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Economy
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Title: Andrew Cuomo and Fannie and Freddie How the youngest Housing and Urban Development secretary in history gave birth to the mortgage crisis
Source: The Village Voice
URL Source: http://www.villagevoice.com/2008-08 ... -fannie-mae-and-freddie-mac/6/
Published: Aug 24, 2010
Author: Wayne Barret
Post Date: 2010-08-24 11:18:22 by Nebuchadnezzar
Keywords: None
Views: 49742
Comments: 71

Andrew Cuomo and Fannie and Freddie How the youngest Housing and Urban Development secretary in history gave birth to the mortgage crisis Comments (31) By Wayne Barrett Tuesday, Aug 5 2008

There are as many starting points for the mortgage meltdown as there are fears about how far it has yet to go, but one decisive point of departure is the final years of the Clinton administration, when a kid from Queens without any real banking or real-estate experience was the only man in Washington with the power to regulate the giants of home finance, the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), better known as Fannie Mae and Freddie Mac. Photograph by Staci Schwartz. Baby Models: Pescha and Sophia Samiljan Details Research assistance by Samuel Breidbart, Brian Colgan, Tatyana Gulko, Sarah Lavery, and Amanda Stutt Related Content

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. He took actions that—in combination with many other factors—helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded "kickbacks" to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why.

What he did is important—not just because of what it tells us about how we got in this hole, but because of what it says about New York's attorney general, who has been trying for months to don a white hat in the subprime scandal, pursuing cases against banks, appraisers, brokers, rating agencies, and multitrillion-dollar, quasi-public Fannie and Freddie.

It all starts, as the headlines of recent weeks do, with these two giant banks. But in the hubbub about their bailout, few have noticed that the only federal agency with the power to regulate what Cuomo has called "the gods of Washington" was HUD. Congress granted that power in 1992, so there were only four pre-crisis secretaries at the notoriously political agency that had the ability to rein in Fannie and Freddie: ex–Texas mayor Henry Cisneros and Bush confidante Alfonso Jackson, who were driven from office by criminal investigations; Mel Martinez, who left to chase a U.S. Senate seat in Florida; and Cuomo, who used the agency as a launching pad for his disastrous 2002 gubernatorial candidacy.

With that many pols at the helm, it's no wonder that most analysts have portrayed Fannie and Freddie as if they were unregulated renegades, and rarely mentioned HUD in the ongoing finger-pointing exercise that has ranged, appropriately enough, from Wall Street to Alan Greenspan. But the near-collapse of these dual pillars in recent weeks is rooted in the HUD junkyard, where every Cuomo decision discussed here was later ratified by his Bush successors.

And that's not an accident: Perhaps the only domestic issue George Bush and Bill Clinton were in complete agreement about was maximizing home ownership, each trying to lay claim to a record percentage of homeowners, and both describing their efforts as a boon to blacks and Hispanics. HUD, Fannie, and Freddie were their instruments, and, as is now apparent, the more unsavory the means, the greater the growth. But, as Paul Krugman noted in the Times recently, "homeownership isn't for everyone," adding that as many as 10 million of the new buyers are stuck now with negative home equity—meaning that with falling house prices, their mortgages exceed the value of their homes. So many others have gone through foreclosure that there's been a net loss in home ownership since 1998.

It is also worth remembering that the motive for this bipartisan ownership expansion probably had more to do with the legion of lobbyists working for lenders, brokers, and Wall Street than an effort to walk in MLK's footsteps. Each mortgage was a commodity that could be sold again and again—from the brokers to the bankers to the securities market. If, at the bottom of this pyramid, the borrower collapsed under the weight of his mortgage's impossible terms, the home could be repackaged a second or a third time and either refinanced or dumped on a new victim.

Those are the interests that surrounded Cuomo, who did more to set these forces of unregulated expansion in motion than any other secretary and then boasted about it, presenting his initiatives as crusades for racial and social justice.

Cuomo was shrewd enough at the age of 24 to manage his father's successful 1982 gubernatorial campaign, and to help run his government. The only statewide campaign his father ever lost was in 1994—when Andrew was at HUD as an assistant secretary and couldn't manage it. He is as quick and as silver-tongued as the elder Cuomo he sounds so much like, but HUD was a test of his depth, so he found himself balancing competing forces and making deals on a grander scale than he was used to in Albany. We now know that he was also making history.

In 2000, Cuomo required a quantum leap in the number of affordable, low-to-moderate-income loans that the two mortgage banks—known collectively as Government Sponsored Enterprises—would have to buy. The GSEs don't actually sell mortgages to borrowers. They buy them from banks and mortgage companies, allowing lenders to replenish their capital and make more loans. They also purchase mortgage-backed securities, which are pools of mortgages regularly acquired by the GSEs from investment firms. The government chartered these banks to pump money into the mortgage market and, while they did it, to make a strong enough profit to attract shareholders. That created a tug-of-war between their efforts to maximize shareholder value, which drove them toward high-end mortgages, and their congressionally mandated obligation to finance loans for those who needed help. The 1992 law required HUD's secretary to make sure housing goals were being met and, every four years, set new goals for Fannie and Freddie.

Cuomo's predecessor, Henry Cisneros, did that for the first time in December 1995, taking a cautious approach and moving the GSEs toward a requirement that 42 percent of their mortgages serve low- and moderate-income families. Cuomo raised that number to 50 percent and dramatically hiked GSE mandates to buy mortgages in underserved neighborhoods and for the "very-low-income." Part of the pitch was racial, with Cuomo contending that Fannie and Freddie weren't granting mortgages to minorities at the same rate as the private market. William Apgar, Cuomo's top aide, told The Washington Post: "We believe that there are a lot of loans to black Americans that could be safely purchased by Fannie Mae and Freddie Mac if these companies were more flexible."

While many saw this demand for increasingly "flexible" loan terms and standards as a positive step for low-income and minority families, others warned that they could have potentially dangerous consequences. Franklin Raines, the Fannie chairman and first black CEO of a Fortune 500 company, warned that Cuomo's rules were moving Fannie into risky territory: "We have not been a major presence in the subprime market," he said, "but you can bet that under these goals, we will be." Fannie's chief financial officer, Timothy Howard, said that "making loans to people with less-than-perfect credit" is "something we should do." Cuomo wasn't shy about embracing subprime mortgages as a possible consequence of his goals. "GSE presence in the subprime market could be of significant benefit to lower-income families, minorities, and families living in underserved areas," his report on the new goals noted. Photograph by Staci Schwartz. Baby Models: Pescha and Sophia Samiljan Details Research assistance by Samuel Breidbart, Brian Colgan, Tatyana Gulko, Sarah Lavery, and Amanda Stutt Related Content

Moody's didn't sound an immediate alarm, but its senior analyst, Stanislas Rouyer, said the expansion into subprime loans and the lower level of documentation that came with them could mean that Fannie 's loss levels would increase in the future. Steven Holmes, a reporter from the Times's Washington bureau, wrote at the time: "In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But," he added, "the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980s."

When HUD released the next set of goals in 2004, it reported that after Cuomo's previous edict, there had been a sudden spurt of GSE subprime investment, "partly in response to higher affordable-housing goals set by HUD in 2000." Fannie had gone from $1.2 billion in subprime-mortgage and securities purchases in 2000 to $9.2 billion in 2001 and $15 billion in 2002. Freddie's numbers were murkier, but clearly also on the rise. In 2003 alone, the two bought $81 billion in subprime securities—which also count against the goals.

Fannie also developed a "flexible" product line, providing up to 100 percent financing and requiring borrowers to make as little as a $500 contribution, and bought $13.7 billion of those loans in 2003. In addition to subprime loans and securities, both banks burst into the "alt-a" market, making alternative products easily available to borrowers who had slightly better credit histories than subprime borrowers, but were unwilling to provide full documentation of their financial histories. (It was the "alt-a" investments that recently brought down the private bank IndyMac.) These risky adventures, according to the 2004 HUD report, prompted Freddie to claim that "the increased goals created tension in its business practices between meeting the goals and conducting responsible lending practices," a self-serving attempt to plant the blame back on HUD.

After this initial uptick, the two banks purchased $434 billion in securities backed by subprime loans between 2004 and 2006. The Washington Post noted this June that the GSEs' aggressive acquisitions "created a market for more such lending" by others, feeding the fire. No one knows just how big a bite the subprime mess is now taking out of the GSEs, or how much of that portfolio will ultimately go bad, but it has become axiomatic that, whatever the total, it is too much, since it will have seriously shaken confidence in these two linchpin institutions.

That June Post story focused its critical reassessment of HUD's affordable-housing goals on the department's 2004 decision—during the Bush re-election campaign—to juice them up again, pushing the target to 56 percent by 2007. Though the story never mentioned Cuomo—whose three-year, eight-point goal hike exceeded Bush's more gradual six-point increase—it did quote his top aide William Apgar, who helped craft the 2000 policy, saying: "It was a mistake." Apgar, who now teaches at Harvard, conceded, "In hindsight, I would have done it differently."

But raising the affordable-housing goals was only half the Cuomo story.

The HUD secretary is also required to produce voluminous rules that govern how the GSEs meet those goals, and the 187-page rules Cuomo issued opened the door to abuse.

The rules explicitly rejected the idea of imposing any new reporting requirements on the GSEs. In other words, HUD wanted Fannie and Freddie to buy risky loans, but the department didn't want to hear just how risky they were.

HUD conceded in the rules that many consumer groups had urged it to insist that the GSEs provide "loan-level data" revealing how many of their loans contained high interest rates, prepayment penalties, or other requirements that presaged bad loans.

Indeed, in March 2000, HUD had acknowledged that the new goal-driven pressure on the GSEs might "warrant increased monitoring and additional reporting." But when the final rules were adopted in October, that momentary caution had been abandoned: "HUD is not establishing any requirements for additional data to carry out this rule." The report explained that the GSEs "objected" to information mandates "related to their purchases of high-cost mortgages," so HUD decided against imposing "an undue additional burden." HUD would have no way of telling how abusive the low-income mortgages it was mandating might be.

Reporting from the GSEs to HUD "does not provide the details . . . [for] effective monitoring of their subprime activity," warned Allen Fishbein in a housing journal two years after the rules were published. Fishbein, who was the senior advisor at HUD for GSE oversight under Cuomo and is now general counsel at the Center for Community Change, said that HUD "should have the necessary information" to determine if the GSEs were purchasing "loans with predatory features," but that it did not.

In a Voice interview, Fishbein, who was reluctant to say a critical word about the regulations he and Cuomo developed, did acknowledge that "it would have been a beneficial thing" to have required such data from the GSEs in the 2000 rule-making, though he contended that HUD has "the general authority to collect it" without a rule-making.

"I certainly would have favored more data in hindsight," he said. But the failure to include reporting requirements that many consumer groups championed at the time was an invitation then—and not just in retrospect—for the GSEs to hide bad loans. Fishbein prefers to blame the lack of verification on the Bush administration, but when Cuomo issued his rules barely a week before the 2000 election, he failed to put any data demands in place that would have alerted the next administration, regardless of who it was, to any risks in the new GSE portfolio. In fact, Bush's HUD did institute some reporting requirements in 2004, but then never revealed much of what was learned.

But Cuomo wasn't only stifling data that HUD could use to keep the GSEs out of trouble. He also went against his own recommendation—in a report issued jointly with the Treasury Department a few months earlier—that called for a prohibition against the GSEs purchasing loans "with high costs and/or predatory features." Instead, Cuomo decided without explanation to adopt rules that prohibited nothing.

Consumer groups then contended that if HUD wasn't going to bar bad loans, it should at least penalize the GSEs for every one they made. Cuomo declined to do that as well, instead declaring that loans with specific odious terms would not be counted against the goals. His allies have pointed to this refusal as evidence of his toughness, but Cuomo couldn't very well reward Fannie and Freddie for purchasing bad loans. And the absence of any reporting requirements made it virtually impossible to figure out which loans shouldn't be credited anyway.

Cuomo also adopted Fannie and Freddie's standards of what a bad loan was, almost verbatim. For example, HUD accepted Fannie's many caveats on prepayment penalties—a predatory practice long condemned by housing advocates. The final rules allowed the GSEs to take goal credit on some loans that carried these penalties, even though these sky-high charges often either bound borrowers to bad mortgages or cost them dearly to climb out.

It should come as no surprise, then, that Fannie conceded in 2005 that 10 percent of its loans had such prepayment penalties. HUD's next rulemaking, in 2004, freely acknowledged that "certain practices were not enumerated in the regulations adopted in 2000," including certain kinds of prepayment penalties, and that they "often lock borrowers into disadvantageous loan products." But once again, HUD did nothing about those practices.

While fashioning these final rules, Cuomo wrestled with the octopus-like reach of Fannie and Freddie, which spend tens of millions each year on lobbying firms. The GSEs hired 88 lobbying firms over six years, three of which were friendly enough with Cuomo to give to his campaign committee later.

Just a look at the New Yorkers tied to the GSEs must have impressed Cuomo, who, after all, would soon return to New York politics. Harold Ickes, the former Clinton chief of staff and a Democratic power broker in this state, was on the Freddie board. Tom Downey, the former New York congressman who would later donate $21,894 to Cuomo, was a Fannie lobbyist. And Al D'Amato, the former banking committee chair who'd shepherded Cuomo's appointment through the Republican Senate, was a Fannie consultant.

But Cuomo was closer to the GSEs' most formidable opponents—namely, the Mortgage Bankers Association (MBA), regarded as the most influential private real-estate finance lobby in Washington, and the upstart FM Watch, a new coalition of heavyweights from Chase to AIG. Both of these groups wanted Cuomo to put as much affordable-housing pressure on the GSEs as he could, and they said so in their releases and newsletters. They opposed what they called Fannie and Freddie's profit-driven "mission creep," which they saw as a publicly subsidized invasion of their high-end mortgage market. Their goal was the same as Cuomo's: to push Fannie and Freddie deeper into low-end mortgages, consistent with the mission statement in their charters.

Two of Cuomo's aides who had also worked for his father, Howard Glaser and Todd Howe, left HUD to take top jobs at the association in the middle of the GSE rule-making (the MBA parted company with both once Andrew was out of HUD). In 2000, a year after Howe joined the association, he described how he had helped build a grassroots MBA effort to pressure Congress and others into supporting HUD in what he described as the "battle" being "waged against Fannie Mae." Glaser's Harvard alumni biography says he "played a key role in negotiating a multi-billion-dollar increase in GSE affordable-housing goals." He and Howe—who insist they had "no contact" with Cuomo on the MBA's behalf—have given $3,000 to Cuomo in recent years.

The MBA also retained Brad Johnson, another ex–Mario Cuomo aide described as his "eyes and ears" in Washington, to lobby HUD while Andrew was secretary. Three other long-term HUD staffers who worked there under Cuomo—including the lawyer who was the contact person listed on the GSE rules—also ended up at the MBA or one of its lobbying firms. Angelo Mozilo, the CEO of Countrywide who's become the face of the subprime scandal, was at one point the MBA's president and a member of its executive committee throughout Cuomo's HUD tenure. He and other MBA leaders became Cuomo donors, with Mozilo donating $1,000 twice—in 2002 and 2006.

Describing HUD as "the court of last resort" and "a key ally," MBA president Kit Sumner hailed Cuomo shortly after the announcement of the GSE goals at the organization's annual convention, which usually draws 6,000 lenders and brokers. Cuomo spoke at the convention every year during his tenure, appeared there as recently as 2004, and was listed on the agenda for 2005, though the MBA says he didn't attend. His father was a paid convention speaker in 2004 as well. Cuomo was regarded as such a friend of the MBA that National People's Action, a Chicago-based housing group, staged protests unrelated to the GSEs at the MBA, HUD, and Cuomo's home in McLean, Virginia. The group's spokesman declared: "We know that the MBA has a lot of pull with Andrew Cuomo, and we tried to convince them to back off. MBA said they are fully committed to HUD."

FM Watch's lobbyists during the Cuomo years at HUD included Tony Podesta, the brother of Clinton's chief of staff, and the law firm Akin Gump, where Cuomo has so many allies that his campaign committee has collected $67,550 in contributions there since he formed it in early 2001. Joel Jankowsky, head of the Akin lobbying group that represented this single-issue group, gave $7,500 to Cuomo—most of it within weeks after the formation of Andrew's committee in 2001. Jankowsky is a close personal friend of Dan Glickman, who joined Akin when he stepped down as agriculture secretary just as Cuomo left HUD in 2001. Glickman's wife Rhoda was Cuomo's deputy chief of staff, and the two Glickmans donated $10,500 to Cuomo. They also covered $23,900 of their own expenses traveling and fundraising for the campaign, which listed that as an in-kind contribution.

These groups clearly had Cuomo's ear, but he was also being pushed to commit the GSEs to more affordable and, in some cases, riskier loans by consumer organizations—groups like ACORN, which has considerable clout in New York elections. The housing advocates were happy with Cuomo's goal-setting at HUD, but the lax reporting requirements and predatory-lending loopholes suggest who was actually driving his agenda. The MBA and FM Watch didn't care about these issues; advocates did. When the final rules were announced, most of the consumer groups said little about these loopholes, but Bruce Marks, CEO of the Neighborhood Assistance Corporation, criticized the tepid enforcement: "What you're seeing is Fannie and Freddie flexing their muscle," he observed. "They have more money than God, and they use it."

Cuomo wouldn't answer Voice questions for this piece, but he was briefed on every issue raised in it and discussed his responses with Glaser, who replied in both interviews and e-mails. Glaser insisted that raising the GSE goals "was a good thing then and now," contending that "no one ever criticized Cuomo for not taking on the fight at HUD" and blaming "the Bush team that never even tried" for the mistakes that have led to the current debacle.

He dismissed the failure to include any reporting requirements in the rules by confusing it with a parallel path that Cuomo took in his final two years—an eventually successful effort to get the GSEs to supply HUD with data on the terms of 10 million loans from their automated underwriting (AU) system. Glaser contends that the GSE's ad hoc decision to turn over that information—which no court was even asked to order—obviated the need to put any data requirements in a binding rule. It's odd that Glaser makes that argument now, since Cuomo never did so when he was making the rules, and when he went on for pages about whether or not to require loan data. In fact, Cuomo's handling of the AU data itself has long been a sore spot. Fishbein's 2002 article noted that HUD completed its review of the data in 2000, but "inexplicably has yet to release the results." (Fishbein says he doesn't know if this was Cuomo's fault.)

Glaser argues that "mortgage bankers thought Cuomo was the toughest secretary they had ever known," especially Mozilo. But Cuomo was celebrated in issue after issue of the MBA's weekly publication, Real Estate Finance Today, and his MBA alliance went well beyond the GSEs—in particular, the steps he took to reshape the Federal Housing Administration, which guarantees millions of mortgages. These actions, too, sought to maximize homeownership—this time by opening the FHA's door to borrowers unable to qualify in the past, a lofty goal that has also helped spur an FHA delinquency rate that exceeds its subprime competitors. The MBA cheered each of these Cuomo decisions—dramatically raising the limits on the size of FHA loans, slicing the down-payment requirement to 3 percent, and cutting the agency's insurance-premium costs virtually in half. Cuomo even supported down-payment and closing-cost assistance programs that allowed FHA borrowers to buy a home without spending a cent of their own money up front.

To the MBA, bigger FHA guarantees on the loans that MBA members granted, combined with easier terms, was a recipe for greater profits. That's why Cuomo announced the insurance cut at their convention shortly before he left office. And that's why the front page of the MBA paper was headlined "MBA Welcomes New FHA Ceiling" when he raised the loan limits, eventually nearly doubling them to $235,000. His decision to grant such large FHA mortgages was, as the GSEs pointed out, in stark contrast with his efforts to drive them into the affordable market. Indeed, it was GSE opposition to the new FHA ceilings that sparked the firefights between them and the Cuomo/MBA combine. At first, the Bush administration echoed Cuomo's FHA policies, but when the crisis hit, it began condemning down-payment assistance and urging a sliding, risk-based scale of insurance premiums.

Cuomo's fellow attorney generals in Illinois, California, and Massachusetts have filed lawsuits against Countrywide and other mortgage companies in the current crisis. And those lawsuits are aimed in part at the sucker punch called "yield-spread premium" that was thrown at millions of households who got mortgages from brokers. Brokers have taken over the origination market in recent years by aggressively advertising, and they decide which lenders get the business.

Cuomo hasn't sued anybody over these outrageous payments to brokers—which are based on the "spread" between the high interest rate that brokers persuade unwary borrowers to accept and the par or going rate they would ordinarily have to pay. If Cuomo did sue, it might make for an awkward moment or two in court, since it was Cuomo who issued a rule in 1999 that dozens of federal courts have since found legalized the yield-spread premiums. He was the first HUD secretary to say they were "not illegal per se," nullifying most of the 150 class-action lawsuits against them filed across the country.

There are certainly those who believe that YSPs are at the heart of the crisis. Senator Chris Dodd, the chair of the banking committee, is trying to ban them, prodded by the fact that up to 90 percent of subprime mortgages quietly triggered these lucrative payments. When the Federal Reserve recently considered barring them and then backed off, a Times editorial charged that it had "balked on banning the practice whereby brokers maximize their commissions by signing up borrowers for the most expensive loan possible, even when the borrower qualifies for a cheaper." The Illinois attorney general, Lisa Madigan, accused Countrywide of structuring their deals with brokers "in a manner that virtually guaranteed" that they were "more concerned with getting the highest YSP possible than getting their borrowers the best loan possible," oblivious to "the possible fraud that this financial incentive would motivate."

Actually, no one has described what's wrong with YSPs better than Andrew Cuomo himself. In his first year as HUD secretary, when his earliest proposal to reform YSPs attracted a Times story, he said: "Too often consumers think the brokers are working for them. In reality, they are working against them." Cuomo's proposed rules that year did not go so far as to prohibit YSPs, but they did require brokers to enter into a written contract with borrowers; the brokers had to check one of three boxes, revealing whether they represented borrowers only or were receiving lender fees. Then they had to disclose the size of the fees, which usually far exceeded what the borrowers were paying.

Cuomo said the point was "to discourage practices that give financial incentives to mortgage brokers that offer higher-priced loans than what are generally available in the marketplace." The MBA, which includes brokers and other industry organizations, got Congressional leaders to oppose it, and Cuomo retreated. A year and a half later, Cuomo adopted a new rule that did the opposite of his first proposal. "The Lending Industry Welcomes Policy Clarification" was the subhead on the MBA's cover story. Cuomo's 1999 rule, issued under pressure from Congress to come up with a policy statement one way or the other because of all the lawsuits, found that YSPs were legal if "reasonably related to the value of the goods" actually furnished or the services "actually performed" by brokers. The Cuomo rule-making also stated that "HUD does not view the name of the payment as the appropriate issue," even though calling something a premium based on a "yield" and a "spread" pretty much destroys any notion that the payment is tied to a good or a service.

Experts point out that borrowers usually have no idea that such a thing exists. In fact, Harvard law professor Howell Jackson discovered that the HUD booklet on settlement costs, issued for distribution to borrowers on Cuomo's watch, never mentions YSPs or how they are financed. "You may wish to ask about the fees that the mortgage broker will receive for its services" is as close as the booklet gets. "Critically absent," concludes Jackson, "is disclosure of the fact that the borrower finances the cost of YSPs through higher monthly mortgage payments." In 1997, Cuomo's proposed rule said that "a consensus" on only one point emerged from the negotiations with the department's broadly based advisory group, namely that "a rule should require that mortgage brokers inform borrowers of the role that they are serving early enough in the transaction to allow the consumer to shop for alternatives." Cuomo's final rule, much like the GSE edict, concluded: "This statement does not mandate disclosures beyond those currently required."

Glaser acknowledged that YSPs are a big cause of the crisis, though he pointedly insisted that they were "not the biggest," and he blamed them on Bush. He pointed out that Mel Martinez issued a YSP rule in late 2001, and claimed that he did so because Cuomo's ruling permitted class-action lawsuits. In fact, courts around the country had denied class-action certifications based on Cuomo's ruling, but a circuit court in Alabama decided that Cuomo's regulations were "ambiguous," which is why Martinez then issued what he called a "clarification" of the Cuomo regulations. But as a San Francisco circuit court found shortly thereafter, the Martinez clarification essentially "reiterated" Cuomo's position and "carries forward the same principles." A dissenting member of the same California panel deplored Cuomo's ruling and said "the phrase 'yield spread premium' " was a "way of avoiding calling a kickback a kickback."

The sad fact is that Cuomo's surrender on YSPs can't be excused as an unfortunate consequence of well-motivated policy, as his defenders have argued regarding his FHA and GSE actions. He has no cover for this one; it exposes him as an agent of special interests. And looking at his GSE and FHA policies through the lens of his retreat on these payoffs (which even Glaser, in a marked change from his MBA days, now condemns) suggests a pattern of compromised judgments.

With Martinez, who was hailed at a $250,000 fundraiser co-chaired by superlobbyist felon Jack Abramoff right after he stepped down as secretary, and Jackson, who is an FBI target now, following him at HUD, Cuomo was, in some respects, the last chance that borrowers had before the crisis hit. The grand ambitions unleashed when he orchestrated his father's win at such an early age propelled him to HUD's helm at a similarly early age, and convinced him to run for governor before he was ready. He seems more comfortable at 50 in the state attorney general's office than he has ever appeared in his public life, but the country will be living with his HUD mistakes, ill- or well-intended, for a long time to come.


Poster Comment: A long read, but the verdict is in. This crisis has it's genesis with the Democrats, not Bush.

And Cuomo, the fucking moron, will be elected Governor of New York!!!!!

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#1. To: Nebuchadnezzar (#0)

I love that this article appeared in one of American's longest running and leading left-wing weekly papers.

There is no question that the sub-prime mess was the fault of the Democrats - Clinton, Cuomo, Barney Frank and Chris Dodd.

There was a monetary component to the housing collapse too -- the fed keeping interest rates artificially low, which caused people to spend too much on their house, while starving their savings and investment.

While we're at it, let's talk about the tax system, which punishes savings and investment, but subsidizes mortgage payments.

The cheap interest rates and mortgage subsidies were also responsible for people taking out "second mortgages", not to remodel their homes, but to buy consumer goods and take vacations. Government policies created incentives for idiots to use their home equity like a checking account. A lot of these people are the ones who are under water on their mortgages right now.

All of these things, plus growing government spending and debt got us to where we are today.

Who is really going to fix them?

jwpegler  posted on  2010-08-24   11:36:00 ET  Reply   Trace   Private Reply  


#2. To: jwpegler (#1)

There is no question that the sub-prime mess was the fault of the Democrats - Clinton, Cuomo, Barney Frank and Chris Dodd.

Agreed. With each passing day we see the leftist-lie of "It's Bush's fault!" is nothing more than the BIG LIE.

Being a Democratic shill means you check your humanity at the door.

Nebuchadnezzar  posted on  2010-08-24   11:38:27 ET  Reply   Trace   Private Reply  


#3. To: Nebuchadnezzar (#0)

Seems that Bush and his five years with a republican congress either never happened, they were so inept they could stop a party in the minority or more likely they just weren't interested and actually supported the policies most of which the Pubby congresses themselves passed. So why would you want them back in power again?

"See in my line of work, you got to keep repeating things over and over and over again for the truth to sink in, to kind of catapult the propaganda." --- George W. Bush (Rochester NY, 5-24-2005)

mininggold  posted on  2010-08-24   11:40:51 ET  Reply   Trace   Private Reply  


#4. To: Nebuchadnezzar (#2) (Edited)

Agreed. With each passing day we see the leftist-lie of "It's Bush's fault!" is nothing more than the BIG LIE

It took two parties to tango, shill.

"See in my line of work, you got to keep repeating things over and over and over again for the truth to sink in, to kind of catapult the propaganda." --- George W. Bush (Rochester NY, 5-24-2005)

mininggold  posted on  2010-08-24   11:42:21 ET  Reply   Trace   Private Reply  


#5. To: jwpegler (#1)

There is no question that the sub-prime mess was the fault of the Democrats - Clinton, Cuomo, Barney Frank and Chris Dodd.

And Lott, Frisk and Hastert.

"See in my line of work, you got to keep repeating things over and over and over again for the truth to sink in, to kind of catapult the propaganda." --- George W. Bush (Rochester NY, 5-24-2005)

mininggold  posted on  2010-08-24   11:45:30 ET  Reply   Trace   Private Reply  


#6. To: mininggold (#5)

And Lott, Frisk and Hastert.

All of whom are major morons and political cowards.

How much of the sub-prime mess was created by new passed by Congress versus executive orders and regulations coming from the Executive branch?

jwpegler  posted on  2010-08-24   11:53:17 ET  Reply   Trace   Private Reply  


#7. To: mininggold, jwpegler, nebuchadneezer (#5)

And that's not an accident: Perhaps the only domestic issue George Bush and Bill Clinton were in complete agreement about was maximizing home ownership, each trying to lay claim to a record percentage of homeowners, and both describing their efforts as a boon to blacks and Hispanics.

Fannie, Freddie, Ginnie have ALWAYS been about keeping the price of housing up.

It's just that as the water's draining out of the pool do you now see the skeletons and wrecks.

Note the $700 Billion gotta have this or we blow up the economy. Not ONLY did Both parties agree, but both parties brought the bill up twice in the face of 85% anger.

* how is this market not down 300+ pts. today?!?!?

mcgowanjm  posted on  2010-08-24   11:53:47 ET  Reply   Trace   Private Reply  


#8. To: mcgowanjm (#7)

* how is this market not down 300+ pts. today?!?!?

The "plunge protection team" is at work. These bastards will do everything they can to keep this wreck afloat till 2012.

Why the American public hasn't marched on D.C. and burned the place down is the bigger question.

Their grand-childrens lives are being destroyed and the don't care.

Being a Democratic shill means you check your humanity at the door.

Nebuchadnezzar  posted on  2010-08-24   11:58:02 ET  Reply   Trace   Private Reply  


#9. To: mininggold (#5)

And Lott, Frisk and Hastert.

To a much lesser extent.

Being a Democratic shill means you check your humanity at the door.

Nebuchadnezzar  posted on  2010-08-24   12:00:20 ET  Reply   Trace   Private Reply  


#10. To: Nebuchadnezzar (#8)

Why the American public hasn't marched on D.C. and burned the place down is the bigger question.

Their grand-childrens lives are being destroyed and the don't care.

They haven't because the Big Hurt hasn't happened yet.

http://www.businessinsider.com/the-15-states-with-the-most-underwater-homes-2010-7#nevada-699-of-mortgages-underwater-15

A Cold Starving Winter should do the trick.

mcgowanjm  posted on  2010-08-24   12:04:09 ET  Reply   Trace   Private Reply  


#11. To: Nebuchadnezzar (#9)

To a much lesser extent.

They were directly responsible since they ran their congresses by the bipartisan model that they bragged was being fair and compassionate. Why are you afraid to let leaders take credit where credit is due? Why do you always want to blame the little guy?

"See in my line of work, you got to keep repeating things over and over and over again for the truth to sink in, to kind of catapult the propaganda." --- George W. Bush (Rochester NY, 5-24-2005)

mininggold  posted on  2010-08-24   12:05:12 ET  Reply   Trace   Private Reply  


#12. To: mcgowanjm (#7) (Edited)

Fannie, Freddie, Ginnie have ALWAYS been about keeping the price of housing up.

Policies that promote home ownership started with the GI bill during WWII. The tax system penalizes savings and investment while subsidizing spending. Over the last couple of decades, interest rates we're kept artificially low to stimulate home purchases. Then we had the sub-prime nonsense.

Even worse, we had people taking out second mortgages on their home equity to buy flat screen televisions designed in Japan and manufactured in China. Who passed the law that allowed second mortgages to be used for anything other than home improvement??? WHO?????

This all worked together to collapse the housing market.

It's not going to come back in our lifetime, at least until the baby boomers (who are downsizing their homes for retirement) are gone.

The American system is really broken. We need to stop subsidizing consumption and stop punishing savings.

Who is going to do this?


American public policy has been dominated by Democrats who don't care and Republicans that don't dare -- Dick Armey

jwpegler  posted on  2010-08-24   12:05:39 ET  Reply   Trace   Private Reply  


#13. To: jwpegler (#12)

It's not going to come back in our lifetime, at least until the baby boomers (who are downsizing their homes for retirement) are gone.

I wouldn't hold my breath for the next generation. Gen X and Y are really fucked up. Gen Y only cares about smoking pot 24/7 so you can expect ZERO from them.

Being a Democratic shill means you check your humanity at the door.

Nebuchadnezzar  posted on  2010-08-24   12:08:58 ET  Reply   Trace   Private Reply  


#14. To: mininggold (#11)

They were directly responsible since they ran their congresses by the bipartisan model that they bragged was being fair and compassionate. Why are you afraid to let leaders take credit where credit is due? Why do you always want to blame the little guy?

I've stated many times I have no love for those Republicans. Over and over again.

But what gets me, is you ALWAYS stick up for the people who fucked us over. Frank, Dodd, Clinton, Obama.

Nary a word about them and any disdain for them.

Being a Democratic shill means you check your humanity at the door.

Nebuchadnezzar  posted on  2010-08-24   12:10:25 ET  Reply   Trace   Private Reply  


#15. To: mcgowanjm (#10)

A Cold Starving Winter should do the trick.

Still too soon before the dam breaks.

Being a Democratic shill means you check your humanity at the door.

Nebuchadnezzar  posted on  2010-08-24   12:11:05 ET  Reply   Trace   Private Reply  


#16. To: jwpegler (#12)

Even worse, we had people taking out second mortgages on their home equity to buy flat screen televisions designed in Japan and manufactured in China. Who passed the law that allowed second mortgages to be on anything other than home improvement??? WHO?????

If I want to spend my second mortgage for frivolous crap that should be my own and the bank's business. But then the bank and I should be the sole responsible parties in suffering the consequences, with no bailout from the taxpayers.

"See in my line of work, you got to keep repeating things over and over and over again for the truth to sink in, to kind of catapult the propaganda." --- George W. Bush (Rochester NY, 5-24-2005)

mininggold  posted on  2010-08-24   12:11:27 ET  Reply   Trace   Private Reply  


#17. To: Nebuchadnezzar (#13)

Gen Y only cares about smoking pot 24/7

They said that (and worse) about the hippie baby boomers too, yet we would up with Bill Gates creating Microsoft, Steve Jobs creating Apple, and too many other people who changed our lives for the better to name here.


American public policy has been dominated by Democrats who don't care and Republicans that don't dare -- Dick Armey

jwpegler  posted on  2010-08-24   12:13:12 ET  Reply   Trace   Private Reply  


#18. To: Nebuchadnezzar (#14)

I've stated many times I have no love for those Republicans. Over and over again.

But what gets me, is you ALWAYS stick up for the people who fucked us over. Frank, Dodd, Clinton, Obama.

Yet your actions don't support your statements. Show me where I stick up for them, LOLOL You can't because I haven't.

If the GOP is going to be the savior party it needs lots of remodeling that won't be done by those who insist on shifting the blame and distracting from the task. Times awasting!

"See in my line of work, you got to keep repeating things over and over and over again for the truth to sink in, to kind of catapult the propaganda." --- George W. Bush (Rochester NY, 5-24-2005)

mininggold  posted on  2010-08-24   12:15:54 ET  Reply   Trace   Private Reply  


#19. To: mininggold (#16) (Edited)

the bank and I should be the sole responsible parties in suffering the consequences, with no bailout from the taxpayers.

Given the current political reality in America, that never had any possibility of happening.


American public policy has been dominated by Democrats who don't care and Republicans that don't dare -- Dick Armey

jwpegler  posted on  2010-08-24   12:17:39 ET  Reply   Trace   Private Reply  


#20. To: jwpegler (#19)

Given the current political reality in America, that never had any possibility of happening. Both parties are culpable in the bailout.

Because the money comes from a private entity, that must be paid back by any means possible.

"See in my line of work, you got to keep repeating things over and over and over again for the truth to sink in, to kind of catapult the propaganda." --- George W. Bush (Rochester NY, 5-24-2005)

mininggold  posted on  2010-08-24   12:19:42 ET  Reply   Trace   Private Reply  


#21. To: mininggold (#16)

If I want to spend my second mortgage for frivolous crap that should be my own and the bank's business. But then the bank and I should be the sole responsible parties in suffering the consequences, with no bailout from the taxpayers.

But that isn't reality. If your bank has FDIC protection than you're gambling with the taxpayers money now, aren't you?

Being a Democratic shill means you check your humanity at the door.

Nebuchadnezzar  posted on  2010-08-24   12:22:31 ET  Reply   Trace   Private Reply  


#22. To: mininggold (#20) (Edited)

Americans want it both ways.

They want big government programs, but they don't want to pay for them.

They want to engage in risky behavior (using their home equity to buy flat screen televisions) but they want to be bailed when things go wrong.

We need to force the issue.

If you want to be bailed out, then we're going to restrict your behavior to mitigate our risks. Oh, you don't want your behavior restricted? Fine, then you are not going to get bailed out. It's just that simple.

The current system cannot work any longer because the Chinese, Japanese, Saudis, and the rest aren't going to finance our huge government debt much longer, at least not to the extent they were.

We better wake up to that fact pretty darn quickly. If we don't, we're going to have an economic calamity that makes the Great Depression look like nothing.


American public policy has been dominated by Democrats who don't care and Republicans that don't dare -- Dick Armey

jwpegler  posted on  2010-08-24   12:25:37 ET  Reply   Trace   Private Reply  


#23. To: jwpegler (#22)

Americans want it both ways.

They want big government programs, but they don't want to pay for them.

They want to engage in risky behavior (using their home equity to buy flat screen televisions) but they want to be bailed when things go wrong.

The bailouts were fairly unpopular among the middle class IIRC, it was the too big to fail guys that ruled that day.

So many homebuyers thought that since the the bank qualified them for a huge mortgage that it actually meant they could make the payments. Too little economic sense among them and the vultures who make the rules knew it.

"See in my line of work, you got to keep repeating things over and over and over again for the truth to sink in, to kind of catapult the propaganda." --- George W. Bush (Rochester NY, 5-24-2005)

mininggold  posted on  2010-08-24   12:45:33 ET  Reply   Trace   Private Reply  


#24. To: Nebuchadnezzar (#21) (Edited)

But that isn't reality. If your bank has FDIC protection than you're gambling with the taxpayers money now, aren't you?

No said anything about FDIC protection which is a fairly recent phenomenom, TO MAINLY PROTECT THE BANKS. There you go again reading into stuff that which is not posted.

You remind me of my nephew who insisted at a young age that in the old days pioneers in their covered wagons traveled on paved roads to California. He couldn't imagine any other scenario than the present highway system.

"See in my line of work, you got to keep repeating things over and over and over again for the truth to sink in, to kind of catapult the propaganda." --- George W. Bush (Rochester NY, 5-24-2005)

mininggold  posted on  2010-08-24   12:49:40 ET  Reply   Trace   Private Reply  


#25. To: mininggold (#23)

So many homebuyers thought that since the the bank qualified them for a huge mortgage that it actually meant they could make the payments.

Part of that mentality was based on the expectation that home prices will always continue to go up.

Home ownership is a good thing, but not to the exclusion of everything else.

The problem is that over the last 30 years or so, the bulk of American savings have gone towards building new houses rather than investing in companies that build consumer electronics, cars, and other things. Sure, we still have all of those other things, but now we get them from Asia instead of building them here.

The reason for this are an array of government policies that subsidize big mortgages and punish savings.

We won't be able to do it any longer because the foreigners aren't us going to continue to finance our spending spree.


American public policy has been dominated by Democrats who don't care and Republicans that don't dare -- Dick Armey

jwpegler  posted on  2010-08-24   14:11:24 ET  Reply   Trace   Private Reply  


#26. To: mininggold (#24)

No said anything about FDIC protection which is a fairly recent phenomenom, TO MAINLY PROTECT THE BANKS. There you go again reading into stuff that which is not posted.

You remind me of my nephew who insisted at a young age that in the old days pioneers in their covered wagons traveled on paved roads to California. He couldn't imagine any other scenario than the present highway system.

Tell you what, let me amend my statement. If a bank is back-stopped by the taxpayers then no HELOCS.

Fair?

Being a Democratic shill means you check your humanity at the door.

Nebuchadnezzar  posted on  2010-08-24   14:22:16 ET  Reply   Trace   Private Reply  


#27. To: All (#0)

In 2000, Cuomo required a quantum leap in the number of affordable, low-to-moderate-income loans that the two mortgage banks—known collectively as Government Sponsored Enterprises—would have to buy. The GSEs don't actually sell mortgages to borrowers. They buy them from banks and mortgage companies, allowing lenders to replenish their capital and make more loans.

This fucker lit the fuse to the entire crisis.

Being a Democratic shill means you check your humanity at the door.

Nebuchadnezzar  posted on  2010-08-24   14:50:58 ET  Reply   Trace   Private Reply  


#28. To: Nebuchadnezzar (#15)

Still too soon before the dam breaks.

That was the DWH. Dam Breaking Dragon King. Announcing our descent into the Olduvai.

You saw the PPT pushing the Stock Market around today.

Fascism is here. Which has run out of arguements. Violence is Next.

By Halloween.

"The caller informed me he was working with Bob Naman, the chemist who found the Corexit in the water in story above, to perform independent testing of Florida waters. He told me he just spoke with Bob about the results of water samples taken all the way down to Naples and St. Petersburg Florida which all tested positive for oil contamination.

During their conversation the Corexit samples in Alabama were brought up and what was actually found was not Corexit at 13.3 parts per million, but was actually the dangerous neurotoxin pesticide 2-butoxyethanol which makes is the main ingredient of Corexit 9527A by 30 to 60% by volume.

According to the Federal Government that version of Corexit was a supposedly discontinued for use in the Gulf of Mexico in May. I was also told that Bob said he was was worried because BP had just called him and threatened him."

Corexit is the Red Flag. No one can tell us why AntiFreeze/Organ Hemorrhaging 2-Butylethylene is STILL being used, 15 miles off the NOGC+Florida NOW, every night.

mcgowanjm  posted on  2010-08-24   19:46:47 ET  Reply   Trace   Private Reply  


#29. To: jwpegler (#12)

Lessons From FDR's Handling Of the Housing Crisis

by L. Wolfe 1. Introduction

Among the many lies told by the Cheney-Bush Administration is that the policies that have created the now-exploding housing bubble have created the largest spurt in home ownership in the nation's history. While it is true, that in absolute numbers, until this moment of collapse, there are more U.S. homeowners now than ever before, the greatest rate of growth in American homeownership occurred over an approximate 40-year period, ushered in by President Franklin Roosevelt's rescue of the dysfunctional and collapsing housing industry and homeowners under the threat of foreclosure during the 1930s, and ending in the early 1980s with Wall Street's looting and destruction of dedicated credit delivery system established for the housing sector.

As Florida's 1928 Housing Crash started THAt Depression. ;}

Fannie/Freddie just the latest Incarnations to support.

mcgowanjm  posted on  2010-08-24   19:50:45 ET  Reply   Trace   Private Reply  


#30. To: jwpegler (#12)

The tax system penalizes

the poor. See folks dying before SS for details.

mcgowanjm  posted on  2010-08-24   19:51:43 ET  Reply   Trace   Private Reply  


#31. To: mcgowanjm (#29)

Lessons From FDR's Handling Of the Housing Crisis

Roosevelt created Fannie Mae. He sowed the seeds of our destruction.


American public policy has been dominated by Democrats who don't care and Republicans that don't dare -- Dick Armey

jwpegler  posted on  2010-08-24   19:52:41 ET  Reply   Trace   Private Reply  


#32. To: jwpegler (#12)

Over the last couple of decades, interest rates we're kept artificially low to stimulate home purchases.

Since the Commodities Act of 1982/Greenspan.

The Bond Market has been allowed to FrontRun the Bonds and then Sell to the Fed/Treasury. A Guaranteed No lose way to make huge amts of $$$/ and dribe % Rates to Zero.

"Then we had the sub-prime nonsense." The Result of Derivative Creation(now $1.5 Quadrillion). Housing has been where this debt has been funnelled into. When the bush43/Oct 08 Admin/Congress decided to Bailout these Insolvent Top 6 Banks, the End of Democracy and the Last Greatest Depression began.

mcgowanjm  posted on  2010-08-24   19:56:10 ET  Reply   Trace   Private Reply  


#33. To: jwpegler (#12)

Even worse, we had people taking out second mortgages on their home equity to buy flat screen televisions designed in Japan and manufactured in China. Who passed the law that allowed second mortgages to be used for anything other than home improvement??? WHO?????

This all worked together to collapse the housing market.

Note how many LEnders have been put in jail for fraud?

0

mcgowanjm  posted on  2010-08-24   19:57:11 ET  Reply   Trace   Private Reply  


#34. To: jwpegler (#12)

This all worked together to collapse the housing market.

It's not going to come back in our lifetime, at least until the baby boomers (who are downsizing their homes for retirement) are gone.

The American system is really broken. We need to stop subsidizing consumption and stop punishing savings.

Who is going to do this?

OR anyone else's life. We need to stop.

The Top 50 000 will be removed. They've installed an Unrealistic System. Reality will now remove them. The Only question is how many people/ institutions/Societys/Civilizations will be taken out before those 50 000 are removed. ;}

mcgowanjm  posted on  2010-08-24   19:59:28 ET  Reply   Trace   Private Reply  


#35. To: mcgowanjm (#33)

Note how many LEnders have been put in jail for fraud?

What fraud did the lenders commit? The problems were created by politicians. You start calling for politicians to go to jail and I will join in.


American public policy has been dominated by Democrats who don't care and Republicans that don't dare -- Dick Armey

jwpegler  posted on  2010-08-24   20:12:42 ET  Reply   Trace   Private Reply  


#36. To: mcgowanjm (#28)

Fascism is here. Which has run out of arguements. Violence is Next.

By Halloween.

Define "violence." Suspension of the elections followed by protests and the troops opening up with SAWs and M16s on the protesters?

Clinton and Cuomo are the true bandits who lit the fuse to this economic crisis we're now in. All in the name of getting more minorities in houses: http://libertysflame.com/cgi-bin/readart.cgi?ArtNum=12554

Nebuchadnezzar  posted on  2010-08-24   20:15:40 ET  Reply   Trace   Private Reply  


#37. To: jwpegler (#31)

Roosevelt created Fannie Mae. He sowed the seeds of our destruction.

W/o FDR's 'programs' which he himself scaled back 1937(why the Depression deepened then, there would've been revolution.

7 million people in Flyover Country perished the Winter of 1932.

mcgowanjm  posted on  2010-08-24   20:38:07 ET  Reply   Trace   Private Reply  


#38. To: Nebuchadnezzar (#36)

Define "violence."

Unemployment is the Worst kinf od Violence:

The nation does not exist to benefit corporations--the corporations exist to benefit the nation and its citizenry--and not just with cartels and plantations. Isn't it odd how this statement--The nation does not exist to benefit corporations--the corporations exist to benefit the nation and its citizenry--sounds breathtakingly revolutionary in today's plantation politics of experience?

Then, when that's not enough, pogroms are launched( see 911 Mosque). Then, Bill of Rights ignored. Then, Wars Abroad Created.

Wash, Rinse, Repeat. Everytime as Empire after Empire tries the same thing, using up it's resources, concentrating wealth.

mcgowanjm  posted on  2010-08-24   20:41:06 ET  Reply   Trace   Private Reply  


#39. To: Nebuchadnezzar (#36) (Edited)

Suspension of the elections followed by protests and the troops opening up with SAWs and M16s on the protesters?

Why suspend elections? Just make sure Both Sides understand the Party of Property's rules. Pension? What Pension?

Neo Feudalism. Sorry, no gas for you. No job either. But we've got some sharecropper positions open. Too bad about all that debt you accumulated. Maybe your children can pay it off. ;}

mcgowanjm  posted on  2010-08-24   20:43:04 ET  Reply   Trace   Private Reply  


#40. To: jwpegler (#35)

What fraud did the lenders commit?

And thank you.

We'll start with No Doc Loans:

And Sweet Jesus Fucki9ng Christ, they're still legal.

http://www.google.com/search?q=No+Doc+Loans&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a

Then No Income Loans:

And THEY"RE still legal:

http://www.google.com/search?q=No+Income+Loans&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a

And just exactly how do you have multiple Securities on the Same Home?

Please. And that's just for starters.

mcgowanjm  posted on  2010-08-24   20:46:50 ET  Reply   Trace   Private Reply  



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