Who's at Fault, Really? - Howard Voyles / HousingMatrix.com

New York Mayor Michael Bloomberg has it right when he recently said, “It was not the banks that caused the mortgage crisis. It was, plain and simple, Congress, who forced everybody to go and give mortgages to people who were on the cusp. …They were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will.”

By 1992 Fannie and Freddie, who have access to Washington’s deep pockets were funding over 70% of the mortgage securitizations.

And no wonder, they were given a Congressional mandate through the Department of Housing and Urban Development began setting “affordable” mortgage goals for both agencies.

That same year Countrywide stepped up their courtship with Fannie Mae and partner with the agency as the buying conduit to build revenues of $92 million in 1992, to $860 million in 1996, to $2 billion in 2000. This made Countrywide the nation’s largest mortgage lender.

Not to go unnoticed that year, Fannie Mae Foundation honored Countrywide for “Outstanding Achievement” in the industry and their annual report noted: “When necessary – in cases where applicants have no established credit history, for example – Countrywide uses nontraditional credit, a practice now accepted by [Fannie].”

In 2004, at the height of the housing boom, Countrywide was Fannie Mae’s largest supplier and by 2006 accounted for 26% of their loans, rising to 28% in 2007.

So up to the bust, Fannie Mae and Freddie Mac rewarded the likes of Countrywide for making bad loans to marginal borrowers.

Then the housing market blew up, thanks to the Wall Street and the private sector…Right?

Sorry, the mortgage lenders and Wall Street are not innocent in this debacle. But they were responding to the urging of the federal government.

Now, that the Genie is out of the bottle Washington is trying to cram it back in with more regulations and spending programs… throwing good after bad?

It is time for Washington to get out of the way and let the private sector sort out this mess. What do you think that will happen? Lawmakers are genetically engineered to pass more laws and regulations and the bureaucrats are just waiting there to enforce them. What are the markets and potential homeowners to do?