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Unsold Homes And Predatory Lending

Published 08/05/08 Jeff Bennett - Print Article
E-mail - editor@economyincisis.org

Many of the horrific tragedies stemming from the housing crisis have left the nation’s economy in a state of shambles and could have been avoided with common sense and stricter laws.

This crisis has left too many citizens without homes and unable to afford their mortgage. Now, information has been released documenting instances within Freddie Mac in 2004 where it was known questionable loans were provided to individuals with sub-par credit who were unable to repay them.

Continued lending of riskier loans became a common practice at Freddie to increase inflows of capital. To date, more than one million homes have been foreclosed this year with no end in sight to how many more citizens will be forced to relinquish their house.

The negligence committed through predatory lending has caused far too much destruction. The taxpayer may be asked to carry the burden and foot the bill for Fannie and Freddie, which will cost more than $25 billion. It has also left hundreds of thousands of homes unsold on the market while deserving individuals cannot attain the necessary credit to purchase them. New and needed laws are quickly coming into fruition to prevent future practices of predatory lending.

Source International Herald Tribune:

That chief executive, Richard Syron, in 2004 received a memo from Freddie Mac's chief risk officer warning him that the firm was financing questionable loans that threatened its financial health.

Today, Freddie Mac and the nation's other major mortgage finance company, Fannie Mae, are in such perilous condition that the U.S. government has readied a taxpayer-financed bailout that could cost billions. Though the current housing crisis would have undoubtedly caused problems at both companies, Freddie Mac insiders say Syron heightened those perils by ignoring repeated recommendations.

…

"He said we couldn't afford to say no to anyone," Andrukonis said. Over the next three years, Freddie Mac continued buying riskier loans.

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