the top 1 percent who have all America’s money buy the houses and then underwrite loans to those who want to live in the houses.
    Let those who can afford to buy homes outright buy the homes. There can be “credit unions” that make sure credit-worthy people move into them, under the umbrella of that top 1%. That would be a service I would be pleased to let them perform. And those who can afford to can buy the multiunit houses as well, and there can be credit unions that help people find compatible tenant communities to live in.
    Right now there is an idea of speculation underlying housing, which is a really really dangerous place to have speculation playing out.

  • Edith

    A house should never have been an investment, but only a place to live. Speculative house buying and flipping drove up the costs of shelter for a lot of people. Is Freddie and Fannie really that big a part of the problem when we compare it to the money that was to be made on Wall Street selling mortgage-backed securities? People were willing to give out crazy loans because they knew they’d pass them on to someone else while making a bundle themselves in the meantime. I think it’s a shame that Freddie and Fannie get so much of the bad rap.

  • Anonymous

    Thank you for this segment. Gretchen has written a number of articles and is one of a handful still covering this. For those of you who don’t believe the truth/facts behind this mess….this is fraud. What the banks did was criminal fraud. They tanked the market. Look at shamethebanks.org and read through REAL stories, look at REAL facts. There are a handful of mega “too big to fail” pseudo imperialist czars profiting and writing the laws behind things. It’s a hell of a mess.

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  • dave

    What do they do in Germany and Japan? I think Fannie has been problematic from its inception. It was an engine in destroying our great cities in favor of suburbanization. The problem was exacerbated by the destructions of the Savings and Loans (remember them) by the Reagan admistration. The blueprint for this disaster was laid out in the early 80s.

  • Ellen Dibble

    There is also a huge warp in communities where the houses are being used as investments. Is it okay to report that you’ve been robbed on your street? Nope. Home values might go down. And then there are the schools. If everybody moves into the gentrified area where the home values are skyrocketing, then the tax base across the way where the home values are not spiking, that tax base shrinks, and the schools become much better in community A than in community B.
    I rest my case. Home values shouldn’t be such an ungodly god over us.

  • Klonie

    Do not throw the baby out with the water. Put a non goverment management team in at both Fannie and Freddie and make the rules so they are logical and fair.

  • Glenn K

    I’m with Edith (comment below) on this!
    I think of what Enron was doing with electricity in California years ago. They took something that had become a basic necessity of life, electricity, and turned it into a vehicle of speculation, using artificial means to drive the market up and down wildly, putting the squeeze on normal folks who were just trying to keep the lights on! When I saw that, I thought, those guys are evil and they ought to be shipped off to jail! Well, guess what! They were doing more immoral things and did eventually end up in jail.

  • -boston burb dweller

    When houses morphed from homes to investments is when things got problematic. Home prices spiked so dramatically that regular people couldn’t afford them. We had never bought because we weren’t able to get a house we could afford to make payments on, even though we knew we could get approved for that loan. The ONLY reason we could buy a nice home in a community we wanted to live in is because that bubble burst.

  • BHA

    Responsible credit, what a NOVEL idea!

    First – Make credit default swaps illegal.

    Second – Make anything LIKE a CDS illegal now and in the future. ‘Complex financial instruments’ is shorthand for ‘how can I squeeze money out of something that is of no value and make a lot of mone for ME’. Get rid of them. Basic investing should be transparent, not complex.

    Third – Make the lenders hold 50% of all loans they make. One of the things that allowed the crash was that the banks had ZERO skin in the game. Make a bad loan, sell it to Wall St and move on to the next loan. Nothing but risk free loan origination fee profits.

    • Pancake Rankin

      I’ve been watching NHK (Japan), DW and Al Jazeera English lately and many analysts seem to agree that since the US financial sector has not been reformed in any way that a new bubble (probably in commodities) is about to burst followed by a Bailout Cry to the American people to once again rescue their business gods. I’d wait about two years to consider buying a house if you really need one. Interest rate hikes will be made insignificant by price breaks. If you have good credit you could buy a whole block and move in all your BFFs.

  • Glenn K.

    My approach is to pay off the mortgage as fast as I can, then invest in good insulation, solar energy, and whatever I can to increase its inherent value, not just its speculative value. I’m very lucky in life as I live in a good location near Boston and prices have not dropped too much, and I was given a little family money to help in this effort. So, not everyone can do what I’m doing, but if you have the money, this is what I’d recommend.

  • Barbara, Coastal Northeast

    Thruout this whole Economic Downturn, I have never heard this possible CONTRIBUTING FACTOR discussed: the activities — in the preceding period — of realtors that caused house prices to sky-rocket. 1) Having “cronies” put a house on the market at an extra high price; 2) Realty company-generated Tear Downs; 3) Realtors’ refusals to show houses that were For Sale By Owner.

    Here is more about these possible factors:

    1) Sometimes they helped a family member, often younger, buy a house. Then, after some period of time, the realtor would tell that person to sell the house because their was another one they should be living in. Then the realtor would tell their relatives to put that house on the market for a MUCH higher price than the “going price” was for that neighborhood (sometimes $100,000 more!). The family member could move at ANY time really, so when someone, usually from out of state, bought the house was of no consequence. What mattered was that a house in a particular market would eventually sell for a LOT more money, thus, — here is the reason — raising the “comps” , that is, raising the price by which the “comparables” are calculated! This would bring UP the sales price of houses all around that area! Now, this probably did NOT happen in areas where Fannie & Freddie Mac were used, as I THINK that they were used for lower income houses? This often happened in areas where people are moving into an older village-type town or city, and away from the cities, often from out of state, often because of the charm of the area. In another instance that I’m aware of, it was several realtors living together in a house who would do this, time & time again. They’d say that they’d put a lot of money into the house, but people who knew the house said that the amount of work was worth of smidgeon of the new asking price.

    2) First, realtors would sometimes have some one of their staff search for properties they thought was appropriate; second, the realtors would have “their own man” whom they would have people sell to, altho that was NOT disclosed. IF people asked for referrals, the realtors would also suggest people go to the realtors’ “own” mortgage brokers who would give out no-document loans, and to lawyers whom they always worked with for the closing. Then “their man” who bought the house would do a tear-down of the smaller, older house in an established neighborhood. Then the realtor’s man would build a McMansion, thus raising the price of the “comparables” once again. Sometimes the sellers of the older house knew what was going to happen; sometimes they were completely unaware.

    3) If someone tried to sell their house “by owner”, the realtors would find every excuse imaginable to not take clients into those houses, even when the client requested to see them, several times over. When the homeowner finally gave up & hired a realty company, the asking price went up.

    3) At least one lawyer has suggested that some of these practices are really prosecutable under RICO statutes.

    This should not be read as suggesting that all realtors did this, or that any realtors did this.

  • Zeno

    To restore faith in ANY market the buyer has to be assured that they are not going to be cheated. Without honest rational regulatory oversight of banks then why would one speculate?

    Mortgages should be exempt from being sold to Investment corporations the IBs, and should never leave their state of origin.

    • Zeno

      …and does it need to be pointed out that the contract of an individual mortgage is solely between the bank and the buyer. How is it legal for the bank to sell your debt agreement to someone else for them to make money?

    • Tina, RI

      Zeno, I don’t know if you saw the List I tried to compile the other day with ideas for How To Change Capitalism (Robt Reich & another guest). THIS idea of yours belongs on that List. I wonder if you’d agree. I’m so far behind in reading the Comments of these past few shows, I fear I’ll miss other ideas that should also be listed.

      • Miffed

        On Point StaffThis new Comments page has some GLITCHES! UGH!

      • Zeno

        Ideas are like seeds cast upon uncertain soil. Add it to your packet of seeds.

  • Anonymous

    Bottom line: Real estate is the origin of most “old wealth” in this country. The banks, whose self-realized purpose in society is to control wealth creation, do not want the plebs to get in on the market. When the govt started FNMA and FMCK it allowed the poor to get in on the market, beginning the fracturing of the old wealth system. But even in that climate, the banks found new ways to try and make money off the new way of things, mass home-ownership, by securitizing their debt to the detriment of our financial system.

    Banks will not allow mass home-ownership unless their old returns can be met, which they cannot. They would rather the more oligarchical rent system where a few landowners own the most properties than a plethora of independent owners. Until we end the banks control of the real estate market, the people will not have land rights.

  • Nancy Brockway

    Fannie and Freddie should not be abolished but returned to their original mission. We changed their mission and let them pursue profits, which in turn drove them to join the frenzy of buying mortgages and mortgage-backed securities for their own account. They began to use the same kind of very risky underwriting policies and leveraging rules that non-governmental agencies (e.g. Countrywide and the banks that financed them) used. The cure is not less government, but more. Back to the future.
    Nancy Brockway
    p.s. if you don’t believe me, read Bethany McLean and Joe Nocera’s book, “All the Devils Are Here.”

  • TomK

    Wow, the “CRA” story again. Funny thing is that the CRA applied to banks only, and the subprime loans were primarily made by the deregulated non-banks. Interesting logic there.

    I wonder if any of the republicans remember Bush and his “Ownership Society”. For a year or so W couldn’t give a speech without mentioning the “Ownership Society”. “Sure, your wages and benefits are shrinking, but your home is worth so much that it’s no problemo, thanks to the “Ownership Society””

    The attack on fannie and freddy is just more of the class warfare that is taking us back to the late 19′th and early 20′th century robber baron capitalism. These are important pillars of the American middle class. The problem is that they were quasi-privatized in the first place, and then the whole market was blown up by insane Reaganomic deregulation. They should be reconstituted in a single government agency and the financial sector should be tightly regulated, like it was before Reagan. Then homes would remain in the reach of the middle class and the mtg business would be profitable for the gvt, which is desperately in need of revenue after all the ideological tax cutting.

  • Ellen Dibble

    Don’t forget the green advantages of trying to wind down suburbia. Suburbia means hours of commuting, means energy consumption and climate change. If this is the American dream I hope we don’t export it. We are still talking about the goal of spreading out. There are winning arguments about more concentrated housing, linked by bus routes or trolleys, with smaller local businesses in those concentrations. And multiunit housing is much more energy efficient. The last few years a sibling has been trying to get me to move to a $40,000 house next door to them in Vermont, and I look all over this northeastern state for rental housing of ANY sort and only come up with the sort that has jacuzzi, pool, and private balcony. The danger is you move into one rental situation, find there is a smoker somewhere in the building, and then you can’t move to another equivalent building because there is no such thing. Where I live, it has cost 13 million dollars to build a 13-unit building for subsidized units; either public or affordable units. But the price to the city was so high because of private bathrooms for each. This boggles the mind.

  • J_smithyy

    From Krugman to GREGG in NC and other haters:

    “Just to repeat the basic facts here:

    1. The Community Reinvestment Act of 1977 was irrelevant to the subprime boom, which was overwhelmingly driven by loan originators not subject to the Act.

    2. The housing bubble reached its point of maximum inflation in the middle years of the naughties: see graph at link

    3. During those same years, Fannie and Freddie were sidelined by Congressional pressure, and saw a sharp drop in their share of securitization: see graph at link

    while securitization by private players surged: see graph at link

    Of course, I imagine that this post, like everything else, will fail to penetrate the cone of silence. It’s convenient to believe that somehow, this is all Barney Frank’s fault; and so that belief will continue.”


    • Gregg – Taylorsville, NC

      No hate here, just love.

      Krugman is way too partisan to be taken seriously. Compare this article in 2003:
      with this one from 2010 concerning deficits:

      • J_smithyy

        More Willfull Ignorance. Sigh.
        2003-personal finance response to looming disaster.
        2010-macro policy prescription for current disaster.
        You do know he rightfully switched to a fixed mortgage in 2003 because he anticipated this mess. Or do you think he should have retained one of those wonderful adjustable rate devices and let it become a frankenstein loan? By 2010 the Financial Mess had arrived and he made sensible prescriptions.

        Where is the dissonance?

        Too partisan?
        Teh Stoopid.

        • Gregg – Taylorsville, NC

          2003: $377 billion deficit (3.4% of GDP) a disaster according to Krugman.
          2009: $1.4 trillion deficit at 9.9% of GDP. No biggee.

          You see no “dissonance”? Who’s the “ignorant tool”.

          Why are you so nasty?

          • J_smithyy

            What part of Fiscal Train-wreck don’t you understand?
            2003:”With war looming, it’s time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I’m terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.”
            Good Call Krugman!

            2010:Fiscal Train-wreck is now all over the tracks and we need to rebuild. Investors are either frightened, venal, or broke. The government needs to step in:”Let’s talk for a moment about budget reality. Contrary to what you often hear, the large deficit the federal government is running right now isn’t the result of runaway spending growth. Instead, well more than half of the deficit was caused by the ongoing economic crisis, which has led to a plunge in tax receipts, required federal bailouts of financial institutions, and been met — appropriately — with temporary measures to stimulate growth and support employment.

            The point is that running big deficits in the face of the worst economic slump since the 1930s is actually the right thing to do. If anything, deficits should be bigger than they are because the government should be doing more than it is to create jobs.”

            Good Call Krugman!
            Our economy needs people to buy stuff. People out of work buy less stuff….We also need a balance in trade but thats another nut to crack.

            Gregg you are comparing apples and oranges and mis-identifying the difference as partisanship. I don’t know why you are doing this but your stance serves and absolves the powerful of their misdeeds and seeks to pile undeserved blame upon those who’ve been discriminated against and the programs that help them. All this in the face of evidence against your claims.

            What do you call that?

          • Gregg – Taylorsville, NC

            So, are you claiming Krugman is a reliable non-partisan voice?

            SPENDING QUADRUPLED under Obama! When have keynesian policies ever worked? Greece? Spain? Please tell me. Krugman still maintains Obama did not spend enough. The $814 billion “stimulus” bill was an utter failure. Obamacare is a looming fiscal disaster. Trillion dollar deficits and 10% unemployment are the new normal. We’re still at war and escalating. Meanwhile Democrats didn’t even submit a budget last year and now that it’s crunch time they threaten to shut down the government rather that face reality.

            Wars did not cause the mess. Neither did tax cuts. We added jobs for 53 straight months after Bush’s tax cuts and unemployment was below 5%. Obama’s promise that the “Stimulus” bill would keep unemployment at 8% was a lie. If it does get to 8% it will seem like happy days.

          • J_smithyy

            Gregg if you are sincere I weep for our country and salute the evil genius of the US elite who’ve devised an education and information system so intricately structured as to hermeneutically seal off logic from fact and data from reasoning in the minds of the good young people of Taylorsville and many cities and towns and villages within reach of Limbaugh’s voice and Frank Luntz’s memos.

          • Gregg – Taylorsville, NC

            Thanks for calling me “young”.

          • J_smithyy

            Define “Spending Quadrupled” and since you brought it up , what was this ‘spending’ on you ahistorical ponce?
            -Bush borrowed to pay for the wars. (one of which he lied us into)
            –Nearly half teh ‘stimulus’ was ineffective tax cuts
            the other $500 million partly gobbled up by hypocritical right-wing officials all over the country because it worked.

            Krugman explains the rest better than I :
            “Here’s the situation: The U.S. economy has been crippled by a financial crisis. The president’s policies have limited the damage, but they were too cautious, and unemployment remains disastrously high. More action is clearly needed. Yet the public has soured on government activism, and seems poised to deal Democrats a severe defeat in the midterm elections.

            The president in question is Franklin Delano Roosevelt; the year is 1938. Within a few years, of course, the Great Depression was over. But it’s both instructive and discouraging to look at the state of America circa 1938 — instructive because the nature of the recovery that followed refutes the arguments dominating today’s public debate, discouraging because it’s hard to see anything like the miracle of the 1940s happening again.

            Now, we weren’t supposed to find ourselves replaying the late 1930s. President Barack Obama’s economists promised not to repeat the mistakes of 1937, when FDR pulled back fiscal stimulus too soon. But by making his program too small and too short-lived, Obama did just that: The stimulus raised growth while it lasted, but it made only a small dent in unemployment — and now it’s fading out.

            And the inadequacy of the administration’s initial economic plan has landed it — and the nation — in a political trap. More stimulus is desperately needed, but in the public’s eyes the failure of the initial program to deliver a convincing recovery has discredited government action to create jobs.

            In short, welcome to 1938.”snip

          • J_smithyy

            Define “Spending Quadrupled” and since you brought it up , what was this ‘spending’ on you ahistorical ponce?
            -Bush borrowed to pay for the wars. (one of which he lied us into)
            –Nearly half teh ‘stimulus’ was ineffective tax cuts
            the other $500 million partly gobbled up by hypocritical right-wing officials all over the country because it worked.

            Krugman explains the rest better than I :
            “Here’s the situation: The U.S. economy has been crippled by a financial crisis. The president’s policies have limited the damage, but they were too cautious, and unemployment remains disastrously high. More action is clearly needed. Yet the public has soured on government activism, and seems poised to deal Democrats a severe defeat in the midterm elections.

            The president in question is Franklin Delano Roosevelt; the year is 1938. Within a few years, of course, the Great Depression was over. But it’s both instructive and discouraging to look at the state of America circa 1938 — instructive because the nature of the recovery that followed refutes the arguments dominating today’s public debate, discouraging because it’s hard to see anything like the miracle of the 1940s happening again.

            Now, we weren’t supposed to find ourselves replaying the late 1930s. President Barack Obama’s economists promised not to repeat the mistakes of 1937, when FDR pulled back fiscal stimulus too soon. But by making his program too small and too short-lived, Obama did just that: The stimulus raised growth while it lasted, but it made only a small dent in unemployment — and now it’s fading out.

            And the inadequacy of the administration’s initial economic plan has landed it — and the nation — in a political trap. More stimulus is desperately needed, but in the public’s eyes the failure of the initial program to deliver a convincing recovery has discredited government action to create jobs.

            In short, welcome to 1938.”snip

          • Gregg – Taylorsville, NC

            “…but your stance serves and absolves the powerful of their misdeeds and seeks to pile undeserved blame upon those who’ve been discriminated against and the programs that help them.”

            I am blaming government for pressuring banks to make bad business decisions under the threat of penalty. It does not help anyone to loan them money they cannot afford to pay back. Does it? As for the bankers, I don’t defend them. Many are sleazeballs working within the law under the parameters set by government.

        • Gregg – Taylorsville, NC

          BTW smartypants, the banking crisis was in 2008. By 2010 it was mostly resolved. The “financial mess” we’re in now happened because of Obama not despite him.

      • J_smithyy

        More Willfull Ignorance. Sigh.
        2003-personal finance response to looming disaster.
        2010-macro policy prescription for current disaster.
        You do know he rightfully switched to a fixed mortgage in 2003 because he anticipated this mess. Or do you think he should have retained one of those wonderful adjustable rate devices and let it become a frankenstein loan? By 2010 the Financial Mess had arrived and he made sensible prescriptions.

        Where is the dissonance?

        Too partisan?
        Teh Stoopid.

  • Anonymous

    Start at the top with enforcement. That’s what they make the big bucks for.

  • Webb Nichols

    It seems very simple in some respects. The United States lived in an inflated world. The Future- lower wages, declining standard of living, declining population relative to availability of housing with no need to build more living units,the construction industry not able to be the engine of the economy. the United States will finally face the challenge of no growth where the GMP is not a measure of economic health but rather it will be a case of renewal and maintaining equilibrium.

  • Alex

    The law of mortgages has been clear for centuries. You take the loan secured by your house – you’d better pay or you loose the house. The market may not exist without this law. Just stop interfering with foreclosures and let the process play itself out as quickly as possible.

  • Ellen Dibble

    The current guest, Barry Zigas, is not talking about the financing for MULTIUNIT housing. The rental units that were undergirded by loans that fell through in the crash were just as exposed, if not more so, than the landlords. Until financing is stabilized it is just as dangerous to buy a multiunit building. I tried to buy such. I was scooted out the door in so many ways. Towns don’t even want these located near them. “Transient,” they say, but statistics show otherwise; happy tenants stay put until they can afford to buy a house in their community.

  • Jan

    Re SWEAT EQUITY: There are way fewer fixer-uppers than there were in previous decades (at least in “good-school” towns): Everyone took out home equity loans and redid their kitchens and baths already!

  • Margaretmaine

    I was a mortgage underwriter in the Seattle area working for mortgage insurance companies. The high rate of defaults in Minnesota, California, Florida and Nevada is not surprising as those states were the four listed in memos as states with the highest fraud level.

    The loss of equity in the Seattle market is not surprising either.

    I wish I had the opportunity to discuss this on the air, for it was no surprise to those of us on the front lines.

  • ThresherK

    “How well did regulators do their job the last time, how well will they do it this time?”, per Gretchen Morgenson.

    Somewhere Grover Norquist is getting aroused. Must be a sweet gig to run gov’t into the ground and then say, “See, it doesn’t work”.

    • Crazyivan46

      Norquist’s whole point is to make gov fail and create social unrest that his ideologues can take advantage of.

    • Argee

      It never seems to fail though. The “conservatives” have been doing this since Reagan at least, Clinton included, and it still sells.
      First, regulators are appointed by folks who don’t believe in regulation, often recruited from the same industry that they are watching over, then their budgets are slashed and for all intents there is no more regulation. Next step is to use the example of poor regulation to eliminate the regulators completely. Once again the wealthy and powerful win.

      Either party, doesn’t matter, even Obama offers his version of shared sacrifice: You rich guys may have to take a small tax hit, you, old lady in Vt., you get to choose between freezing to death or starving next winter.

      Govt. of, by and for the plutocrats.

      • TomK in Boston

        Exactly right Argee, and yeah, I’m getting really sick of hearing about sacrifice and “difficult choices” when, somehow, it’s never difficult for our new oligarchs. When will a “hard choice” be hard on the superrich? The USA is changing from a middle class society to an oligarchy, and nobody is fighting back but Bernie Sanders.

      • TomK in Boston

        Exactly right Argee, and yeah, I’m getting really sick of hearing about sacrifice and “difficult choices” when, somehow, it’s never difficult for our new oligarchs. When will a “hard choice” be hard on the superrich? The USA is changing from a middle class society to an oligarchy, and nobody is fighting back but Bernie Sanders.

    • Edith

      Yes! Yes! Yes! The Wrecking Crew, as Thomas Frank calls them. What I don’t get is what are all those wealthy people going to do when the government that issues all of their money that makes them rich is completely irrelevant. Won’t the currency be irrelevant too? I guess they will have changed all their dollars by then to Chinese Yuan? Who knows.

  • Anonymous

    This country is pathetic. So idiot buy’s a gram of weed it’s the end of the world for the guy. Businessmen steal millions hurting thousands and it’s like ho hum. Justice is a joke. The Rule of Law is Pathetic and ignored. There are no priorities.

    • Dave in CT

      Exactly. We spend so much time blaming “the market” and lose faith in competition and liberty, when what we have is a failure of real accountability to the rule of law. If players in a level playing field of competitive markets were punished harshly for breaking, corrupting, or colluding to change, the Law, we would have a much different world. But of course an authoritarian attitude of knowing best and picking winners and loser trying to “manage” a just and productive society is just too appealing, regardless of its continued failings.

      Neocon crony Republicans and run of the mill social engineering Democrats are the ones that have given us our corrupt State Capitalism behemoth and its consequences.

      Why so many dump on Liberty-type ideas that are against that, and predicted so many of our problems, still confounds this searching former self-defined Progressive.

  • Mkeisner2001

    Seem to be missing the point of what changed. As always it is new technology. It was mortgage backed securities that was the cause because primary lenders got fees and did not have to take risk. If we went back to a situation where the primary lender had risk then we would avoid the problem even with a government guarantee as long as the guarantee did not totally bailout the lender.

    • -boston burb dweller

      Agreed regarding mortgage-backed securities. One word: Toxie.

    • Zeno

      Absolutely, mortgages should never leave a bank, and should NEVER be sold to an Investment bank.

      The country must reinstate the Glass-Steagall act passed after the great depression.

  • Stankay2

    I think that this is an opportune time for a re-examination of our national housing policy. If the original purpose of encouraging home ownership with affordable mortgages was to enhance long-term community stability, why couldn’t such a worthy goal be achieved through other means? Isn’t it time to include rentals as part of a national policy too? Here in Massachusetts renters are given a limited tax deduction for their rental payments similar to those for mortgage payments.

    Moreover, renting encourages another social goal: mobility of employment. Many homeowners who would like to move to another community or part of the country are stuck with houses that they cannot sell – and thus they may not be able to take that new job elsewhere.

    Finally, there has to be a change in our collective mindset that home ownership is the path to building wealth. Our banks and their enablers in a Greenspan Federal Reserve and Wall Street were willing to provide cheap loans to fuel that fantasy at a time when alternative investments in American industry and technology were not as profitable. In short, real estate lending was the low-hanging fruit that benefited everyone – banks, investors, government taxing authorities (who benefited from higher property taxes fueled by inflated prices with cheap and easy loans), and homeowners (who leveraged their homes with multiple mortgages to finance an unsustainable life style).

  • J_smithyy

    Subprime Suspects
    The right blames the credit crisis on poor minority homeowners. This is not merely offensive, but entirely wrong.
    -From Daniel Gross
    snip”…Third, lending money to poor people and minorities isn’t inherently risky. There’s plenty of evidence that in fact it’s not that risky at all. That’s what we’ve learned from several decades of microlending programs, at home and abroad, with their very high repayment rates. And as the New York Times recently reported, Nehemiah Homes, a long-running initiative to build homes and sell them to the working poor in subprime areas of New York’s outer boroughs, has a repayment rate that lenders in Greenwich, Conn., would envy. In 27 years, there have been fewer than 10 defaults on the project’s 3,900 homes. That’s a rate of 0.25 percent.

    On the other hand, lending money recklessly to obscenely rich white guys, such as Richard Fuld of Lehman Bros. or Jimmy Cayne of Bear Stearns, can be really risky. In fact, it’s even more risky, since they have a lot more borrowing capacity. And here, again, it’s difficult to imagine how Jimmy Carter could be responsible for the supremely poor decision-making seen in the financial system. I await the Krauthammer column in which he points out the specific provision of the Community Reinvestment Act that forced Bear Stearns to run with an absurd leverage ratio of 33 to 1, which instructed Bear Stearns hedge-fund managers to blow up hundreds of millions of their clients’ money, and that required its septuagenarian CEO to play bridge while his company ran into trouble. Perhaps Neil Cavuto knows which CRA clause required Lehman Bros. to borrow hundreds of billions of dollars in short-term debt in the capital markets and then buy tens of billions of dollars of commercial real estate at the top of the market. I can’t find it.”snip


    • ThresherK

      Hey, when it comes to lending to irresponsible rich white guys, the half-life of Neil Bush’s shame was measured in microseconds.

      Amazing how little reverberation inside the Beltway the S&L scandals had this crisis around.

  • Rewqqq

    A responsibility revolt on the ‘BANKS’ irresponsible leverage activity over the last few years is at hand. Obscene personal profits equals opportunism, not equal opportunity. Walk out your door every to the street every night at 6 pm, talk to your neighbors about what must be regulated, mainly for all our children. A peaceful STRONG statement must go to the governances today, and last at least a week.

  • ThresherK

    At 57 mins it sounds like Gretchen clarified her statement and asked for real regulation and enforcement, rather than a Shrub-like “they’re all too clever for us dumb gummint types” smirk. Better job.

  • TomK in Boston

    There’s no big economic crash without leverage (gambling with borrowed money). If all you lose is what you have, you can’t bring down the economy. The investment banks were leveraged up to 40:1 on subprime crack. It helped that the deregulatin’ Bush SEC had upped the allowable leverage on the biggest IB because “they know what they’re doing”. Funny how I learned in high school that margin (buying stock with borrowed money) was one of the causes of the 1929 crash. “Black Swan”?? What a joke. We just had yet another garden variety leveraged bubble bursting.

    The cause of the crash was deregulation of the financial industry, and we should respond accordingly and NOT go after the middle class. No poor jerk who took out an irresponsible mtg broke into the executive suite at Merrill Lynch, took out a gun, and said “lever up or I’ll shoot!”.

    • Zeno

      Agreed. The people who were deregulated would like us to believe otherwise.

  • Miller

    gosh, hate this new format!!

  • David in Wellesley, Mass.

    New-format-haters: Don’t overlook the “Sort by” button under the new-comment box. We can still follow the thread from top to bottom if we want.

    • John

      That only sorts the original comments. Responses are still linked to the comment and are not displayed chronologically. I suppose we could circumvent it by not using the response feature but that will make even more of a confusing mess if some people do and others don’t.

  • Micahel

    weak sause it’s not allowing for comments for your second hour show.

    Great show btw.

  • Micahel

    weak sause it’s not allowing for comments for your second hour show.

    Great show btw.

  • W Prothero

    In Santa Barbara, a substantial fraction of the housing purchases were made by realtors hoping to do minor cosmetic fix-ups and flip for a quick profit. I wonder how much of the decrease in sales is due to the decrease in realtor flipping rather than by folks who intend on living in their homes for a time.

  • Kevin Newman

    Housing will not come back until lenders start lending again. A quick story: I wanted to buy an investment home and went in with my parents. We all have FICOs over 790 and combined, have an income of over $400,000 annually. Negotiated price on the investment home was $160,000 and we pledged $60,000 for down payment so we were seeking a $100,000 loan…and we were denied. Yes, the bank denied us a loan based on our monthly income. Unbelievable.

    So, instead we paid cash and closed the deal 6 weeks ago, but the reality is that banks are now using draconian rules to unfairly deny investors and potential home owners in such a way that is artificially extending this recession.

    • Dominguez

      Thanks Kevin for your comment. I am a Realtor and I have to deal with this problem. They are buyers who wants to buy a property but the prices still high in certain areas and the bank is not given them enough money to put an offer. Sellers believe that they high therefore they want to recoup their investment and are not accepting the reality of the market.

    • geffe

      And we bailed these institutions out! Why are we not beating down the doors of these institutions is beyond me.

  • Ed Boughton

    Back in 2008 the government should have bought ALL the Adjustable-Loans from the Lenders $400billion (according to the Supreme Court we could have taken under Eminent Domain). After the Economic Crisis is stabilized and we fix the Leading Rules then we Give the right-of -first-refusal to the original lender as we would roll them back to private lending.

    Gone through and readjusted all the sub-primes, based on their income. Not adjusting the Principal. If this would not make sense then rent the home back to them.

    This would have saved everyone. If American’s did not take a hi to personal wealth, there would be less Belt-Tightening. And we would have had less layoffs. But to insure this I would have given $10,000 cash it Every Tax Payer. if they paid off debt – good for the economy. Put in the Bank — good for the economy. Spent it like “Happy Money” — good for the economy.

    This would have made a HARD BOTTOM, saving American Wealth and Property Values and may have saved ALL of us world wide the Economic Crisis.

    Then we should have Tried all these Lenders, especially for the ones who took Insurance Policies on people they knew would default. If you and I did that we would be in Prison for Insurance Fraud.

    This could have been saved
    -Edward Boughton

    • twenty-niner

      As long as we’re going back in time, if Fed hadn’t engineered a bail out for LTCM’s creditors in 1997, investment banks and hedge funds would’ve been on notice that failure can happen to more than the mom-and-pop store down the street from the new Walmart.

      Or if the Fed hadn’t flooded the banks with cheap liquidity in the early part of the decade, they wouldn’t have used that money to foment a reckless housing bubble.

      The glaring lesson is that big banks don’t use cheap money to fund far-reaching high-risk innovations. They use the money for quick returns, whether it be packaging no-doc toilette paper loans and figuring out how to stamp them with AAA ratings, or pumping up commodities markets.

      Here’s the latest example of how the system is rigged:

      “JP Morgan Says It Had A Perfect Trading Second Half In 2010, Lost Money On Just 8 Days In 2010, Made Money On 96.9% Of Trading Days”


      Losses on only 8 gambling days? Really?

      Wall street is back to its old game, the bonuses are back in spades, and then some; and it only took trillion-dollar bailouts from Congress and the Fed, and a couple of years. Of course, expect no leadership from the White House or Congress to rein in this garbage.

      …business as usual.

  • Wm. James from Missouri

    A caller called in and said that his wife had to take a job in India, so that they might find a way to recoup real estate losses. Indians are coming to the US to take American jobs. What is wrong with this picture ?

    • Amar272004

      Um..actually many indians are returning back to India. But this story itself is so interesting, I hope Tom Ashbrook does an hour for this. Americans leaving the shores for opportunities abroad

  • Wm. James from Missouri

    When I was growing up I can remember small Mop & Pop stores, in which mom and pop lived behind the store. We were less about image then and more about getting it done. Why can’t builders sell properties that are designed to be upgraded at some future time. This would allow owners to build equity quickly and give them the option to grow into the house that will serve them well.

    Secondly, we need to bypass banks and move to more “option to buy “ contracts, with generous or reasonable terms. Equity should be built as quickly as possible.

  • fladdap

    HuffPost Blogger Richard Zombeck has collected tons of stories by homeowners in their own words at http://www.shamethebanks.org. The banks and mortgage companies new what they were doing – this didn’t happen by accident.

    • Dave in CT

      Mortgage companies were the street dealers. Criminals, but not the top.

      • fladdap

        Goof point.

      • fladdap

        ugh, “good” point

      • Dave in CT
        • Dave in CT

          oops, I meant the crime bosses….who feed the dealers.

    • Truth In Exile

      It happened because of the likes of Barney
      Frank and other liberal blowhards (no pun intended) that forced banks to relax lending practices in exchange for lack of oversight in Wall Street. Has anybody gone to jail?

  • darren

    Barry is a hoax. All this talk about helping middle class. What a scum bag. Let the housing price correct. That will make home affordable.

    Interest rate and downpayment are not the only variables. Why do “expert” thing housing price will stay at a lofty level?

    Owning a home is not a right. If you want one, work hard and save for the downpayment.

  • Bobem

    I’m afraid that all of the focus on Fanny and Freddy is pathetic red herring. To quote from “MarketWatch” 2/17/2011:
    Democrats acknowledged that the housing refinance giants had a hand in the crisis but asserted they were not a significant factor.

    “Fannie and Freddie were a deeply flawed business model. They did add helium to the housing boom, but they never contributed a majority of originations of subprime mortgages. That came from Wall Street,” said Phil Angelides, chairman of the Financial Crisis Inquiry Commission. A Democrat, Angelides is a former treasurer of the state of California.

    The Republicans think otherwise, they always will… this is a political game that’s unfortunately going to affect a very large number of families in the US.
    Fanny was made a publicly traded company in 1968, for more than 30 year it worked well… Then Wall Street got very very hungry…who pays, why Fanny and Freddy of course… definitely not the angels on Wall Street…. come on!!!

  • Jim in Omaha

    Fannie and Freddie were the taxpayer-backed institutions that were utilized by a corrupt finance sector to fleece mostly hardworking Americans seeking to be part of the “ownership society” that was promoted as the American Way. All you need to ask is “who made money by F&F backing all those worthless mortgages?” The answer is “the corrupt lenders, appraisers, bond raters, and Wall Street securitizers of that crap.” Poor and ignorant borrowers were not the ones who benefited from F&F. As they say: “FOLLOW THE MONEY”.

  • geffe

    One thing that I heard might happen here is that fixed 30 year loans might be a thing of the past. That would be a really bad thing and I think this needs to be addressed with regulation.

    • Bd1732

      geffe – you are correct. There is no financial institution that will take on the risk of a 30 year fixed financial instrument for consumer mortgages. If they attempt to pass on that risk to consumers, rates or fees would be so high that no one would want the loan.
      This is the elephant in the room.

  • Sam Jones

    In re the caller who spoke of “sweat equity”:
    What working people these days have the /time/ to do up a house themselves?

    • Zing

      Those that are realistic and intelligent?

      • Sam Jones

        We believe we’re realistic. We rent.

        • Truth In Exile

          Pay yourself first or pay your landlord? Its a free country.

  • Dmitry

    my house is my boat anchor, if I didn’t buy it, I would’ve been able to improve my job situation by moving to East Coast where I was offered a job.

  • Sinclair

    House ownership is a money pit unless you have a well paying, secure job.

    Besides, we mostly inhabit only 3 rooms: the kitchen, living room, + bedroom. Larger domains are really a waste of money.

    I choose not to own as I recognize that my career choice is unlikely to afford me a good mortgage. So, I rent a 1 bedroom apartment, in a lively part of the city, close to public transport.

    • Truth In Exile

      Sinclair, find a decent realtor to help you purchase and built wealth through home ownership. History speaks for itself. Don’t let talking heads tell you what to think. You deserve the American Dream!

  • geffe

    You know the Fannie and Freddie thing stinks. The people who were in charge should be in jail in my view, or maybe in stocks in front of the White house. This whole thing was made by wall street and it sucked in Freddie and Fannie. It’s stinks these people have rapped the American Public and caused the largest economic downturn since the Great Depression and there are no consequences for them at all.

    • Zing

      All the more reason we should turn over healthcare to the gummit.

      • geffe

        Interesting how you make the most absurd analogies.
        Fannie and Freddie was not run by the government and I’m trying real hard here to be polite. As if health care has been so well run by the private sector.

  • Donna Coq

    Hate to be the bearer of bad news but some of the largest commercial real estate owners back at 4thQ 2009 said the real estate market and economy would be in a slump for 7 – 10 years also because of the large CMBS’s on Wall Street. That’s if we’re lucky. They didn’t know if it would really ever come back. We will need something really breakthrough to take us out. Some local developers were upside down and some still owe me money but they’re broke. Donna Coq

  • Dave in CT

    Even leaving Fannie and Freddie out of it, remember that none of this highly-leveraged bubble shennaniganism and the ill-gotten interest and fees generated along the way by our favorite sector, would never have been possible without a willing Federal Reserve (unaccountable) and the joys of Fractional Reserve Banking (arguably a money-changer scam from the get-go).



    You don’t have to be conspiratorial to be concerned.

    • Dave in CT

      …..although after all we’ve seen in this world, believing in high-level collusion is not that difficult. Particularly when you look at the creation of the Fed, the long arguments against it by historically prominent Americans, and the astoundingly arrogant comments of the bankers of the day when it was all happening.

    • Dave in CT

      …..although after all we’ve seen in this world, believing in high-level collusion is not that difficult. Particularly when you look at the creation of the Fed, the long arguments against it by historically prominent Americans, and the astoundingly arrogant comments of the bankers of the day when it was all happening.

  • Nick

    When is America going to have its own Revolution like in the Middle East over throw the Plutocracy that is ruining this country?

  • Wesley

    The assumption that houses have value beyond their tangible construction cost is what’s leading us astray. Why should a regular increase in house value be assumed? Why is high house value good? Sure is if you’ve got a big mortgage, but if you don’t, then low cost housing might be a better thing. So let’s stop artificially inflating the value of houses, and focus on good houses at cheap price.

    • Truth In Exile

      Wesley, value is derived from people building communities other want to live in. In expensive neighborhoods you will find better schools, shopping, cultural activities, etc. In poor neighborhoods, you’ll find poor schools and other undesirable conditions, which makes these areas less desireable, therefore, less expensive or valuable. Its not about the construction costs leading us astray, its about the value created by people in a neighborhood that others desire and want.

  • Truth In Exile

    I disagree with most of the assumptions of your guests today. They never mention the fact that bankers were forced by goverment to lower lending standards in exchange for relaxation of other financial activities, which eventually blew up in the American taxpayers face and ended with the bailout. Now, the champions of the little guy from the NY Times say that lending standards should be raised to shut out the little guy. Wow! Talk about speaking out of both side of your mouth.

    • geffe

      That’s not what happened. The government did not force anything on the banks. The banks lobbied for deregulation of the market and go it. Then someone had the bright idea of bundling up all these mortgages for the derivative market and it all came tumbling down. To put this into the simplest terms. You had rating agencies such as Standard and Poor’s giving triple A ratings to things that were anything but. The whole thing is clearly made up by wall street and the banks and a lot of people got caught up in it. the government’s part in all of this was not regulating the market well enough to prevent this. We had 50 years of a stable housing market and then in the 80′s it all started to unravel with the zeal to deregulate.

      Again the government did not force anything on anyone.

  • Dcadigan01

    I would hate to think of the mess the housing market would be if
    Fannie Mae and Freddie Mac weren’t involved–as bad as the pro-
    blem seems now. I believe it would be in utter shambles given the
    casino memtality of Wall Street…

    I think Timothy Geitner is wrong to suggest the housing market be-
    longs back in private hand for this reason…(One must remember.
    here–Geitner was one of those who subcribed to a Lassie Faire approach to the markets during the Bush and Greenspan era..
    And for that matter so has many in the Obama fiscal camp…This
    was one of the Left’s biggest disappointment with Obama’s appoint-
    ees too. They were all part of the same mindset that brought us
    the market crash..)

    Still, I agree with David Stretfeld the right way forward is to build a tighter framework for regulatory control of the housing market. With
    perhps caps on the aspects that failed to keep the system in check
    and indeed contributed directly to the problem Susan Wachter point-
    ed out. Dee

  • Gregg – Taylorsville, NC

    “Define “Spending Quadrupled” and since you brought it up , what was this ‘spending’ on you ahistorical ponce?
    -Bush borrowed to pay for the wars. (one of which he lied us into)
    –Nearly half teh ‘stimulus’ was ineffective tax cuts
    the other $500 million partly gobbled up by hypocritical right-wing officials all over the country because it worked.”

    By quadrupled, I mean 4 times as much. Look at this:
    Please don’t give me the “shoot the messenger” approach as these are not Heritages numbers, they are the CBO and White House numbers. It’s an older graph and to be truthful the first yer came in slightly under the projection but now those projections are low. If you want the actual CBO (or OMB) charts then let me know as I have them at the ready. They are the same as the graph only harder to cipher in chart form.

    The wars did not cause this fiscal problem. Here are the numbers (if that matters to you):
    The ol’ “lied us into war” claptrap, are you serious?
    Also review “The Iraq Liberation Act of 1998″ when Clinton made regime change the official US policy.

    Someone please tell me how tax cuts (allowing taxpayers to keep more of what they’ve earned) cost money. What tax cuts were in the “Stimulus”? Are you confusing tax credits? I do agree the “Stimulus” was “ineffective” though.

    Now, to your elitist and personal assumptions, here I am commenting on an NPR blog after having listened to Tom Ashbrook for quite a while. I read Krugman as well as Krauthammer. I listen to Rush and Diane Rheem. And yes (I was jerking your chain earlier) I watch Fox but also MSNBC and CNN. Mostly I look at actual bills, debates, projections and history. You should try looking beyond NPR and The New York Times, especially if you are going to accuse others of myopia. Pot meet kettle.

    • Gregg – Taylorsville, NC

      The above is in reply to j_smithyy from further down the page. I put it in the wrong place. Sorry.

  • Gregg – Taylorsville, NC

    Here are the updated numbers for Obama’s horrendous debt.


  • tthought

    The Housing Affordability Modification Program (HAMP) is not what everyone believes it is.

    The general public has been told this program is an attempt to reduce the number of foreclosures. Despite the enormous sum of money Congress gave to the banks for this purpose, less than 10% of intended beneficiaries of the program have been helped.

    The real reason for HAMP was to avoid a deflationary panic in the housing market. If everyone believed housing prices would continue to fall due to continuing foreclosure activity, there would be greater downward pressure on home prices while people stayed out of the market waiting for a better price.

    HAMP is a joint creation of the Federal Reserve, the current administration, and the banks. It is NOT what it claims to be, it is simply a measure to ease the housing market’s deflation.

    People caught up in the HAMP program need to count their losses and walk away now.

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