Quote:
Originally Posted by spence
I'm well aware of your background.
But all the chart indicates is the relationship between lending and interest rates. This relationship seems pretty obvious. The issue at hand is how much the CRA enabled this growth. Most of the non-political analysis I've read doesn't seem to support the argument that it had a major impact in new loans or defaults.
-spence
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Spence, most of the analysis is pretty straightforward and implicates declining underwriting standards. I'll save you the headache of going through all the federal reserve documents. Here is a snapshot of what happened.
Issuance by year, comparing 2006 vs. 2001:
2001: Traditional 30 year fixed rate mortgages = 57%
2001: Subprime = 7%
2001: Non-traditional loans: 3%
2006: Traditional 30 year fixed rate mortgages = 33%
2006: Subprime =19%
2006: Non-traditional: 14%
This is common-sense stuff. Remember that overall issuance quintupled from 2000. The growing mix of risky loans (as % of total underwriting) on sharply rising loan issuance was a recipe for disaster, as evidenced by sharply deteriorating loan delinquencies after 2004.
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