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594 Notes to Chapter 11

16. A recent analysis published by FHFA comes to very similar conclusions. See “Data on the Risk
Characteristics and Performance of Single-Family Mortgages Originated from 2001 through 2008 and
Financed in the Secondary Market,” September 13, 2010.
17. FCIC staff analysis, “Analysis of housing data and comparison with Ed Pinto’s analysis,” August 9,
2010. In the sample data provided by the Federal Reserve, Fannie Mae and Freddie Mac mortgages with a
FICO score below 660 had an average rate of serious delinquency of 6.2% in 2008. In public reports, the
GSEs stated that the average serious delinquency rates for loans with FICO scores less than 660 in their
guarantee books was 6.3%. Fannie Mae 2008 Credit Supplement, p. 5; Freddie Mac Fourth Quarter 2008
Financial Results Supplement, March 11, 2009, p. 15.
18. In the sample data provided by the Federal Reserve, Fannie Mae and Freddie Mac mortgages with
LTVs above 90% had an average rate of serious delinquency of 5.7% in 2008. In public reports, the GSEs
stated that the average serious delinquency rates for loans with LTVs above 90% in their guarantee books
was 5.8%. Fannie Mae 2008 Credit Supplement, p. 5;
Freddie Mac Fourth Quarter 2008 Financial Results Supplement, March 11, 2009, p. 15.
19. Edward Pinto, “Memorandum: Sizing Total Federal Government and Federal Agency Contribu-
tions to Subprime and Alt-A Loans in U.S. First Mortgage Market as of 6.30.08,” Exhibit 2 with correc-
tions through October 11, 2010 (www.aei.org/docLib/PintoFCICTriggersMemo.pdf). The 26.7 million
loans include 6.7 million loans in subprime securitizations and another 2.1 million loans in Alt-A securi-
tizations, for a total of 8.8 million mortgages in subprime or Alt-A pools, which Pinto calls “self-denomi-
nated” subprime and Alt-A, respectively. To these, he adds another 8.8 million loans with FICO scores
below 660, which he labels “subprime by characteristic.” He also adds 6.3 million loans at the GSEs that
are either interest-only loans, negative amortization loans, or loans with an LTV—including any second
mortgage—greater than 90%, which he collectively refers to as “Alt-A by characteristic.” The last addi-
tions include an estimated 1.4 million loans insured by the FHA and VA with an LTV greater than 90%—
out of a total of roughly 5.5 million FHA and VA loans—and 1.3 million loans in bank portfolios that are
inferred to have his defined “Alt-A characteristics.”
20. Fannie Mae 2008 Credit Supplement, p. 5; Freddie Mac Fourth Quarter 2008 Financial Results
Supplement, March 11, 2009.
21. Edward Pinto, “Yes, the CRA Is Toxic,” City Journal, Autumn 2009.
22. Neil Bhutta and Glenn Canner, “Did the CRA Cause the Mortgage Market Meltdown?” Federal
Reserve Board of Governors, March 2009. The authors use the Home Mortgage Disclosure Act data,
which cover roughly 80% of the mortgage market in the United States—see Robert B. Avery, Kenneth P.
Brevoort, and Glenn B. Canner, “Opportunities and Issues in Using HMDA Data,” Journal of Real Estate
Research 29, no. 4 (October 2007): 351–79.
23. Elizabeth Laderman and Carolina Reid, “Lending in low and moderate income neighborhoods in
California: The Performance of CRA Lending During the Subprime Meltdown,” November 26, 2008,
working paper to be presented at the Federal Reserve System Conference on Housing and Mortgage Mar-
kets, Washington, DC, December 4, 2008.
24. FCIC, “Preliminary Staff Report: The Mortgage Crisis,” April 7, 2010.
25. Bank of America response letter to FCIC, August 20, 2010.
26. John Reed, interview by FCIC, March 4, 2010.
27. Lewis Ranieri, interview by FCIC, July 30, 2010.
28. Nicolas Weill, interview by FCIC, May 11, 2010.
29. Ibid.
30. Nicolas Weill, email to Raymond McDaniel and Brian Clarkson, July 4, 2007.
31. Moody’s Investors Service, “Early Defaults Rise in Mortgage Securitizations,” Structured Finance:
Special Report, January 18, 2007, pp. 1, 3.
32. Moody’s Investors Service, “Moody’s Downgrades Subprime First-lien RMBS-Global Credit Re-
search Announcement,” July 10, 2007.
33. Weill, interview.
34. FCIC staff estimates, based on analysis of Blackbox data.
35. Data on Bear Stearns provided by JP Morgan to the FCIC.