Tag Archive | "refinance"

UPDATED: Obama Sued Citibank Under CRA to Force it to Make Bad Loans

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Do you remember how we told you that the Democrats and groups associated with them leaned on banks and even sued to get them to make bad loans under the Community Reinvestment Act which was a factor in causing the economic crisis (see HERE ) … well look at what some fellow bloggers have dug up while researching Obama’s legal career. Looks like a typical ACORN lawsuit to get banks to hand out bad loans.

In these lawsuits, ACORN makes a bogus claim of Redlining (denying poor people loans because of their ethnic heritage). They protest and get the local media to raise a big stink. This stink means that the bank faces thousands of people closing their accounts and get local politicians to lobby to stop the bank from doing some future business, expansions and mergers. If the bank goes to court, they will win, but the damage is already done because who is going to launch a big campaign to get the bank’s reputation back?

It is important to understand the nature of these lawsuits and what their purpose is. ACORN filed tons of these lawsuits and ALL of them allege racism.

Thanks to the IUSB Vision Weblog for providing additional details of this story.

We pulled the docket down, but here’s a brief for your summary:

Case Name
Buycks-Roberson v. Citibank Fed. Sav. Bank Fair Housing/Lending/Insurance
Docket / Court 94 C 4094 ( N.D. Ill. ) FH-IL-0011
State/Territory Illinois
Case Summary
Plaintiffs filed their class action lawsuit on July 6, 1994, alleging that Citibank had engaged in redlining practices in the Chicago metropolitan area in violation of the Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691; the Fair Housing Act, 42 U.S.C. 3601-3619; the Thirteenth Amendment to the U.S. Constitution; and 42 U.S.C. 1981, 1982. Plaintiffs alleged that the Defendant-bank rejected loan applications of minority applicants while approving loan applications filed by white applicants with similar financial characteristics and credit histories. Plaintiffs sought injunctive relief, actual damages, and punitive damages.

U.S. District Court Judge Ruben Castillo certified the Plaintiffs’ suit as a class action on June 30, 1995. Buycks-Roberson v. Citibank Fed. Sav. Bank, 162 F.R.D. 322 (N.D. Ill. 1995). Also on June 30, Judge Castillo granted Plaintiffs’ motion to compel discovery of a sample of Defendant-bank’s loan application files. Buycks-Roberson v. Citibank Fed. Sav. Bank, 162 F.R.D. 338 (N.D. Ill. 1995).

The parties voluntarily dismissed the case on May 12, 1998, pursuant to a settlement agreement.
Plaintiff’s Lawyers Alexis, Hilary I. (Illinois)
FH-IL-0011-7500 | FH-IL-0011-7501 | FH-IL-0011-9000
Childers, Michael Allen (Illinois)
FH-IL-0011-7500 | FH-IL-0011-7501 | FH-IL-0011-9000
Clayton, Fay (Illinois)
FH-IL-0011-7500 | FH-IL-0011-7501 | FH-IL-0011-9000
Cummings, Jeffrey Irvine (Illinois)
FH-IL-0011-7500 | FH-IL-0011-7501 | FH-IL-0011-9000
Love, Sara Norris (Virginia)
Miner, Judson Hirsch (Illinois)
FH-IL-0011-7500 | FH-IL-0011-9000
Obama, Barack H. (Illinois)
FH-IL-0011-7500 | FH-IL-0011-7501 | FH-IL-0011-9000
Wickert, John Henry (Illinois)

UPDATE :  Hotair.com comments on this story HERE .

New York Post Article HERE :

THE seeds of today’s financial meltdown lie in the Community Reinvestment Act – a law passed in 1977 and made riskier by unwise amendments and regulatory rulings in later decades.

CRA was meant to encourage banks to make loans to high-risk borrowers, often minorities living in unstable neighborhoods. That has provided an opening to radical groups like ACORN (the Association of Community Organizations for Reform Now) to abuse the law by forcing banks to make hundreds of millions of dollars in “subprime” loans to often uncreditworthy poor and minority customers.

Any bank that wants to expand or merge with another has to show it has complied with CRA – and approval can be held up by complaints filed by groups like ACORN.

In fact, intimidation tactics, public charges of racism and threats to use CRA to block business expansion have enabled ACORN to extract hundreds of millions of dollars in loans and contributions from America’s financial institutions .

The Woods Fund report makes it clear Obama was fully aware of the intimidation tactics used by ACORN’s Madeline Talbott in her pioneering efforts to force banks to suspend their usual credit standards. Yet he supported Talbott in every conceivable way. He trained her personal staff and other aspiring ACORN leaders, he consulted with her extensively, and he arranged a major boost in foundation funding for her efforts.

And, as the leader of another charity, the Chicago Annenberg Challenge, Obama channeled more funding Talbott’s way – ostensibly for education projects but surely supportive of ACORN’s overall efforts.

UPDATE 2: Fox News gets on the story

UPDATE 3: CNS News Analysis

Under the Clinton administration, federal regulators began using the act to combat “red-lining,” a practice by which banks loaned money to some communities but not to others, based on economic status. “No loan is exempt, no bank is immune,” warned then-Attorney General Janet Reno. “For those who thumb their nose at us, I promise vigorous enforcement.”

The Clinton-Reno threat of “vigorous enforcement” pushed banks to make the now infamous loans that many blame for the current meltdown, Richman said. “Banks, in order to not get in trouble with the regulators, had to make loans to people who shouldn’t have been getting mortgage loans.”

This threat combined with the government backing of Fannie and Freddie set the stage for the current uncertainty, because the “banks could just sell the loans off to Fannie or Freddie,” who could buy them with little regard for negative financial outcomes, Richman said.


UPDATE 4: Obama Audio saying it was a Good Idea to give people loans that couldn’t afford them.

We told you before how Obama sued banks with so called “community organizers” to force the banks to give bad loans to people who couldn’t afford them. Well now we have the audio of Obama saying in 2007 that giving sub-prime loans to people who couldn’t afford them is a good idea.

UPDATE 5: So what really (no really ) cause this economic crisis?

Referenced / Associated News Article:

Government Engineered Mortgage Crisis: No Racism Here, Move Along.

Barack Obama’s Fannie Mae, Freddie Mac Connection

[tags]racism, acorn, barack obama, clinton, fannie mae, freddie mac, banks, refinance, mortgage, economic crisis,community reinvestment act, cra, scandal, Madeline Talbott, lawsuit,citibank, chicago, loan applications, minorities, credit history[/tags]

Government Engineered Mortgage Crisis: No Racism Here, Move Along (Update 3)

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Nine years ago this month, the New York Times proved to be rather prophetic:

Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”


Home ownership has, in fact, exploded among minorities during the economic boom of the 1990’s. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University’s Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent . In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent .

This whole mess was inspired by rabble-rousing left-wing groups who felt (not thought) that blacks were not getting enough mortgages.

Note, however, that when whites (31%) or Asians (46%) are on the losing end of this equation, it is apparently NOT evidence of any racism. Right, ACORN?

Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites , in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

– Steven A. Holmes, “Fannie Mae Eases Credit To Aid Mortgage Lending” , New York Times , 30 September, 1999.


We’re all Homeowners Now

Cover Up of Fannie Mae/Freddie Mac in 2004 Exposed


Burning Down The House: What Caused Our Economic Crisis?

This video is an informative look at the factors that are causing our current financial and economic crisis. It discusses policy changes 13 years ago that unleashed the sub-prime mortgage-backed securities market, which accelerated prices erratically, inviting speculation and loose lending practices which were both condoned and encouraged by existing regulation and carried out by risk-blind executives and Fannie Mae and Freddie Mac.


Heartland Democratic Presidential Forum 12/07

Here’s a video from a forum exclusively for thousands of community organizers including Gamaliel and ACORN people.  Obama said that ACORN and friends (responsible for voting fraud and the subprime crisis) are going to be shaping policy for an Obama presidency.

The Mortgage Meltdown; What you need to know

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The following is my personal opinion and not a solicitation. Written as a concerned U.S. citizen and not a representative of any company or organization. I have put this together to help people understand what I believe is the root cause of the mortgage melt down and subsequent Wall Street crash. It is critical to understand this because the core problem is continuing and will prolong the bottom. And the current bailout plan does not take these factors into account and sets us up for another wave that could send us over the edge.  I have first hand real life experience working with families to solve this problem and have read & researched everything I can get my hands on. The problem is found on the front lines. While there are many who could take blame, I want to outline the process and describe everyone’s roll in the process. My belief is that it is the non-traditional mortgages that are at the core of the problem. Read along & see if you agree.

First layer of blame goes to the consumer. There are two areas here. First is lack of financial education to understand how mortgages work in the first place. People hold fast to interest rate & payment being the only consideration when choosing a mortgage. This belief has cost many of them dearly. This is a majority of the population. Just ask anyone how his or her mortgage works or even what his or her note rate is, or how note rate compares to APR. A smaller subgroup of this are those who overextended themselves & bought too much home. These are the people who the media & the experts like to blame. Later I will give detail & examples of what mortgages these people accepted.

Next are the mortgage brokers. This group of mostly unregulated individuals often has just as little understand of the mortgages as their customers. And they were driven by greed. They could make 2 – 3x the commission for selling a non-traditional mortgage to any client. And because of competition they had to offer the product with the lowest initial interest rate. Which excluded a 15 or 30-year traditional fixed mortgage. So prime borrowers got the same loans as everyone else. The Federal Reserve estimated between 2003 & 2006 60% of the mortgages sold were of a non-traditional type. That is everyone who bought new or refied existing homes!

The mortgage companies or banks them selves have to shoulder most of the blame. They created the products in the first place. They developed the compensation structure. They had two objectives. First collect fees for originating as many mortgages as possible. Second set the client up to come back with in five years for a new mortgage, which would generate more fees. They had little or no intent of keeping the mortgages. They were sold to investment banks so the banks held no long-term liability. They gained a short-term profit & hoped to maintain it with a steady stream of repeat business. To increase cash flow & feed hungry investors as the game went on they began to make riskier loans. In addition there has been evidence of inflated appraisals, which then drove up housing prices.

To better understand why I think this is where most of the blame lies you need to understand the products being sold. I will share with you the four major types I have seen the most.

First is the straight up 30 or 15 year fixed mortgage. This has been the norm from the beginning and until the last five years the majority of mortgages. You have a set interest rate & payment for a fixed time period. No bells & no whistles, easy to understand.

Next up is the ARM or adjustable rate mortgage. For this type of loan you would usually have a 1, 3, or 5 year period where the interest rate & payment are fixed. Then the interest rate varies at a set interval of generally 6 months or one year. Sometimes rates adjust every two weeks, based on some index plus a margin. Typically based on the US treasury or the LIBOR, London Banking Index. The margin can be from under 1% to anything, Generally from 2 to 5 points. They also have a floor & a cap. The floor or lowest the rate can be during any period are rarely below the initial rate. Many caps are set at 18%. How generous! The riskier the loan the shorter the fixed period & the bigger the margin added to the index. The challenge to a bail out is the prospect of higher overall rates, which gives a higher index to work from. The real crime is that the difference between a fixed mortgage rate and an ARM was in many cases less than ½%. In fact at the time of this writing Bank Rate.com shows a difference of only .02%. Not worth the risk of potentially higher rates. Banks like these loans because the risk of higher rates is transferred to the borrower. Where on a 30-year loan they hope the cost of borrowing will remain under the rate you pay for the next 30 years. They are in the business of making & selling loans, most of the money is made up front. Look at how much money goes toward principal reduction the first five years of any loan. Most goes to interest. The plan was to have you refi in five years, start back on the high interest cycle again, and generate more fees. Esp if they sold the loan. I asked one broker why they only sold arms. His response was they would need more clients again in 3 or 5 years. For someone who knows they will be moving for fact in under five years the lower payment might make sense. But that was back before the boom. Now at less than ½% difference it makes no sense and yet that is the majority of what is being sold right now.

Third is the interest only mortgage. For this loan to borrower is obligated to make only interest payment for a fixed period of time. Then the loan payment would recast to a fixed payment for the remainder of the loan period, in most cases 30 years. I have seen some set for 30 years. The riskier the loan the shorter the period before full payments were due. Let me share an example with you to illustrate the impact of this type of loan. I took a group with me on the spring homes tour 2008. We went to see a $2.7 million dollar home. There were fliers in the lobby from a nationally known mortgage company stating this dream home could be yours. For 20% down, ($ 540,000) you could get a 30-year interest only mortgage with a payment of $10,800 at 6%. In the fine print it showed the interest only period was good for the first ten years. After that you would still have a balance of $ 2,160,000 but with only 20 years to pay  it off. Resulting in a new payment of  $ 15,474. That is a 43% increase in payment! Now who can take a 43% increase in their mortgage? And is someone with $ 540,000 down a sub prime borrower? The sub prime borrower talk is a diversion. In this case the bank would get $ 540K in equity up front, the borrower pays in $ 1,296,000 in interest with no principal reduction. If they can keep the loan the bank gets an additional $ 1,553,760 in interest dollars. If the borrower refinances, the cycle starts all over again. Of course this assumed a never-ending growth in home values. Also of note is that in this plan the interest rate only remained fixed the first five years and varied annually after that.  I assumed it stayed fixed in the above example for the life of the loan.

The fourth type of loan is a mix of the second & third called a pick a payment loan or a power option loan. These were & are used primarily in the refinance market and targeted those with the most equity & best credit profiles. All the ones I have seen work in the following manner. A client with a high FICO score & at least 20% equity get a very low interest rate mortgage. They then have an option of four payments they can make. The first would pay the loan off in 15 years & has the highest payment. The second is based on a 30-year payoff. The third is an interest only payment. And the fourth & lowest payment is not even enough to cover the interest charges. Which results in the short payment of interest due being applied to the principal balance. Now which payment do you think most people pick? There is a clause in the mortgage note that when the balance reaches 110% or in some I have seen 125% of the original balance the loan will recast into a payment that will pay the loan in full in the remaining time to 30 years. It generally takes 5 to 7 years to reach that point. These mortgages have not even begun to recast. The rating agency Fitch says the peak of recasts will not happen until 2010! And that the average monthly payment will go up $ 1053. They expect that most if not all of these will result in foreclosure with the decline in home values and the fact that more than 100% is owed from the original loan amount. Certainly these clients were in a position before to afford their homes.

Then you have the investment banks that bought the mortgages. As prices went up and volume increased they were willing to pay top dollar for lower & lower grade mortgages. They packaged the loans & sold them to investors on Wall Street including Fannie, Freddie, & Lehman Bros. Their appetite fueled the greed of the mortgage companies.

Next are the rating agencies that rated the packaged loans. They suffered from a lack of education initially. They looked at the quality of the loan only based on the credit worthiness of the borrower and the loan to value of the house. They never looked at the terms of the loan to see that the terms of a reset could put a payment well above a borrowers ability to pay. Then when defaults began to mount they were slow to sound the alarm.

Wall Street ate these loans up. They spread them out over the entire system. It looked good on the surface. A loan backed up by one’s own house. Who would intentionally bail out on that? And if they did the house could be sold. And private mortgage insurance would cover 20% of the loan value up front. Plus there was the promise of long-term returns from a 30-year loan payoff. They did not due diligence to examine the under lying loan product.

The start of the melt down.

The people who had poor credit or bought too much home got the shortest fixed term on their arms. Even though they were financed later in the cycle because of unbridled greed they began to fail first. This started to drive down home values. The next riskiest mortgages failed and drove prices farther down. Now you have a situation where even prime borrowers cannot refinance out of their increasing payment from their ARM mortgages due to the drop in values. One misconception is that rates are low so the payments would not go up that much or stay down. But the payment is based on an index plus a margin. The rates published for arm loans now are only the initial rate. The actual rate being paid now could be much higher. And the bail out will only aggravate the problem. This bail out promises higher rates, (higher index) as one of the results. Then you have companies like AIG paying out more pmi claims than they had every planned to, part of the cause of their melt down. And the crisis spreads.

All of this could have been avoided if true fixed rate loans had been sold a majority of the time. In most cases the difference in the borrowers note rate was under ½%. On a $100,000 loan would mean less then a $ 40 per month difference.

The problem is that these very risky loans are still being sold. Ask any realtor what they have been seeing this year. Until this stops the crisis will continue. Because if the Fed is right about the 60%, and from my experience they are, the cost will skyrocket. The mortgage industry is  $ 1.5 trillion per year. Over the last four years that is $ 6 trillion. If 60% own the wrong mortgage the risk is 3.6 trillion! And typically after a foreclosure you must have good credit for 7 to 10 years before most companies will give you a mortgage. That alone will slow down any recovery in the housing market.

A possible fix

First off we need to out law these types of loans for the residential consumer. Second anyone who has this type of loan should be offered a new no closing cost fixed rate 30 year mortgage with 30 days before the first payment is due. With 30 yr fixed rates low right now most would be lower than their current arm payment. It would cost way less to eat the closing costs and the profits the higher payments the arm loan offers than to have everyone default. Plus the relief this would give the homeowners could relax spending. This is the only way to stop the slide & have a true bottom.

Jim Grabber

UPDATED: Barack Obama’s Fannie Mae, Freddie Mac Connection

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Lehman Brothers collapse is traced back to Fannie Mae and Freddie Mac, the two big mortgage banks that got a federal bailout a few weeks ago.

Freddie and Fannie used huge lobbying budgets and political contributions to keep regulators off their backs.

A group called the Center for Responsive Politics keeps track of which politicians get Fannie and Freddie political contributions. The top three U.S. senators getting big Fannie and Freddie political bucks were Democrats and No. 2 is Sen. Barack Obama.

Now remember, he’s only been in the Senate four years, but he still managed to grab the No. 2 spot ahead of John Kerry — decades in the Senate — and Chris Dodd, who is chairman of the Senate Banking Committee.

Fannie and Freddie have been creations of the congressional Democrats and the Clinton White House, designed to make mortgages available to more people and, as it turns out, some people who couldn’t afford them.

Fannie and Freddie have also been places for big Washington Democrats to go to work in the semi-private sector and pocket millions. The Clinton administration’s White House Budget Director Franklin Raines ran Fannie and collected $50 million. Jamie Gorelick — Clinton Justice Department official — worked for Fannie and took home $26 million. Big Democrat Jim Johnson, recently on Obama’s VP search committee, has hauled in millions from his Fannie Mae CEO job.

"… Unfortunately, this will come back and haunt Barack Obama in light of what happened this week in the financial markets.  You just can’t go back in time and pick new friends and advisers …" said Shane Kinsch.

Now remember: Obama’s ads and stump speeches attack McCain and Republican policies for the current financial turmoil. It is demonstrably not Republican policy and worse, it appears the man attacking McCain — Sen. Obama — was at the head of the line when the piggies lined up at the Fannie and Freddie trough for campaign bucks.

Sen. Barack Obama: No. 2 on the Fannie/Freddie list of favored politicians after just four short years in the Senate.

Next time you see that ad, you might notice he fails to mention that part of the Fannie and Freddie problem.


Explosive video found: Fannie Mae CEO calls Obama and Dems the "Family" "Conscience" of Fannie Mae. This is video from 2005 of Fannie Mae CEO Daniel Mudd praising Democrats and Barack Obama at a Congressional Black Caucus gathering.  DEVELOPING….


What was the real cause of this mess?