1992: The issue of Fannie and Freddie becoming involved in the mortgage-backed securities began when the Congress, according to a speech by Ben Bernanke, “adopted the Federal Housing Enterprises Financial Safety and Soundness Act, in effect, requiring Fannie and Freddie to devote a percentage of their lending to support affordable housing increasing their pooling and selling of such loans as securities.” (Ben S. Bernanke, “The Community Reinvestment Act: Its Evolution and New Challenges“, speech, Community Affairs Research Conference, Washington, D.C., Federal Reserve System 03/30/ 07)
1997: The Taxpayer Relief Act of 1997 allowed First Union Capital Markets and Bear, Stearns & Co. launch the first publicly available securitization of Community Reinvestment Act (CRA) loans, issuing $384.6 million of such securities. All carried Fannie Mae guarantee as to timely interest and principal. (“First Union Capital Markets Corp., Bear, Stearns & Co. Price Securities Offering Backed By Affordable Mortgages,”PR Newswire, AND “Fannie Mae increases CRA options,” American Bankers Association Banking Journal, November, 2000)
1998: Inflation-adjusted home price appreciation exceeded 10% per year in most West Coast metropolitan areas providing oxygen to the national housing bubble, according to Robert J. Schiller, Professor of Economics and Finance at Yale University. (“Understanding Recent Trends in House Prices and Home Ownership,” Kansas City Federal Reserve Bank 08/01/07)
July, 1999: The Department of Housing and Urban Development, led by Secretary Andrew Coumo, announced a Clinton-era program to provide $2.4 trillion for “affordable housing.” Also that month, Countrywide Financial and Fannie Mae signed a Strategic agreement which lead to Countrywide becoming the country’s leading mortgage provider to poor minorities. (Cuomo Announces Action To Provide $2.4 Trillion In Mortgages For Affordable Housing For 28.1 Million Families US Department of Housing and Urban Development 07/29/99)
September, 1999: Fannie Mae, according to an article in the New York Times, “eased the credit requirements on loans that it will purchase from banks and other lenders … and will encourage banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans.” (Steven A. Holmes, “Fannie Mae Eases Credit To Aid Mortgage Lending,” The New York Times 09/30/99)
2002: The financial markets had gone through the collapse of the dot-com bubble, but, the housing bubble continued to gain steam. At this point annual appreciation had reached its highest level in over 20 years. (Annual Home Appreciation Rates, California 2002-2003 ForecastChart.com)
2003: President George W. Bush supported the expansion of the low-income housing program leading Fannie Mae and Freddie Mac, to buy $81 billion in subprime securities. Later that year the Bush Administration pushed for new oversight of Fannie and Freddie to be conducted by the Department of the Treasury, but that move was blocked by Congress. (Carol D. Leonnig, “How HUD Mortgage Policy Fed The Crisis,” Washington Post, 06/10/08, Leonnig)
2004-2007: Many banks, mortgage underwriters and other lenders, 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.
February, 2007: the housing market had slowed to the point that Subprime industry collapsed leading more than 25 subprime lenders to declare bankruptcy, announce significant losses, or put themselves up for sale. (The Subprime Lending Crisis: Causes and Effects of the Mortgage Meltdown CCH Federal Banking, Bianco, 2008)
April 7, 2007: New Century Financial, the largest U.S. independent provider of home loans to people with poor credit histories, collapsed amid rising subprime delinquencies and defaults. (“New Century files for Chapter 11 bankruptcy,” CNN 04/03/07)
July, 2008: Congress enacts the Housing Economic Recovery Act of 2008 (“HERA”). This ac