Quote:

haven't heard from anyone except you that they gave out these loans because the government FORCED them to.

---

Quote:

Twenty years ago the buzz-word in the media was “redlining.” Newspapers across the country were filled with hard-hitting investigative reports about evil and racist mortgage lenders refusing to make real estate loans to various minorities and to applicants who lived in lower-income neighborhoods. There I was closing these loans in the afternoons, and in the mornings offering a counter-argument on the radio to these absurd “redlining” claims. Frankly, the claims that evil mortgage lenders were systematically denying loans to blacks and other minorities were a lot sexier on the radio than my claims that when credit histories, job stability, loan-to-value ratios and income levels were considered there was no evident racial discrimination.

Political correctness won the day. Washington made it clear to banks and other lending institutions that if they did not do something .. and fast .. to bring more minorities and low-income Americans into the world of home ownership there would be a heavy price to pay. Congress set up processes (Research the Community Redevelopment Act) whereby community activist groups and organizers could effectively stop a bank’s efforts to grow if that bank didn’t make loans to unqualified borrowers. Enter, stage left, the “subprime” mortgage. These lenders knew that a very high percentage of these loans would turn to garbage – but it was a price that had to be paid if the bank was to expand and grow. We should note that among the community groups browbeating banks into making these bad loans was an outfit called ACORN. There is one certain presidential candidate that did a lot of community organizing for ACORN. I won’t mention his name so as to avoid politicizing this column.

These garbage loans to unqualified borrowers were then bundled up and sold. The expectation was that the loans would be eventually paid off when rising home values led some borrowers to access their equity through re-financing and others to sell and move on up the ladder. Oops.

Right now this crisis is being sold to the American public by the left as evidence the failure of the free market and capitalism. Not so. What we’re seeing is the inevitable result of political interference in free market economics. Acme bank didn’t want to loan money to Joe Homebuyer because Joe had a spotty job history, owed too much money on his credit cards, and wasn’t all that good at making payments on time. The politicians told Acme Bank to figure out a way to make that loan, because, after all, Joe is a bona-fide minority-American, or forget about opening that new branch office on the Southside. The loan was made under politicial pressure; the loan, with millions like it, failed – and now we are left to enjoy today’s headlines.

---

Quote:

I worked as a loan officer, both commercial and consumer loan officer at a bank for 9 years and what Neal said is absolutely 100% true. Every mortgage loan we did had a separate sheet attached and you made note that it was approved as a "CRA" (Community Reinvestment Act) loan. Bad deal or not, it sailed through. I, and other loan officers like me, noted our objections to debt ratio, excessive credit obligations, or derogatory credit history and we called these the "sacrificial loans", sacrificed to the ogre that was big brother. We knew the loans being made didn't qualify, but it was better to play the odds that folks would sell the homes with increasing values at some point or that their income would rise and they'd be responsible enough to make the payments on time.

Lenders have their loans reviewed from time to time and we were called on the carpet for loans that went bad. Do you know, I was never called in for any CRA designated loan or questioned about why a decision was made on any loan tagged as a "CRA" loan.

We kept nauseatingly strict track of these loans and the portfolio because when the Federal regulators came to audit the bank, whenever they wanted to expand or buy another bank, the regulators specifically wanted to see our CRA portfolio and ensure that red-lining was not taking place.

Neal is spot on. The mortgage debacle is partly to blame on the banks, but more so on government interference in the market and the pressure brought to bear on the banks to force them into making loans to less than qualified individuals.

---

zappaisgod said:

An excuse?  An EXCUSE?  It was mandated.  The government interfered with the market and we get this.  Banks never would have loaned money to these fucks because they weren't likely to pay it back.  They gummint said they must.  If you want to give low income losers a chance to buy a house do it with your money, not mine.  Thank you Mohatma Gandhi.

---

riceandpeas said:

This theory is just republicans blowing smoke. It's the exact opposite of the truth, as this comprehensive study proves. The CRA banks were actually LESS likely to make high-risk loans. In fact if there had been MORE CRA banks things would have been better.

---

supernovasky said:

I'm not going to pretend to understand all of this, but it seems to me it's a lot harder to narrow this down to a single cause. Our economic woes are multifaceted, and I hate the blame game you guys seem to be playing.

I mean, hell, just look at the reasons Wiki has been talking about:

http://en.wikipedia.org/wiki/Subprime_Crisis

---