[quote=asianautica]So you’re saying in the 80s and 90s, when 20% and 3x income were the norm, the majority of cheaper area were bought by investors? I don’t buy that one bit. [/quote]

I am not very familiar with the 80s and 90s. But FHA has been around since the 30s and 3% downpayments on FHA loans may have existed for a very long time.

I’m also not sure about 20% being the norm. The oldest data point I could find is that the median first-time-buyer downpayment in 1997 in SoCal was around $10,000. Median home price was in high 100’s.

The story of 20% and 3x being the norm is probably a myth. In coastal California, anyway, (in my opinion) prices have not been so low and down payments have not been so large for many decades.

[quote]In light of that, please explain Freddie and Fannie’s predicament? They did not play in the Credit Default Swap markets.. Bear Sterns did. The act contributed to some of the current problem not all. [/quote]

Freddie and Fannie were extremely thinly capitalized and they had a bunch of mortgage-backed securites on the books. Existing regulations forced them to mark to market. When the MBS market started tanking, Fannie/Freddie book value took a hit.

[quote]What I did state though is that CRA achieved the opposite of what was intended. [/quote]

In your point of view, CRA has been a time-delay fuse that was lit in 1977 and finally brought down Fannie and Freddie 31 years later, in 2008. Got it.