September 30, 1999

Fannie Mae Eases Credit To Aid Mortgage Lending

By STEVEN A. HOLMES

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, 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.''

Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

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.

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.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

Copyright 2009 The New York Times 

 

April 5, 1992

By ANDREE BROOKS

MINORITY and ethnic home buyers have long sensed that they do not get equal consideration when they apply for mortgages and suspected that they were rejected more hastily than whites with similar financial profiles.

Studies have recently confirmed this. A Federal Reserve Board study based on 5.3 million applications from 9,300 banks, published last October, found minorities twice as likely to be rejected as whites with the same household income.

A similar study by the Department of Housing and Urban Development found that lenders in the New York City area had a particularly bad record on minority loans. This was followed by a study by Barry Leeds & Associates, a Manhattan financial market research firm whose findings, released in February, showed subtle levels of bias in the less-than-helpful way many loan officers handled nonwhite applicants.

Bankers have since concluded that a major reason for the high rejection rate may be that many minority and ethnic applicants, among them recent immigrants, do not have credit or employment histories that conform to anticipated norms.

As a consequence, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) have issued what they call "clarified" guidelines to encourarge lenders to become more flexible in their interpetation of qualifying criteria. Fannie Mae and Freddie Mac are Government-chartered corporations that buy mortgages from lenders. In making a secondary market for home loans, these agencies set lending standards for the entire mortgage industry.

Derrick Cephas, the New York State Superintendent of Banks, sent a letter to some 500 lending institutions reiterating the theme.

Mark Willis, a member of the American Bankers' Association Residential Mortgage Task Force, who is working on similar goals, said: "We have all begun re-examining the criteria to make sure we are excluding only those people who won't pay and making sure we don't overlook people who will."

For a loan to be salable on the secondary market, the borrower needs to show a stable income for the prior two years. Under the old guidelines, lenders often held this to mean they had to exclude an applicant who had changed jobs too often in that time or those who had to incorporate part-time earnings, seasonal work or unemployment compensation to maintain a certain income level.

Under the new guidelines all these sources are now considered "good" income.

A lack of credit history also tended to be a drawback. This was particularly hard for some immigrants who are used to dealing only in cash and are not connected to the world of credit cards and American-style banking. The credit history requirement can now be met by documenting a history of timely telephone, rent and utility payments or other proofs that bills are paid on time.

Even certain blots on a credit record will have to be more carefully scrutinized by lending officials before they can form the basis for rejection. "We emphasize that excellent credit does not have to be perfect or spotless, since certain circumstances can be beyond a borrower's control," notes Robert J. Engelstad, Fannie Mae's senior vice president for mortgage and lender standards in his directive to lenders.

Other modifications allow grants from church, municipal or community sources to replace the portion of the down payment that can be supplied by a gift from a relative. Even the definition of "family member" as the source of these funds can now be broadened in many instances to encompass large extended families or the closely-knit "savings clubs" common among certain groups.

In addition, the condition of the home may be evaluated in comparison to others in the neighborhood and not judged by a more arbitrary standard that often exluded many houses. Even if a neighborhood has many offices, stores or gas stations and is thus not strictly a residential area, this should no longer preclude a loan.

DESPITE these changes, reformers fear that deep-rooted practices and attitudes will not alter overnight. Thus they urge potential borrowers who fear they may be rejected to take advantage of counseling services to help them through the mortgage maze.

One of these is Acorn (the Association of Community Organizations for Reform Now), a group that helped redraft the language of the Freddie Mac guidelines. It has just opened offices in Brooklyn (call 718-693-6700). It also maintains branches in St. Louis, Dallas, Phildelphia, Houston, New Orleans, Little Rock, Ark., Chicago, Washington, Des Moines and Minneapolis.

John Hemschoot, director of home mortgage standards for Freddie Mac, said that banks and savings and loans associations are expected to respond more rapidly to the directives than independent mortgage companies since these institutions are under greater pressure from regulators to fulfill their responsibilites to minorities and the poor under the Community Reinvestmet Act.

In the New York area, Chemical Bank in January began an Affirmative Mortgage Progam and a Neighborhood Homebuyers' Mortgage Program, both incorporating virtually all the changes in the Freddie Mac and Fannie Mae directives.

These programs should also reduce the regular points charges and application fees and assure any rejected applicant a second review to see if exceptions might be made. They further provide counseling services and a $10 million fund to cover loans that would not be salable on the secondary market because special exceptions are being made, said Carol Parry, Chemical'st managing director for community development. Call (800) 243-6226 for more details.

Chase Manhattan Bank has established a similar program combining counseling services with a redefinition of qualifying criteria. For more information, visit any local branch and ask about the bank's Community Development Programs, or call its New York area mortgage hotline at (718) 797-5441.

Nancy Gordon, vice president of Globe Mortgage, of Hackensack, N.J., which has handled many minority applications in the region, warned, however, that documentation will still be needed to substantiate deviation from the norm.

If, for example, a car is to be sold to raise money for a downpayment, rather than tapping into a long-term savings account, proof of this sale will have to be produced. Similarly, independent corroboration of a lengthy illness or family breakup will be needed to explain a credit problem.

Drawing

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Hello, children, welcome and gather round as today we tell the story of the very first Thanksgiving according to the left. First off, let’s title this holiday more appropriately: Plaguegiving, since this was the day we guilty materialistic white folks got off the boats with our evil European diseases and decided to spread them among the peace-loving, culturally enriched Native Americans.

Anyway, I want to tell you the story of Plaguegiving. It’s a story of cruelty and malice – all driven by belief in that ethnocentric Judeo-Christian god. It’s a story of repressed homosexuality and racial hatred. It’s a story that will be the basis for Michael Moore’s next documentary.

The story of Plaguegiving begins aboard the Mayflower, an environmentally insensitive name for a boat the carried dozens of members of the English Separatist Church, a Puritan sect. As you’ll remember, the Puritans are evil. They liked to burn witches and put criminals in the stocks and such.

Well, supposedly they left England to avoid religious persecution, but the truth is that they went somewhere to spread their own religious persecution. They were just like those Christian Taliban who backed Prop. 8, except they wore big, unfashionable hats and funny shoes.

The Puritans also came to America to spread colonialist imperialism. Their voyage was financed by a London stock company, which means, of course, that they were evil corporate minions. 

Anyway, the Mayflower first set ground on that cursed day, December 11, 1620. They were illegal immigrants, (not that all are bad) under international law had arrived to despoil the pristine wilderness. 

But there was good news. Because the Eurocentric white folks aren’t in touch with Mother Earth, they promptly starved. Also, it was a tough winter. That’s because of the global warming they brought with them from Europe. As all you children know, global warming is caused by white people doing stuff.

So they froze. Mother Earth would have had her glorious revenge, but somehow 56 of the original 102 survived. The survivors began to take command of the earth, trying to rape her to their advantage. But they didn’t know how to get along with nature.

Then something terrible happened. A race traitor, an Uncle Sitting Bull named Squanto, got in touch with the Western imperialists. Squanto spoke English already – he had been enslaved by white folks and then bought by a Spanish monk, who released him because his better, more atheist feelings got the better of him. Squanto then went to England where he learned English and converted to Christianity, corrupting his beautiful cultural heritage. Then he came back to America, where the gracious Natives took him in despite the fact that he sold out to Whitey. It was a move the Natives would later regret.

Anyway, Squanto knew English when the Puritan devils got there. He helped them plant corn and survive, and they had a great feast in 1621 after executing several turkeys and slaughtering some squash and corn. So they celebrated Thanksgiving – I mean, Plaguegiving. They sat to eat with the Native Americans, suckering them with their kindness, only to send them diseased blankets later. 

But because we’re a racist country and want to forget our transgressions, because we’re First World gluttons who continue to pillage the Third World, we only remember how great the food was. 

In 1789, George Washington – the Slave owner who used tree corpses for his teeth -- proclaimed a National Day of Thanksgiving, but, thanks to Gaia, it did not become a national holiday every year.

Then Abraham Lincoln, the so-called Great Emancipator. The man who used slavery as a way gain power for himself, made it a national holiday. In 1863, he wrote, “The year that is drawing towards its close, has been filled with the blessings of fruitful fields and healthful skies. To these bounties, which are so constantly enjoyed that we are prone to forget the source from which they come, others have been added, which are of so extraordinary a nature, that they cannot fail to penetrate and soften even the heart which is habitually insensible to the ever watchful providence of Almighty God … They are the gracious gifts of the Most High God, who, while dealing with us in anger for our sins, hath nevertheless remembered mercy. It has seemed to me fit and proper that they should be solemnly, reverently and gratefully acknowledged as with one heart and one voice by the whole American People. I do therefore invite my fellow citizens in every part of the United States, and also those who are at sea and those who are sojourning in foreign lands, to set apart and observe the last Thursday of November next, as a day of Thanksgiving and Praise to our beneficent Father who dwelleth in the Heavens.”

Lincoln didn’t mention the genocide against the Indians or the genocide against the turkeys. He didn’t even mention the environmentally insensitive name of the Pilgrim ship. And he didn’t care that atheists don’t believe in Almighty God and so have no one to give thanks to. That’s no surprise. Lincoln was just following in the footsteps of the white terrorists who came to Massachusetts in 1620.

So happy Plaguegiving, kids. Go home and tell your parents how guilty they are for celebrating genocide and imperialist conquest. We’ll give you the day off of school so that you can harass them all day. May you and the racist decedents of the slave masters get salmonella from the executed turkeys and die a slow, painful death. Not unlike the prisoners at Guantanamo Bay.

The End 

Dear Listeners,

I would like to take a moment and tell you about a young former military family in need. Scott served in the Iraq war from 2005-2006 as an army Combat medic. During his tour one day, his armored humvee hit a roadside bomb which tore the doors off the vehicle. At the time he thought he was unhurt. Later and currently he started suffering from vertigo, memory loss and difficulty concentrating on the most simplest of tasks. When he returned home, these symptoms continued unbeknownst to him. It took him weeks and weeks to find a job and money was tight with nothing to support at that time his wife and four small children. He was finally hired by the local Kansas City ambulance service. He had trouble on the job with remembering things, getting lost, not concentrating. He was unable to pass his paramedic tests due to these problems. He just felt he needed to try harder, work harder. One of the paramedics who he worked with felt he had a brain injury. Finally he was unable to work as an EMT and the ambulance service let him clean out ambulances for $8 an hour. It is pretty hard to feed a family of 6 at that time on eight dollars an hour. When I asked Lori, his wife, how did you feed your family, she replied, “We ate a lot of beans.” After an altercation with the police where he was not following directions, and not understanding the police at a checkpoint, the police found out he was a vet from Iraq and made him go to the VA.

Lori and her children have spent hour and hours, months and months with endless doctor’s appointments and endless amounts of red tape, to get a diagnosis on Traumatic Brain Injury, and post traumatic stress syndrome. They have had little or no income while waiting for benefits to kick in. Lori, who loves homeschooling, would home school her 3 small boys and a toddler in the halls of the VA hospital while waiting for Scott at his appointments. Since then they have had another baby, little 6 pound Noah, at the end of October. Needless to say Christmas’s have been lean; there has been no room for the extras or emergencies. They live in an 800 sq. foot house which is in badly need of repair. Flooring needs to be replaced, plumbing work needs to be done just to name a few. They are badly in need of dressers for the children, good mattresses and a toddler bed just to name a few items. You can probably imagine what the picture is here. The KC community has adopted this family for Christmas. When Lori asked her 3 older boys what they wanted for Christmas, they really couldn’t tell her because they have never had the opportunity to ask what they want. There has been a bank account set up to help them get back on their feet and make the necessary changes in their home to have a safe and maintained home. This family is a loving, Godly family. They are extremely humble and appreciate any help that they can get. They recognize the needs of all vets who are in a similar situation and only hope that one day they can help them. Please consider honoring this courageous vet who has served our country by helping his wife and five children get back on their feet.

www.dialchristmas.com 

Thanks for listening.