Sunday, October 19, 2008

Clinton HUD Sec. Cisneros Caused the Housing Mortgage Mess – New York Times
THE RECKONING, Building Flawed American Dreams by David Streitfeld and Gretchen Morgenson New York Times front page article, Sunday, October 19, 2008 includes:
■ Clinton administration’s top housing official Henry G. “Cisneros loosened mortgage restrictions so first-time buyers could qualify for loans they could never get before.”
■ “he encouraged the unprepared to buy homes — part of a broad national trend with dire economic consequences.”
■ “He reflects often on his role in the debacle, he says…’I’ve been waiting for someone to put all the blame at my doorstep’,”
■ “It was, he argues, impossible to know in the beginning that the federal push to increase homeownership would end so badly.”
■ “until recently getting a mortgage was a challenge for low-income families. Many of these families were minorities, which naturally made the subject of special interest to Mr. Cisneros, who, in 1993, became the first Hispanic head of the Department of Housing and Urban Development.”
■ “Thus was born the National Homeownership Strategy, which promoted ownership … HUD, an agency that greased the mortgage wheel for first-time buyers by insuring billions of dollars in loans. Families no longer had to prove they had five years of stable income”
■ “Countrywide signed a government pledge to use ‘proactive creative efforts’ to extend homeownership to minorities and low-income Americans. … Countrywide … set up a subprime unit in 1996.”
■ “There were real gains during the Clinton years, as homeownership rose to 67.4 percent in 2000 from 64 percent in 1994. Hispanics and African-Americans were the biggest beneficiaries.”
■ “Mr. Cisneros … acknowledges that ‘people came to homeownership who should not have been homeowners’.”
■ “lenders were allowed to hire their own appraisers rather than rely on a government-selected panel.”
■ “two more changes HUD made on Mr. Cisneros’s watch: they no longer had to interview most government-insured borrowers face to face or maintain physical branch offices.”
■ “Mr. Cisneros left government in 1997 …. HUD continued to draw attention in the news media and among consumer advocates for an overly lenient posture toward the housing industry.”
■ “Then, capitalizing on a housing expansion he helped unleash, he joined the boards of a major builder, KB Home, and the largest mortgage lender in the nation, Countrywide Financial — two companies that rode the housing boom, drawing criticism along the way for abusive business practices.”
■ “Countrywide expanded subprime lending aggressively while Mr. Cisneros served on its board. In September 2004, according to documents provided by a former employee, lending audits in six of Countrywide’s largest regions showed about one in eight loans was ‘severely unsatisfactory’ because of shoddy underwriting.”
■ “Mr. Cisneros says his mistake was not the greed that afflicted many of his counterparts in banking and housing; it was unwavering belief.”


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