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Sunday, July 17, 2011

How the American dream became a nightmare

For many years it was said - "Owning a home was an American dream," but over the last few years I don't believe that belief is shared by many anymore. It has always been a good thing when a person could stake out a little piece of parcel of land and build upon it. Let's face it, there's not much that feel better than knowing "you" are that person that have the sole right to do as you please on that piece of property that you are in the possession of. When the troops came home from the second World War many houses were put up to accommodate their arrival and to start or expand  their families. America was booming with manufacturing and other domestic trades. But as you might imagine, as time progressed, families started to want more than they could afford and the Federal government working with and through other entities began to explore ways in which they (the government) could help the citizens get into a home of their own. The National Mortgage Association (Fannie Mae) got its start in 1938 during the Great Depression as part of the New Deal. It was designed to provide local banks with federal money (tax payers) to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing. Now, this was all well and fine if the borrower had the means to pay for that which he wanted to buy. In the latest fiasco of bundling and other techniques that only someone working on Wall Street could imagine in the dead of night were employed to steer business into the coral that only they could understand. It's no wonder the symbol on Wall Street is the iconic Bull, because what the bankers, lawyers, derivative traders and the like handed the tax payers of this country comes from the rear end. In 1970, the federal government (Congress) authorized Fannie Mae to purchase private mortgages, i.e. those not insured by the FHA, VA, or FmHA, and created the Federal Home Loan Mortgage Corporation (FHLMC). In 1992, President George HW Bush signed the Housing and Community Development Act. The Act amended the charter of Fannie Mae and Freddie Mac to reflect Congress view that the Government Sponsored Enterprise (GSE) "have an affirmative obligation to facilitate the financing of affordable housing for low income and moderate families. In 1999 Fannie Mae came under pressure from the Clinton administration to expand mortgage loans to low and moderate income borrowers. Getting into a financial dilemma is not like getting into an automobile crash, the former normally take some time for one to realize just how much of a mess they are in, where as the latter is sudden. With many  borrowers entering into a loan that should have never taken place because of their inability to repay or being steered into a sub-prime loan where as they qualified for a conventional loan but was not offered it has caused many homeowners dream to become a nightmare and the saga continues. 


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