ANDREW CUOMO’S SCANDAL…
“Remarkably, Cuomo so far hasn’t had to answer for his scandalous past at HUD in his race against Republican challenger Carl Paladino. Only the Village Voice has looked into his role in the subprime scandal.
“Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis,” the Voice concluded. Cuomo refused to talk to the liberal paper.”
Posted 10/20/2010 07:05 PM ET
Subprime Scandal: Andrew Cuomo is running for governor of a state whose economy he helped sink when he ran the agency regulating Fannie and Freddie’s “affordable housing” mission.
The Democratic candidate’s role in the subprime mortgage scandal has not come out in New York’s gubernatorial debates or in the media. But he’s a chief reason Fannie and Freddie invested so heavily in the subprime loans still plaguing the mortgage giants and the overall economy.
As HUD secretary from 1997 to 2001, Cuomo pushed government-sponsored Fannie and Freddie to buy more home loans to low-income borrowers with impaired credit, in an attempt to end what he thought was lending discrimination against minorities. By 1999, they had committed $1 trillion in such high-risk loans.
But Cuomo still was not happy. So in 2000, he hiked their affordable-housing quota to 50%. That meant Fannie and Freddie had to devote fully half their mortgage financing to “underserved” borrowers with unproven or damaged credit. To help them meet that drastic new goal, Cuomo pressured them to relax their lending criteria and invest in subprime loans. He also authorized them to buy subprime securities.
This isn’t ancient history. The quota Cuomo set in 2000 remained in force through 2004 and beyond. Four years after he required Fannie and Freddie to commit half their lending to support affordable housing, they together commanded almost half the subprime securities market.
Credit quality suffered while risk soared. By 2005, most of the loans they’d bought had down payments of 3% or less. Many had no down payment at all. By 2008, Fannie and Freddie had drowned in a toxic soup of bad subprime paper.
Relevance to New York voters? Like the rest of taxpayers, they are on the hook for an estimated $1 trillion in losses in what could end up being the mother of all bailouts. Meanwhile, related foreclosures are still rattling Wall Street.
Subprime lender Countrywide Financial was Fannie’s biggest customer, and now it’s Bank of America’s biggest headache. BofA can’t finalize foreclosures and liquidate the toxic debt it inherited from Countrywide until it untangles the chain of title on the subprime mortgages its subsidiary originated and sold to Fannie.
Ex-Fannie chief credit officer Ed Pinto blames Cuomo for the mess. He says he and other HUD officials “should have known the risks were large,” adding that “Cuomo was pushing mortgage bankers to make loans and basically saying you have to offer a loan to everybody.” Why? Because like Bill Clinton, whose housing policies he was following, Cuomo championed the faulty notion that “racist” bankers erected barriers to minority homebuyers, creating a “mortgage gap.” And he was hellbent on closing it.
In 1998, Cuomo announced details of a settlement he’d struck with a mortgage lender HUD he probed for alleged lending bias. The deal included a record multibillion-dollar loan commitment to minorities. Cuomo admitted the borrowers “would not have qualified but for this affirmative action on the part of the bank.” He also expected higher default rates from the loans he mandated.
But he didn’t care about the risk he was injecting into the financial system, because he was carrying out “social justice.” What better way to do it than socializing mortgages?
Remarkably, Cuomo so far hasn’t had to answer for his scandalous past at HUD in his race against Republican challenger Carl Paladino. Only the Village Voice has looked into his role in the subprime scandal.
“Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis,” the Voice concluded. Cuomo refused to talk to the liberal paper.
Driving Fannie and Freddie into the risky subprime market to subsidize housing for those who could not afford it ranks as one of the worst policy disasters in U.S. history. New Yorkers deserve to know more about Cuomo’s role in the disastrous policy.
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