Aaron's Mortgage Blog

What your credit card company has to tell you

New rules regarding rates, fees, and limits

• No interest rate increases for the first year. Your credit card company cannot increase your rate for the first 12 months after you open an account. There are some exceptions:
  • If your card has a variable interest rate tied to an index; your rate can go up whenever the index goes up.
  • If there is an introductory rate, it must be in place for at least 6 months; after that your rate can revert to the "go-to" rate the company disclosed when you got the card.
  • If you are more than 60 days late in paying your bill, your rate can go up.
  • If you are in a workout agreement and you don't make your payments as agreed, your rate can go up.
• Increased rates apply only to new charges. If your credit card company does raise your interest rate after the first year, the new rate will apply only to new charges you make. If you have a balance, your old interest rate will apply to that balance.
• Restrictions on over-the-limit transactions. You must tell your credit card company that you want it to allow transactions that will take you over your credit limit. Otherwise, if a transaction would take you over your limit, it may be turned down. If you do not opt-in to over-the-limit transactions and your credit card company allows one to go through, it cannot charge you an over-the-limit fee.
  • If you opt-in to allowing transactions that take you over your credit limit, your credit card company can impose only one fee per billing cycle. You can revoke your opt-in at any time.
• Caps on high-fee cards. If your credit card company requires you to pay fees (such as an annual fee or application fee), those fees cannot total more than 25% of the initial credit limit. For example, if your initial credit limit is $500, the fees for the first year cannot be more than $125. This limit does not apply to penalty fees, such as penalties for late payments.
• Protections for underage consumers. If you are under 21, you will need to show that you are able to make payments, or you will need a cosigner, in order to open a credit card account.
  • If you are under age 21 and have a card with a cosigner and want an increase in the credit limit, your cosigner must agree in writing to the increase.

Changes to billing and payments

• Standard payment dates and times. Your credit card company must mail or deliver your credit card bill at least 21 days before your payment is due. In addition:
  • Your due date should be the same date each month (for example, your payment is always due on the 15th or always due on the last day of the month).
  • The payment cut-off time cannot be earlier than 5 p.m. on the due date.
  • If your payment due date is on a weekend or holiday (when the company does not process payments), you will have until the following business day to pay. (For example, if the due date is Sunday the 15th, your payment will be on time if it is received by Monday the 16th before 5 p.m.).
• Payments directed to highest interest balances first. If you make more than the minimum payment on your credit card bill, your credit card company must apply the excess amount to the balance with the highest interest rate. There is an exception:
  • If you made a purchase under a deferred interest plan (for example, "no interest if paid in full by March, 2012"), the credit card company may let you choose to apply extra amounts to the deferred interest balance before other balances. Otherwise, for two billing cycles prior to the end of the deferred interest period, the credit card company must apply your entire payment to the deferred interest rate balance first.
• No two-cycle (double-cycle) billing. Credit card companies can only impose interest charges on balances in the current billing cycle.

http://www.federalreserve.gov/consumerinfo/wyntk/creditcardrules.htm

Independence Day

	I hope you and your family enjoyed the Independence Day holiday weekend. And, I sincerely hope you have been enjoying your complimentary subscription to the MORTGAGE MARKET GUIDE WEEKLY. Due to the July 4th holiday, the next full issue will arrive on Monday, July 13. In the meantime, check out the article below on one of our nation's most powerful symbols this time of year: the Stars and Stripes. The MORTGAGE MARKET GUIDE WEEKLY is the industry's leading publication of this type, and I am pleased to provide this valuable resource to you. If you feel any of your clients, friends, family members, or associates would benefit from keeping up-to-date on market and economic trends in this easy-to-read format, please let me know and I will be more than happy to add them free of charge. Best wishes to you, and please do not hesitate to contact me if you need assistance at this time!

The Mortgage Market View...

	UNFURLING THE STARS AND STRIPES By Jeffery Vail The flag remains a powerful symbol of patriotism for many Americans. But where did those stars and stripes come from in the first place? Time for us to unfurl the story. What Came Before the "Stars and Stripes"? Try the "Continental Colors." It had 13 red and white stripes representing the 13 colonies and a British Union Jack in the corner. George Washington raised this flag as the banner of the Continental Army on January 1, 1776. Other early flags depicted a pine tree or a snake. There were several versions of the "Gadsden flag," which was yellow with a rattlesnake coiled over the words "Don't Tread on Me!" Betsy Ross--Did She or Didn't She? Many Americans believe a Philadelphia seamstress named Betsy Ross designed and sewed the first Stars and Stripes. The legend began when her grandson, William Canby, spoke on the origin of the flag to the Pennsylvania Historical Society in 1870. Canby said his grandmother had told him that she fashioned the flag in June 1776 at the request of George Washington. Still, despite the fact that Betsy Ross was a good businesswoman who kept careful records, Canby admitted he could find no documents to back up the story. Canby said Washington approached Ross because he was part of a congressional committee in charge of creating a new flag. But no one has found any evidence that the committee existed, that Washington visited Ross's shop, or that the two even knew each other. Betsy Ross did make flags, but for now, the legend of her sewing the first-ever Stars and Stripes remains a legend. Why Stars and Stripes? On June 14, 1777, the Continental Congress, meeting in Philadelphia, adopted the following resolution, without comment or debate: "Resolved, That the flag of the United States be thirteen stripes, alternate red and white: that the union be thirteen stars, white in a blue field, representing a new constellation." Congress said nothing about the stars' arrangement, so different versions of the Stars and Stripes appeared during the following years, with different star patterns. These included the "Betsy Ross flag," with the stars in a circle. Many historians now believe the Stars and Stripes may have been the work of Francis Hopkinson, a congressman, artist, and signer of the Declaration of Independence. In 1780, Hopkinson wrote a letter to the government about designs he had made for official symbols, including the "Flag of the United States of America." He noted that he hadn't been paid and asked for a quarter cask of wine as compensation. Why Red, White, and Blue? No official explanation of the color scheme has ever been established. Yet in 1782, Charles Thomson, the congressional secretary in charge of choosing a great seal for the United States, did explain the meaning of the seal's red, white, and blue. He said, "White signifies purity and innocence, Red hardiness and valor, and Blue . . . signifies vigilance, perseverance and justice." On the other hand, the flag may be red, white, and blue simply because those are the colors of the British flag. Maybe early Americans weren't quite as rebellious as they thought. This article was provided to you through collaboration with Every Learner. To learn more, play quizzes, and read additional articles, visit http://everylearner.com and get a one-month membership at no cost to you. Copyright © 2002-2009 Every Learner, Inc. All rights reserved.

The Week's Economic Indicator Calendar

	Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise. Economic Calendar for the Week of July 06 - July 10 Date ET Economic Report For Estimate Actual Prior Impact Mon. July 06 10:00 ISM Services Index Jun 46.0 44.0 Moderate Wed. July 08 10:30 Crude Inventories 7/03 NA -3.66M Moderate Thu. July 09 08:30 Jobless Claims (Initial) 7/04 NA 614K Moderate Fri. July 10 08:30 Balance of Trade May -$29.2B -$29.2B Moderate Fri. July 10 10:00 Consumer Sentiment Index (UoM) Jul 71.0 70.8 Moderate

The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is not without errors. As your trusted advisor, I am sending you this newsletter because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

Bits of good news surface for Twin Cities housing market

By JIM BUCHTA, Star Tribune

November 12, 2008

© 2008 Star Tribune. All rights reserved.

Subject: Responding to your message

Dear Aaron:

Thank you for taking the time to contact me to voice your concerns with the financial crisis we're facing.  I hear you loud and clear and want to assure you that I took your thoughts to heart prior to casting my vote.  I appreciate having the chance to respond to your well-founded frustration.

 I am deeply concerned about the financial crisis and its impact on our already troubled economy.  While this crisis may seem to be only about Wall Street, in reality it touches each and every Minnesotan.  Jobs, personal and retirement savings, loans for businesses, college and car loans, and mortgages are all at stake. Prior to the vote, I received a multitude of real-life stories from Minnesotans who were facing issues such as the inability to make payroll or get a student loan.   

 I am frustrated that the case-by-case approach up to this point in dealing with the financial crisis had failed to solve the problem. Unfortunately, we entered a new and dangerous phase in which our entire financial system hangs in the balance.  Dramatic action was required to respond to economic disaster.  I did not take lightly for one minute allocating $700 billion in taxpayer money.  In fact, I am infuriated that we are at this point, but I did come to the ultimate conclusion that it was necessary.

 In response to the crisis, which was brought on by outright greed, mismanagement and a failed financial regulatory system, the Administration proposed on September 19, 2008, a $700 billion plan to systematically stabilize the financial system and protect the economy by buying toxic mortgage-related assets that have been paralyzing the financial system.  As originally proposed, I could not support the Administration's plan.  In fact, on September 29, I sent a letter to Senate Banking Committee Chairman Dodd, Ranking Member Shelby, House Financial Services Chairman Frank, and Ranking Member Bachus making it known that in order to gain my support, any financial rescue plan needed to uphold the principles of Wall Street accountability, taxpayer protections, and no blank checks or golden parachute payouts to Wall Street executives.

 As you may know, on October 1, 2008, I joined 73 of my colleagues in passing revised financial stabilization legislation that included my required principles.  More specifically, the financial stabilization legislation doesn't give a blank check for Wall Street, provides for strong oversight and judicial review, limits executive compensation, and prohibits golden parachutes for participating institutions.  Signed by President Bush on October 3, this legislation provides $700 billion, in installments, for programs to buy and insure these toxic assets. $250 billion will be given upfront; another $100 billion if the President certifies need, and the last $350 billion will be subject to Congressional disapproval.

It is important to point out that these assets have underlying value. In fact, the Congressional Budget Office has determined that the net cost to the taxpayer would be "substantially less than $700 billion."  Moreover, a number of well-respected market observers have suggested that the government could actually earn a profit on these assets. In the event that a profit is not made, the President must report to Congress with a plan on how to make up any shortfall from the financial industry.  And if there are profits, they must be used for debt reduction. 

In addition, this legislation directs the Securities and Exchange Commission (SEC) to suspend mark-to-market accounting if it is found to be in the public interest, raises the Federal Deposit Insurance Corporation (FDIC) insurance limit from $100,000 to $250,000, provides responsible homeowner relief such as a three-year extension of mortgage debt forgiveness, and protects middle-class Minnesotans from higher taxes.

Going forward, we cannot go back to business as usual.  The need to aggressively undertake financial regulatory reform is a top priority of mine and will remain so until we pass much-needed legislation. Our current system is broken - we must have a forward looking regulatory system for our 21st century economy.  We need greater transparency and accountability across our entire financial system so that regulators and consumers fully understand financial products and their possible risks.  We also need to put more "cops on the beat" to better police Wall Street. 

You may also be interested to know that I have called on Wall Street executives to repay any and all ill-gotten bonuses they may have received, and I have also asked Attorney General Mukasey to investigate whether Wall Street executives engaged in criminal conspiracy and fraudulent activities.  Executives who clearly helped to create this crisis must be held accountable, and those who have broken our laws should be punished through fines and jail time.

This was not an easy vote.  In fact, this was one of the most politically unpopular votes I have had to take.  But the thing is, I don't think Minnesotans sent me to Washington to cast easy votes.  You sent me here to weigh pros and cons and do what is best for our state.  At the end of the day, and after laying everything out on the table, the dangers of not acting far outweighed any political fallout that may come because of my vote.

These are extremely challenging times.  Please know I will continue to do everything in my power to support the economy and protect the taxpayer.

While we may not view this issue the same way, I do appreciate the chance to respond.  I respect and appreciate your advice and hope you will continue to share your thoughts and ideas with me.

Sincerely,
Norm Coleman
United States Senate

"Stayin' Alive." At 103 beats per minute, this old disco song by the Bee Gees has almost the perfect rhythm to help jump-start a stopped human heart using CPR, according to medical researchers from the University of Illinois. Has our government and others across the globe found a similar, albeit "off-beat," life line for kick-starting the ailing financial markets? I suppose, only time will tell.

Governmental maneuvers in the recent weeks to thaw the frozen credit market (including pledges to take a direct ownership in a large number of financial institutions and providing guarantees of loan repayments thus eliminating counterparty risk between banks) seem to have provided some much needed salutary effect. However, the "feel good" factor has not fully kicked in yet. The overnight borrowing costs between banks for the dollar as reflected in the LIBOR rate eased from their recent highs. Nonetheless, long-term lending rates still remain high. The average 30-year fixed mortgage rate increased by slightly more than 50 bps to 6.74 percent. The cost of capital for businesses and households remains high, and availability is limited, too.

The U.S. stock markets gyrated furiously last week with the volatility index (VIX) scaling to new heights. This is not necessarily a bad thing, per se, since it points to a keen tussle between "bulls" (who are hoping this is as low as the markets can drop) and "bears" (who think the markets are headed further southward). But the difficulty in "timing" the market may affect the sentiment as well as the volumes. There is still a lot of uncertainty out there with concerns around earnings growth, a 17-year low in new home construction, soaring unemployment and falling consumer spending. But one of the best investors the markets has ever seen, Warren Buffet, expressed thoughts that this might be the best time to invest in the markets and own quality stocks at affordable prices.

Oil and gold prices declined dramatically last week. Fuel prices generally have adjusted accordingly to this price decline, though we're not yet seeing a corresponding ripple effect, such as a reduction in airfares. While falling prices can be a relief, economists now worry about the new "D" word - deflation. Deflation, the opposite of inflation, implies that the prices of a wide range of products are falling. Combined with the current economic and financial situation, the reduction in price may actually be due to a fall in demand. This is dangerous, since companies may have to cut back production, which hurts earnings and consequently may increase unemployment. Although at present, economists are not predicting such a vicious cycle, this is an ever-present global danger in the current state of the world.

In this scenario, the value of your vote has gained great significance. The third presidential debate last week was watched by a keen audience nationwide, probably worldwide, with both candidates expressing divergent views, especially on economic reforms. Irrespective of the ideology one favors, it cannot be denied that government intervention in the current economic crisis has been the most important stabilizing factor; and it seems that the government's involvement in private enterprise is here to stay for a while, at least. Let us hope that brings about a quick turnaround in the health of the economy.

The outlook for the week ahead includes corporate earnings releases. Some of the notable ones will be from Caterpillar, Boeing, 3M, McDonalds Corporation, Apple and Microsoft. In addition, Monday's release of September's index of leading U.S. economic indicators will kick off a fairly light week for data. Wednesday's weekly mortgage market index, Thursday's weekly U.S. claims for jobless benefits and Friday's report on September U.S. existing home sales will be scrutinized for signs of further weakness in the housing and job markets.

On a slightly different note, even the elite super-rich have recently seen their investments erode due to the vagaries of the stock market. It is said that some affluent vintage wine collectors have taken to selling rare bottles for cash. If you happen to track this market, just possibly, you might be able to reap the benefits of a good bargain. Now that's the bubbly side of this crisis many would enjoy!

Have a good, calm and profitable week.

BARACK OBAMA AND JOHN MCCAIN ROAST THEMSELVES & EACH OTHER AT ALFRED E. SMITH DINNER VIDEO

Home Owner Options Expand With Early Advice

Recent turbulence on Wall Street and in the nation’s economy is at the forefront of Minnesotans’ minds. But for many families, the real economic crisis is an unexpected health bill, adjusting interest rate, a job reduction or even a job loss that is putting their mortgage at risk.

This year 28,000 homes in Minnesota are expected to face foreclosure, and another 80,000 home owners are expected to miss at least one payment.

Home owners who are falling behind – or even those in danger of doing so – are encouraged to contact mortgage support advisors for help. Advisors are equipped to work one-on-one with home owners to determine possible options, and can work directly with lenders on behalf of home owners to negotiate potential “work out” options where mortgage payments could be decreased.

The HOPE for Homeowners Act of 2008, which went into effect on October 1, presents additional opportunities for home owners to refinance their mortgages with the Federal Housing Administration (FHA). Advisors are also equipped to help home owners navigate this new law.

“Home owners across the state are struggling to keep up with their mortgages, there’s no doubt,” observed Julie Gugin, executive director of the Minnesota Home Ownership Center, which coordinates the state’s network of mortgage support advisors at 23 nonprofit agencies. “We hope that Minnesota’s mortgage lenders and other professionals will continue encouraging home owners to seek support from our network of advisors at the first sign of trouble.”

In particular, the Center is asking Minnesota Mortgage Association members to join them in encouraging home owners to consider three questions when evaluating personal finances:

• Are you worried about being stuck in your mortgage?
• At the end of the month, do you find yourself struggling to get ahead, or even to keep up?
• Are you questioning the future because you worry about how you will make ends meet today?

Home owners who answer “yes” to any of these questions are encouraged to contact the Center’s network of mortgage support advisors to learn about potential options for managing their mortgage.

“Our network of mortgage support advisors has a variety of tools available to help home owners – from the HOPE for Homeowners Act, to refinance counseling, to working with lenders. But home owners need to speak with an advisor so that these tools can be of help to them. The ‘Checklist’ is a new tool that lets home owners consider their situation from a variety of angles – to think about the type of loan they have, and how the economy is impacting their lives and their mortgage,” added Gugin. “Our goal is to get people thinking and to get them speaking with an advisor before even one payment is missed.”

If you would like to become involved in raising awareness about options available to help home owners avoid foreclosure in your community, contact Ed Nelson at the Minnesota Home Ownership Center at ed@hocmn.org or (651) 659-9336. The Center is equipped to provide you with fact sheets, tips and support for sharing this important information in your community.

Are journalists playing favorites with some of the key political figures involved with regulatory oversight of U.S. financial markets?

MSNBC’s Chris Matthews launched several vitriolic attacks on the Republican Party on his Sept. 17, 2008, show, suggesting blame for Wall Street problems should be focused in a partisan way. However, he and other media have failed to thoroughly examine the Democratic side of the blame game.

Prominent Democrats ran Fannie Mae, the same government-sponsored enterprise (GSE) that donated campaign cash to top Democrats. And one of Fannie Mae’s main defenders in the House – Rep. Barney Frank, D-Mass., a recipient of more than $40,000 in campaign donations from Fannie since 1989 – was once romantically involved with a Fannie Mae executive.

The media coverage of Frank’s coziness with Fannie Mae and his pro-Fannie Mae stances has been lacking. Of the eight appearances Frank made on the three broadcasts networks between Jan. 1, 2008, and Sept. 21, 2008, none of his comments dealt with the potential conflicts of interest. Only six of the appearances dealt with the economy in general and two of those appearances, including an April 6, 2008 appearance on CBS’s “60 Minutes” were about his opposition to a manned mission to Mars.

Frank has argued that family life “should be fair game for campaign discussion,” wrote the Associated Press on Sept. 2. The comment was in reference to GOP vice presidential nominee Sarah Palin and her pregnant daughter. “They’re the ones that made an issue of her family,” the Massachusetts Democrat said to the AP.

The news media have covered the relationship in the past, but there have been no mentions since 2005, according to Nexis and despite the collapse of Fannie Mae. The July 3, 1998, Reliable Source column in The Washington Post reported Frank, who is openly gay, had a relationship with Herb Moses, an executive for the now-government controlled Fannie Mae. The column revealed the two had split up at the time but also said Frank was referring to Moses as his “spouse.” Another Washington Post report said Frank called Moses his “lover” and that the two were “still friends” after the breakup.

Frank was and remains a stalwart defender of Fannie Mae, which is now under FBI investigation along with its sister organization Freddie Mac, American International Group Inc. (NYSE:AIG) and Lehman Brothers (NYSE:LEH) – all recently participants in government bailouts. But Frank has derailed efforts to regulate the institution, as well as denying it posed any financial risk. Frank’s office has been unresponsive to efforts by the Business & Media Institute to comment on these potential conflicts of interest.

While the relationship reportedly ended 10 years ago, Frank was serving on the House Banking Committee the entire 10 years they were together. The committee is the primary House body which along with the Office of Federal Housing Enterprise Oversight (OFHEO) has jurisdiction over the government-sponsored enterprises.

He has served on the committee since becoming a congressman in 1981 and became the ranking Democrat on the committee in 2003. He became chairman of the committee, now called the House Financial Services Committee, in 2007.

Moses was the assistant director for product initiatives at Fannie Mae and had been at the forefront of relaxing lending restrictions at the company for rural customers, according to the Feb. 23, 1998, issue of National Mortgage News (NMN).

“Herb Moses, who helped develop many of Fannie Mae’s affordable housing and home improvement lending programs, has left the mortgage industry,” Darryl Hicks wrote for NMN. “Mr. Moses - whose last day was Feb. 13 - spent the past seven years at Fannie Mae, most recently as director of housing initiatives. Over the course of time, he played an instrumental role in developing the company’s Title One and 203(k) home improvement lending programs.”

Hicks explained in his story how Moses orchestrated a collaborative effort between Fannie Mae and the Department of Agriculture.

“The Dartmouth grad also played a crucial role in brokering a relationship between Fannie Mae and the Department of Agriculture,” Hicks wrote. “This led to the creation of Fannie Mae’s rural housing program where the secondary marketing agency agreed to purchase small farm loans insured through the department.”

While Moses served at Fannie Mae and was Frank’s partner, Frank was actively working to support GSEs, according to several news outlets.

In 1991, Frank and former Rep. Joe Kennedy, D-Mass., lobbied for Fannie to soften rules on multi-family home mortgages although those dwellings showed a default rate twice that of single-family homes, according to the Nov. 22, 1991, Boston Globe.

BusinessWeek reported in its Nov. 14, 1994, issue that Fannie Mae called on Frank to exert his influence against a Housing & Urban Development proposal that would force the GSE to focus on minority and low-income buyers and police bias by lenders regardless of their location. Fannie Mae opposed HUD on the issue because it claimed doing so would “ignore the urban middle class.”

Moses left Fannie in 1998 to start his own pottery business. National Mortgage News called Moses a “mortgage guru” and said he developed “many of Fannie Mae's affordable housing and home improvement lending programs. Moses ended his relationship with Frank just months after he left Fannie.

Even after the relationship ended, however, Frank was a staunch defender of Fannie Mae even as other experts suggested there were serious problems building in Fannie Mae and Freddie Mac.

According to an article by Kathleen Day in the Oct. 8, 2003, Washington Post, Frank opposed giving the Bush administration the right to approve or disapprove business activities that “could pose risk to the taxpayers.” He told the Post he worried the Treasury Department “would sacrifice activities that are good for consumers in the name of lowering the companies’ market risks.”

Just a month before, Frank had aggressively thwarted reform efforts by the Bush administration. He told The New York Times on Sept. 11, 2003, Fannie Mae and Freddie Mac’s problems were “exaggerated,” a gross miscalculation some five years later with costs estimated to be in the hundreds of billions.

“These two entities – Fannie Mae and Freddie Mac – are not facing any kind of financial crisis,” Frank said to the Times. “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Frank has also reaped campaign contribution benefits from Fannie Mae and its counterpart Freddie Mac. According a front page story in the Sept. 19, 2008, Investor’s Business Daily by Terry Jones, Frank has received $40,100 in campaign cash over the past two decades from the GSEs.

Frank is ranked 16th on a list that includes both houses of Congress and fifth among his colleagues in the House. According to data from the Center for Responsive Politics’ OpenSecrets.org, political action committees financed by both Freddie and Fannie have contributed $3,017,797 to members of Congress since 1989. And according to the July 16 issue of Politico, the two entities have spent a whopping $200 million to buy influence – including not only campaign donations to members of Congress, but also presidential campaigns and lobbying efforts.

In a July 23 op-ed, Wall Street Journal Editorial Page Editor Paul Gigot put the blame for the GSEs’ collapse firmly on the members of the liberal establishment who took money from Freddie and Fannie. “Fan and Fred also couldn't prosper for as long as they have without the support of the political left... This includes Mr. Frank and Sen. Chuck Schumer (D., N.Y.) on Capitol Hill, as well as Mr. [Paul] Krugman and the Washington Post's Steven Pearlstein in the press.”

Frank was asked by CNN’s John Roberts on the Sept. 22, 2008 “American Morning” about this and his opposition to reform Fannie Mae and Freddie Mac. Originally, he claimed he didn’t think the two GSEs were facing any problems when the issue first surfaced in 2003. He instead blamed the Republican-controlled Congress for their ultimate fall, failing to mention his friendly relationship with Fannie Mae and the contributions it had made to his campaign over the years.

“Yes, I did not think we were facing a crisis in 2003, but that didn't mean we didn't have to have reform,” an animated Frank said when confronted with the question. “Here’s the deal, the Republicans controlled Congress from 1995 through 2006. They did zero to reform Fannie Mae and Freddie Mac.”

However, on Sept. 17, 2008, former Bush administration Deputy Chief of Staff Karl Rove elaborated on the Bush administration’s efforts to curb abuses at the two GSEs in 2003. He told Fox News’ “Hannity & Colmes” that Frank was among the most aggressive opponents of White House attempts to reform Fannie Mae and Freddie Mac.

“All of this bad stuff on Wall Street happened because people got greedy and the greed started at Fannie Mae and Freddie Mac,” Rove said. “And I know this because five years ago, the administration was alerted by the regulator, James Lockhart, that there was insufficient authority and that these institutions – particularly Fannie – were out of control.”

Rove said the Bush administration’s efforts to reform Fannie and Freddie were opposed by congressional Democrats – specifically Frank and Senate Banking Committee Chairman Christopher Dodd, D-Conn.

“And I got to tell you, for five years, I was part of an effort at the White House to fight this and our biggest opponents on the Hill who blocked this every step of the way were people like Chris Dodd and Barney Frank. And Fannie and Freddie are the $200 billion contagion at the center of this.”

Frank has been quick to blame deregulation for some of the problems in the financial environment, as he did on Bloomberg television’s Sept. 19 “Political Capital with Al Hunt.” However, as earmark crusader Rep. Jeff Flake, R-Ariz. pointed out – it’s not deregulation, but it was the structure of Fannie Mae and Freddie Mac that had been guarded by Frank and other members of Congress.

“Some people point at deregulation,” Flake said to the Business & Media Institute on Sept. 23. “It’s not deregulation at all. We have for far too long shielded Fannie and Freddie for example, with the implicit and now explicit guarantee. I just found it humorous.”

Flake specifically named Frank as one of the members behind letting allegations of transgressions at the two GSEs for slipping by without oversight from Congress.

“Just a few minutes ago, a reporter was asking me about this and saying, ‘Barney Frank is saying that’s just – because there were allegations,’ correct ones – ‘that Fannie and Freddie have been the playground for politicians for years and now the other side is saying Fannie and Freddie were just a small part of this and this goes far beyond.’ It does, but these same people a couple of weeks ago said, ‘You got to bail out Fannie and Freddie because they touch everything out there. They touch nearly every mortgage out there.’ And because of that explicit guarantee – that we would come and bail them out, nobody has been subject to market discipline.”

Frank claims differently, according to a letter to the editor published in the Sept. 17, 2008 Wall Street Journal. Frank noted that in 2005 he supported regulating compensation for Fannie and Freddie executives.

“In fact, my reform efforts had begun when we were still in the minority. In 2005, I joined Michael Oxley, then chairman of the House Financial Services Committee, in supporting legislation to increase the regulation of Fannie and Freddie that passed the House by a vote of 330 to 90,” Frank wrote. “When former Congressman Richard Baker proposed to examine the compensation structure of Fannie and Freddie's top executives, and some members of Congress tried to block him, I explicitly spoke out in support of his right to do that and our right, as a Congress, to examine the GSE’s compensation practices.”

The red flags were raised long before the government bailed out the two GSEs in August 2008. The first egregious scandal involving Fannie Mae occurred in 2004. A 2004 Wall Street Journal editorial was first to point out claims in an OFHEO report that showed accounting malpractices by the GSE.

“For years, mortgage giant Fannie Mae has produced smoothly growing earnings. And for years, observers have wondered how Fannie could manage its inherently risky portfolio without a whiff of volatility, the Oct. 4, 2004, editorial, “Fannie Mae Enron?” said. “Now, thanks to Fannie’s regulator, we know the answer. The company was cooking the books. Big time.”

See Relat