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Subprime Losses: Products of Unregulated Finance Companies

Adam R.'s picture

Posted October 22, 2008

Although a lot of pundits and critics (Neil Cavuto, Charles Krauthammer) have attempted to blame the housing finance crisis on the Community Reinvestment Act, reality keeps getting in the way.

These numbers show the servicing companies that have born the most losses on subprime loans.  With a few exceptions, most of these firms are not regulated by CRA.  Moreover, most are players that came to the mortgage loan market well after the CRA Act was written.  Some, like AIG or Bear Stearns, came in to the game well afterwards.

  • Countrywide Financial
  • HSBC
  • JP Morgan Chase
  • Wells Fargo Home Mortgage
  • American Home Mortgage (Wilbur Ross)
  • Ocwen
  • Litton (Goldman Sachs)
  • Home Loan Services
  • HomeEq Mortgage (Barclays)
  • Washington Mutual
  • ResCap (General Motors)
  • Saxon (Morgan Stanley)
  • Citi
  • American General Finance (AIG)
  • EMC Mortgage (Bear Stearns and Chase)

source: Inside Mortgage Finance

What this tells me is that these companies made the decision to seek out risky loans, not because they were made to by CRA, but because they were tempted by the promising of fat returns.  They are Wall Street firms, not bank-holding companies.  These are the smartest guys in the room.  For their poor decision, they are being punished.

And swiftly.  If only we weren't all suffering for their excesses.