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Monday, July 7, 2014

Mortgage Securitization 2000, $81 Billion in Subprime securities

Who Was Really to Blame-- Banks or the Government or Both?

There are many cases of people losing homes which have nothing to do with any subprime loans, but of errant and improper actions by banks that were caught up in actions so egregious, that laws had to be changed in various states to prevent banks from further causing so much harm.     


http://en.wikipedia.org/wiki/Timeline_of_the_United_States_housing_bubble
  • 1995–2001Dot-com bubble.
    • March 10, 2000: NASDAQ Composite index peaked, Dot-com bubble collapse begins.
  • 2000:
    • October: Oct. 2000 - HUD Sec Andrew Cuomo ANNOUNCES NEW REGULATIONS TO PROVIDE $2.4 TRILLION IN MORTGAGES FOR AFFORDABLE HOUSING FOR 28.1 MILLION FAMILIES
    • October: Fannie Mae committed to purchase and securitize $2 billion of Community Investment Act-eligible loans.[25][26]
    • November: Fannie Mae announced that the Department of Housing and Urban Development (“HUD”) would soon require it to dedicate 50% of its business to low- and moderate-income families" and its goal was to finance over $500 billion in Community Investment Act-related business by 2010.[27]
    • December:Commodity Futures Modernization Act of 2000 defines interest rates, currency prices, and stock indexes as "excluded commodities," allowing trade of credit-default swaps by hedge funds, investment banks or insurance companies with minimal oversight,[28] and contributing to 2008 crisis in Bear Stearns,Lehman Brothers, and AIG.[29][30][31]

2001 - 2006[edit]

  • 1997–2005:Mortgage fraud increased by 1,411 percent.[32]
  • 2000–2003Early 2000s recession (exact time varies by country).
  • 2001–2005: United States housing bubble (part of the world housing bubble).
  • 2001: US Federal Reserve lowers Federal funds rate eleven times, from 6.5% to 1.75%.[33]
  • 2002–2003: Mortgage denial rate of 14 percent for conventional home purchase loans, half of 1997.[18]
  • 2002: Annual home price appreciation of 10% or more in California, Florida, and most Northeastern states. "annual home growth value at highest rate since 1980" Retrieved 2008-10-06.
    • June 17:President G.W. Bush sets goal of increasing minority home owners by at least 5.5 million by 2010 through tax credits, subsidies and a Fannie Mae commitment of $440 billion to establish NeighborWorks America with faith-based organizations.[34]
  • 2003: Fannie Mae and Freddie Mac buy $81 billion in subprime securities.[16]
    • JuneFederal Reserve Chair Alan Greenspan lowers federal reserve’s key interest rate to 1%, the lowest in 45 years.[35]
    • September: Bush administration recommended moving governmental supervision of Fannie Mae and Freddie Mac under a new agency created within the Department of the Treasury. The changes were blocked by Congress.[36]
    • December: President Bush signs the American Dream Downpayment Act to be implemented under theDepartment of Housing and Urban Development. The goal was to provide a maximum downpayment assistance grant of either $10,000 or six percent of the purchase price of the home, whichever was greater. In addition, the Bush Administration committed to reforming the homebuying process that would lower closing costs by approximately $700 per loan. It was said it would further stimulate homeownership for all Americans.[37]

  • 2003-2007: The Federal Reserve failed to use its supervisory and regulatory authority over banks, mortgage underwriters and other lenders, who abandoned loan standards (employment history, income, down payments, credit rating, assets, property loan-to-value ratio and debt-servicing ability), emphasizing instead lender's ability to securitize and repackage subprime loans.[28]
  • 2004:
    • U.S. homeownership rate peaked with an all time high of 69.2 percent.[38]
    • HUD increased Fannie Mae and Freddie Mac affordable-housing goals for next four years, from 50 percent to 56 percent, stating they lagged behind the private market; from 2004 to 2006, they purchased $434 billion in securities backed by subprime loans.[16]
    • October:SEC effectively suspends net capital rule for five firmsGoldman SachsMerrill LynchLehman BrothersBear Stearns and Morgan Stanley. Freed from government-imposed limits on the debt they can assume, they levered up 20, 30 and even 40 to 1.[39]
  • 2004–2005: Arizona, California, Florida, Hawaii, and Nevada record price increases in excess of 25% per year.[citation needed]
  • 2005United States housing market correction ("bubble bursting").
    • February: The Office of Thrift Supervision implemented new rules that allowed savings and loans with over $1 billion in assets to meet their CRA obligations without investing in local communities, cutting availability of subprime loans.
    • September: The Federal Deposit Insurance Corporation, Federal Reserve, and the Office of the Comptroller of the Currency allow loosening of Community Reinvestment Act requirements for "small" banks, further cutting subprime loans.[17][40]
    • Fall: Booming housing market halts abruptly; from the fourth quarter of 2005 to the first quarter of 2006, median prices nationwide dropped off 3.3 percent.[41]
    • Year-end: A total of 846,982 properties were in some stage of foreclosure in 2005.[42]
  • 2006: Continued market slowdown. Prices are flat, home sales fall, resulting in inventory buildup. U.S. Home Construction Index is down over 40% as of mid-August 2006 compared to a year earlier. A total of 1,259,118 foreclosures were filed during the year, up 42 percent from 2005.[43]

2007[edit]

Year-to-year decreases in both U.S. home sales and home prices accelerates rather than slowing, with U.S. Treasury secretary Paulson calling "the housing decline ... the most significant risk to our economy."[44] Home sales continue to fall. The decrease in existing-home sales is the steepest since 1989. In Q1/2007, S&P/Case-Shiller house price index records first year-over-year decline in nationwide house prices since 1991.[45] Thesubprime mortgage industry collapses, foreclosure activity increases [46] and rising interest rates threaten to depress prices further as problems in the subprime markets spread to the near-prime and prime mortgage markets.[47]
  • February–ongoing2007 subprime mortgage financial crisis - more than 25 subprime lenders declare bankruptcy, announce significant losses, or put themselves up for sale.
  • April 2New Century Financial, largest U.S. subprime lender, files for chapter 11 bankruptcy.[48]
  • July 19Dow Jones Industrial Average closes above 14,000 for the first time in its history.[49]
  • August: worldwide "credit crunch" as subprime mortgage backed securities are discovered in portfolios of banks and hedge funds around the world, from BNP Paribas to Bank of China. Many lenders stop offering home equity loans and "stated income" loans. Federal Reserve injects about $100B into the money supply for banks to borrow at a low rate.
  • August 6American Home Mortgage files for chapter 11 bankruptcy.[50]
  • August 7: Democratic presidential front-runner Hillary Clinton proposes a $1 billion bailout fund to help homeowners at risk for foreclosure.[51]
  • August 16Countrywide Financial Corporation, the biggest U.S. mortgage lender, narrowly avoids bankruptcy by taking out an emergency loan of $11 billion from a group of banks.[52]
  • August 17: Federal Reserve lowers the discount rate by 50 basis points to 5.75% from 6.25%.[53]
  • August 31: President Bush announces a limited bailout of U.S. homeowners unable to pay the rising costs of their debts.[54] Ameriquest, once the largest subprime lender in the U.S., goes out of business.[55]
  • September 1–3: Fed Economic Symposium in Jackson Hole, WY addressed the housing recession that jeopardizes U.S. growth. Several critics argued that the Fed should use regulation and interest rates to prevent asset-price bubbles,[56] blamed former Fed-chairman Alan Greenspan's low interest rate policies for stoking the U.S. housing boom and subsequent bust,[57][58] and Yale University economist Robert Shiller warned of possible home price declines of 50 percent.[59]
  • September 14: A run on the bank forms at the United Kingdom's Northern Rock bank precipitated by liquidity problems related to the subprime crisis.[60]
  • September 17: Former Fed Chairman Alan Greenspan said "we had a bubble in housing" [61][62] and warns of "large double digit declines" in home values "larger than most people expect."
  • September 18: The Fed lowers interest rates by half a percent (50 basis points) to 4.75% in an attempt to limit damage to the economy from the housing and credit crises.[63]
  • September 28: Television finance personality Jim Cramer warns Americans on The Today Show, "don't you dare buy a home—you'll lose money," causing a furor among Realtors.[64]
  • September 30: Affected by the spiraling mortgage and credit crises, Internet banking pioneer NetBank goes bankrupt[65] NetBank Inc was the largest savings and loan failure since the tail end of the Savings and Loan crisis in the early 1990s.[66] and the Swiss bank UBS announced that it lost US$690 million in the third quarter.[67]
  • September 30:Prices fell 4.9 percent from September 2006 in 20 large metropolitan areas, according to Standard & Poor's/Case-Shiller indexes. This is the 9th straight month prices have fallen.[68]
  • October 10: US Government and private industry created Hope Now Alliance to help some sub-prime borrowers.[69]
  • October 15–17: A consortium of U.S. banks backed by the U.S. government announced a "superfund" or "super-SIV" of $100 billion to purchase mortgage-backed securities whose mark-to-market value plummeted in the subprime collapse.[70] Fed chairman Ben Bernanke expressed alarm about the dangers posed by the bursting housing bubble;[citation needed] Treasury Secretary Hank Paulson said "the housing decline is still unfolding and I view it as the most significant risk to our economy. ... The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth."[44]
  • October 31: Federal Reserve lowers the federal funds rate by 25 basis points to 4.5 percent and the discount window rate by 25 basis points to 5 percent.
  • October 31: Prices fell 6.1 percent from October 2006 in 20 large metropolitan areas, according to Standard & Poor's/Case-Shiller indexes. This is the 10th straight month prices have fallen.[68]
  • November 1: Federal Reserve injects $41B into the money supply for banks to borrow at a low rate. The largest single expansion by the Fed since $50.35B on September 19, 2001.
  • December 6: President Bush announced a plan to voluntarily freeze the mortgages of a limited number of mortgage debtors holding ARMs for 5 years. The plan run by the Hope Now Alliance. Its phone number is 1-888-995-HOPE.[71] Some experts criticized the plan as "a Band-Aid when the patient needs major surgery",[72]a "teaser-freezer",[73] and a "bail-out".[74][75]
  • December 11: Federal Reserve lowers the federal funds rate by 25 basis points to 4.25 percent and the discount window rate by 25 basis points to 4.75 percent.
  • December 12: Federal Reserve injects $40B into the money supply for banks to borrow at a low rate and coordinates such efforts with central banks from Canada, United Kingdom, Switzerland and European Union.
  • December 24: A consortium of banks officially abandons the U.S. government-supported "super-SIV" mortgage crisis bail-out plan announced in mid-October,[76] citing a lack of demand for the risky mortgage products on which the plan was based, and widespread criticism that the fund was a flawed idea that would have been difficult to execute.[76]
  • December 26: Standard & Poor's/Case-Shiller indexes of housing prices in 20 large metropolitan areas for October 2007 is released showing that for the 10th straight month priced have fallen, but most worrying is that the decline in home prices accelerated and spread to more regions of the country in October. "Since their peak in July 2006, home prices in the 20 regions have dropped 6.6 percent.[68] Economists' predictions of the total amount of home price declines from the bubble's peak range from moderate 10–15 percent to larger 30–50 percent price declines in some areas.[59][68]
  • December 28: The November U.S. Commerce Department's "stunningly weak report" released on December 28, 2007 show that year to year decreases in both U.S. home sales and home prices is accelerating rather than bottoming out due to "eminently rational behaviour" based on "a psychological point where expectations of future price declines have become entrenched".[77]
  • Year-end: A total of 2,203,295 foreclosures were filed on 1,285,873 properties during the year, up 75 percent from 2006. More than 1 percent of all households were in some stage of foreclosure during 2007, up from 0.58 percent in 2006.[78]

2008[edit]

Home sales continue to fall. Fears of a U.S. recession. Global stock market corrections and volatility.
  • January 2–21January 2008 stock market downturn.
  • January 24: The National Association of Realtors (NAR) announced that 2007 had the largest drop in existing home sales in 25 years,[79] and "the first price decline in many, many years and possibly going back to theGreat Depression."[80]
  • March 10: Dow Jones Industrial Average at the lowest level since October 2006, falling more than 20% from its peak just five months prior.
  • March 14–18: Dropping valuations of mortgage securities caused by skyrocketing default and foreclosure rates forces margin calls to the Wall Street bank Bear Stearns for debts the bank used to leverage mortgage issuances, and threatens BSC with bankruptcy and causes worldwide market jitters. In a weekend deal brokered by U.S. Treasury secretary Paulson and Fed chairman Ben BernankeJPMorgan bank agrees to purchase BSC for $2 per share, compared to their 2007 high of nearly $170, in exchange for the Federal Reserve Bank agreeing to accept BSC's devalued mortgage backed securities as collateral for public loans at the newly created Term Securities Lending Facility (TSLF), effectively providing a mechanism to bail out Wall Street banks threatened with insolvency.[81]
  • March 1–June 18: 406 people were arrested for mortgage fraud in an FBI sting across the U.S., including buyers, sellers and others across the wide-ranging mortgage industry.[82]
  • June 18: As the chairman of the Senate Banking Committee Connecticut's Christopher Dodd proposed a housing bailout to the Senate floor that would assist troubled subprime mortgage lenders such as Countrywide Bank, Dodd admitted that he received special treatment, perks, and campaign donations from Countrywide, who regarded Dodd as a "special" customer and a "Friend of Angelo." Dodd received a $75,000 reduction in mortgage payments from Countrywide.[83][84] The Chairman of the Senate Finance Committee Kent Conradand the head of Fannie Mae Jim Johnson also received mortgages on favorable terms due to their association with Countrywide CEO Angelo R. Mozilo.[83][85]
  • June 19: Ex-Bear Stearns fund managers were arrested by the FBI for their allegedly fraudulent role in the2007 subprime mortgage financial crisis. The managers purportedly misrepresented the fiscal health of their funds to investors publicly while privately withdrawing their own money.[86]
  • July 30Housing and Economic Recovery Act of 2008 changes the $250,000/$500,000 capital gains exclusion applying to second homes and rental property.[87]
  • Year-end: A total of 3,157,806 foreclosures were filed on 2,330,483 properties during the year, up 81 percent from 2007. More than 1.84 percent of all households were in some stage of foreclosure during 2008, up from 1.03 percent in 2007.[88]

2009[edit]

  • Year-end: A total of 3,957,643 foreclosures were filed on 2,824,674 properties during the year, up 21 percent from 2008 . More than 2.21 percent of all households were in some stage of foreclosure during 2009, up from 1.84 percent in 2008.[89]

2010[edit]

  • Mid-year: A total of 1,961,894 foreclosures were filed on 1,654,634 properties during the first half of the year, up 5 percent from same period last year. More than 1.28 percent of all households were in some stage of foreclosure during the first half of 2010.[90]
  • Year-end: A total of 3,825,637 foreclosures were filed on 2,871,891 properties during 2010, up nearly 2 percent from the previous year. More than 2.23 percent of all households were in some stage of foreclosure during 2010.[91]

2011[edit]

  • Mid-year: A total of 1,170,402 properties received foreclosure notices during the first half of the year, down 29 percent from the same period in 2010. 0.9 percent of all households were in some stage of foreclosure during the first half of 2011.[92]
  • Year-end: A total of 1,887,777 properties received foreclosure notices during the year, down 34 percent from last year. 1.45 percent of all households were in some stage of foreclosure during 2011, compared to 2.23 percent in 2010. .[93]

2012[edit]

  • Mid-year: A total of 1,045,801 properties received foreclosure notices during the first half of the year, a two percent increase over the previous six months, but down 11 percent from the same period in 2011. 0.79 percent of all households were in some stage of foreclosure during the first half of 2012.[94]
  • Year-end: A total of 1,836,634 properties received foreclosure notices during the year, down 3 percent from last year. 1.39 percent of all households were in some stage of foreclosure during 2012, compared to 1.45 percent in 2011.[95]

2013[edit]

  • Mid-year: A total of 801,359 properties received foreclosure notices during the first half of the year, a 19 percent decrease over the previous six months, and 23 percent down from the same period in 2012. 0.61 percent of all households were in some stage of foreclosure during the first half of 2013.[96]
  • Year-end: A total of 1,361,795 properties received foreclosure notices during the year, down 26 percent from last year. 1.04 percent of all households were in some stage of foreclosure during 2012, compared to 1.39 percent in 2012.[97]
  • Price Appreciation: Nationwide median price for single family home appreciated 12.5% from 3Q 2012 to 3Q 2013, with some cities experiencing over 40% appreciation. [98] In November 2013, Fitch Ratings sustainable home price model estimated that nationally, home prices are 17% overvalued, however this is concentrated in some markets more than others.[99]

See also[edit]

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