Tags: IMF | Riskiest | Mortgage | Lenders | Biggest | Lobbyists

IMF: Riskiest Mortgage Lenders Biggest Lobbyists

Thursday, 31 Dec 2009 10:14 AM

In its new "A Fistful of Dollars" report, the International Monetary Fund concludes that the riskiest mortgage lenders were also the most active lobbyists in Washington.

IMF researchers found that during 2000 to 2007, lenders lobbying more intensively on mortgage-related legislation — such as consumer protection laws and securitization — made more hazardous mortgage loans than those who lobbied less.

“These results suggest that lobbying may be linked to lenders expecting special treatments from policymakers, allowing them to engage in riskier lending behavior,” the report notes.

The big lobbyists originated mortgages with higher loan-to-income ratios, securitized a faster growing proportion of their loans, and had faster growing loan portfolios.

Not surprisingly, lobbyist lenders’ stock suffered more during the financial crisis and delinquency rates are higher in areas where lobbying lenders’ mortgage lending grew the fastest.

New research by Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that Fannie Mae and Freddie Mac began buying risky loans as early as 1993, The Wall Street Journal reports.

Pinto also says that Fannie and Freddie routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A.

By the end of 2008, the two government-sponsored enterprises, or GSEs, held or guaranteed approximately 10 million subprime and Alt-A mortgages and mortgage-backed securities, risky loans with a total principal balance of $1.6 trillion that are now defaulting at unprecedented rates.

Since 2008, under government control, the two agencies have continued to buy dicey mortgages in order to stabilize housing prices.

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In its new A Fistful of Dollars report, the International Monetary Fund concludes that the riskiest mortgage lenders were also the most active lobbyists in Washington. IMF researchers found that during 2000 to 2007, lenders lobbying more intensively on mortgage-related...
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