But isn’t it still the bank’s responsibility to be sure the buyer is capable of fulfilling the mortgage, regardless of what is flipping plans are? You may go to the bank with a story about what you want to do, but shouldn’t the mortgage expectation be the same?
Geez Sam…aren’t we done with Kurtz already as a highly unreliable source? I’m sure I can dig up some equally wonky liberals out there who say bad things about your side that are just as nutty in their spin if you really want but I suspect you wouldn’t accept them as proof of anything (nor should you).
So too with this goof (not to mention the unimpeachable integrity of the NY Post [<–sarcasm]). If what he says is the truth you should be able to find plenty of info from reputable sources saying the same thing.
The activities of ACORN are common knowledge. This isn’t some expose’. It’s like that lawsuit I quoted above - if there truly was discrimination, the bank was at fault. But I take such claims with a grain of salt because groups like ACORN routinely use such lawsuits as an intimidation tactic. Any loan refusal of a minority is automatically assumed to be motivated by race. A group like ACORN files suits like this all the time, then uses their existence as a hammer against banks if they try to merge or engage in other activities that must be in compliance with the CRA.
That’s the whole point - to put a chilling effect on the denial of mortgages to minorities. The bank’s formula doesn’t just include, “will this mortgage be paid back?”, but also includes, “What will be the cost to us if we refuse? Will we be sued?” This biases them towards giving out the loan, which is why ACORN engages in these tactics in the first place.
So you’re saying there are no cases of banks discriminating against minorities? Or are you saying that it is improper to give those discriminated against the right to sue?
I don’t care what you want to see, I’m sure the courts would want to see the details of the case and the evidence for discrimination.
So the reason mortgage brokers wanted to write subprime loans without documentation was fear of being sued? :rolleyes:
Who hijacked it? Did “wealthier” people force mortgage brokers to not look at their paystubs?
BTW, minorities can sue for employment discrimination also. That is obviously the reason that employers these days are forced to hire without resumes, and without checking references. And they’re so scared they don’t do this for white people either. Never can be too careful.
Absolutely spot on. The sounds-boring-but-really-isn’t Irvine Housing Blog features current home listings that show a pattern of–among other things–HELOC abuse by many middle-class home owners in California.
The analysis of a property in this link is well worth a review; it is hardly an isolated case, and points out the abuses allowed by home financiers over the past few years. Owners of a five-bed four-bath home in tony Northwood bought their home for $360K in 1998, and are now asking $1.2 million to cover several refinances/second mortgages they took on the property over the past ten years. Their total debt on the property is estimated at over $1.2 million; given the market, this is likely a short sale.
The simple fact of the matter is that during the housing bubble, many middle-income homeowners treated their rising equity like an ATM machine. If folks on the right are trying to pin this on Clinton and minority loans, how do they explain home-equity abuse like this?
I don’t think the flippers were a big part of the problem. They’re taking a bath, as they should, and they won’t get bailed out.
I think the bigger problem was the owner occupant who could afford the teaser rate, and who assumed and/or was told that he could refinance before the rate ballooned. Lots did, but when the prices went down, they got stuck. Others got stuck with mortgages with big prepayment penalties, so they couldn’t afford to refinance. I can’t imagine what they were told to make that sound like a good deal.
Around here $500K buys you a modest 3 bedroom house, probably around 1500 sq ft. The bubble had to end, sure, but people were waiting for it to end for years, and those who didn’t buy back then found themselves falling further and further behind. It wasn’t pure greed. A lot of people bet and lost, but still more bet and won.
When i bought, 12 years ago, we were at a market low but the prices were still high compared to the pretty high priced town in NJ where we then lived.
Here is a map of foreclosure rates for 2007.If Sam was correct that community activist groups caused the problem, you’d expect to see higher numbers in urban centers. Chicago is indeed fairly high, but not as high as that hotbed of liberalism, Nevada. Florida is pretty high also, as is the less urban parts of California. A cursory glance shows that this map matches declining house values pretty well. New York, in fact, is fairly low.
As an example of your point, my son-in-laws parents did exactly what you say (and they’re very white.) They wanted to buy lots of crap even with reduced income, which was totally their fault. In the broader sense, the stagnation of income for the bottom 95% of the population due to Republican economic and tax policy meant that to keep up consumption people needed to borrow. It would have been much better if they hadn’t and we were forced into a recession 4 years ago, but the president said go shopping, and they listened.
First off if there was discrimination the banks should fight it if it is untrue. Sure businesses may calculate it is not worth the effort but if they are being hammered, as you said, by unfair claims of discrimination they should litigate a pile of them. This would send a messageto those suing they will not find pushovers and the banks could collect a pile of these bogus claims and use them to lobby Congress to close this loophole that was being abused.
Further, you are still ignoring the other side of this whole mess. On the face of it there is nothing wrong with a risky loan. As long as all parties know the risk (because of due diligence in collecting information) it’s fine. The government never expected the banks to try to lose money on risky loans. The banks had the assurance of the government that the loans were insured against default.
If that were the end of it the disaster might be a mere few tens of billions of dollars as the government alone is left backing up these bad loans. But that is NOT the end of it.
The banks turned around and started bundling good and bad loans together and transferring the risk to other parties. The detail of the actual risk was lost and the credit rating agencies were complicit in rating these things as safe when they weren’t. Then everyone keeps telling the next guy this is a safe bet and the bundle will grow in value with nary an end in sight. On it goes till someone figured out this was all really fantasy money and there was nothing behind it but bad risk.
This goes waaaay beyond ACORN and loans to poor people. If it was just loans to poor people we would in no way be facing anywhere near the $700 billion to over a trillion dollars in bad debt we see today. No way, no how can you lay that at the feet of some poor dude who nabbed a loan he should not have gotten.
Las Vegas had a red-hot housing market earlier this decade and I believe that would skew the numbers regardless of whether that state was red or blue. In California, just about every red county listed has a metro/urban town of 250K+ population. With 30 million plus, there’s quite a bit of urbanization going on in the Central Valley and the Inland Empire.
It seems that how red hot the market was is the best predictor of foreclosure rates. And I didn’t claim that the redness or blueness of the state had anything to do with this. Sam seems to be saying that activist groups forced banks to make bad loans. That could happen in the urban centers of either red or blue states. In fact, while Florida and California are fairly far apart politically, they are similar in foreclosure rates.
Heck, they had to come up with something, didn’t they? In the public’s mind (such as it were…), the financial industry is very closely identified with Pubbies, and have been for generations. Pubbies have fostered that identity happily when it underlines their probity, realism, and disinclination to squander money on people. Now, in this context, it becomes associated with greed, rapacity and dishonorable intent.
So they gotta come up with some rationale, however flimsy, for how this is all the fault of the DFH and their liberal allies. Its hogwash, they know its hogwash, but they’ve gotta have something!
For a giddy moment, it looked as though they were going to rebrand themselves as the People’s Republican Party, stern enemy of the Wall Street fat cats, protector and palladin of the working class. Didn’t last long, and its kind of a shame, 'cause I was* really * enjoying that one!
I didn’t say minority foreclosures were the problem.
As far as I can tell, this is what happened - the manipulations of the market to expand housing (sub prime mortgages, Fannie/Freddie guarantees, the CRA, etc) drove up demand for housing dramatically. Not just among poor people, but lots of people who took advantage of these rules. Fannie and Freddie were underwriting risk, which amounts to a subsidy for home buyers. Subsidize something, and you get more of it.
The increased demand for housing was also the result of low interest rate policies by the Fed. Put these two together, and suddenly there was a big spike in demand for housing. This in turn drove up the price of housing. And that in turn kicked of a speculative bubble. Enter the house flippers, the people using their houses as ATMs, etc. All of that’s true. But the reason it happened was because government policy inflated the demand for housing in a dramatic way.
This increased demand would normally have been checked by constrictions on available credit, or by the price of the houses themselves, as a new equilibrium price was reached. But enter government again - house prices climbed, and priced poor people out of the market. The government reacted by loosening the credit rules further, enabling sub-prime mortgages, zero down mortgages, etc. So the bubble kept inflating until the whole house of cards collapsed.
Here in Canada, we’re fairly heavily tied to the U.S. economically. But we don’t have the same government policies. We don’t have sub-prime mortgages. We can’t deduct our mortgage interest from our taxes. We have the CMHC, a GSE that helps low-income families buy houses, but they have to pay a risk premium to compensate for their low down payment (and you still need a 5% down payment through CMHC, and still have to qualify in all other ways (steady job, expenses including mortage no higher than a certain percentage of salary, etc).
In Canada, we had a housing boom too. But it corrected itself, and was never as wild. And we didn’t see the same kind of crash that you’re experiencing. The bubble was smaller, the crash milder. The difference? Government policy. Your government went nuts feeding the bubble, and ours didn’t.
The Bushiviks, in the library, with the candlestick.
It was their bold and innovative idea to start an expensive military adventure while cutting taxes. Feeding your chikens eggs, and eating both yourself. Dumb-da-dumbdumb dumb!
How many times over the last several years have you heard the Bushiviks answer grumblings about the economy with glowing hymns to the housing industry, how everybody has a share, we are the “ownership society”. Meanwhile, people borrow on their “equity” to pay their credit card bills, and Citibank is happy. Vaporcash is passing from hand to hand so it looks like an economy. But it wasn’t, we were borrrowing all of it. Who the fuck puts a war on their credit card? Who is that fucking stupid?
Answer starts with “R” and ends with “Obama”.
[Hamsters just ate my post, so I’m posting without cites and I have to go home anyway, so I’ll make this quick]
To think that Fannie and Freddie have no liability is naive at best. These behemoths should have never existed. They create moral hazards and market distortions. They create moral hazards because they are implicitly backed by the government, and after recent events we see that to be true. Because of this, take more risks, where such risks impair competition and distort the market place.
The GSEs made a whole bunch of money from creating Mortgage Backed Securities. Because of its inherent advantages (easy lines of credit straight from the Treasury and government backing ability to create MBSs), they repackaged their debt into a security. Because of their inherent abilities, they could take set these securities at better than the 30 year T-bill rate. The market loved them. They did too, as they often would buy it off each other. IOW, they are insuring their own losses. Let’s put that into perspective: This wasn’t so bad if they weren’t ridiculously leveraged 65 to 1 (debt against assets) in the first place. And, to make matters worse, they still had a AAA rating (again because of the government backing). In real numbers, in 2004, that’s $880B of assets against $1.4T (that’s billion and trillion respectively!)
Private banks/corporations that you so vehemently rail against have to take on riskier loans and riskier practices in order to compete because the GSEs were crowding out these businesses. They also encouraged lax underwriting to feed its MBS habit, particularly subprime and Alt A loans because they had larger spreads.
Nonetheless, I don’t blame Clinton. If there’s going to be any finger-pointing, we should be point at our selves, at our own greed. Politicians liked this plan because Fannie and Freddie were large contributors. It created a lot of tax revenue. Homebuyers liked it because it gets them into houses they probably wouldn’t have gotten under traditional lending standards. Homesellers liked it because they got more money out of their homes. Investors liked it because of the huge returns they were getting. Unfortunately, it was all based on a bubble. The correction is a harsh mistress.
I’m not sure this passes the sniff test. I’d have to be persuaded with more convincing arguments than a few anecdotes from Kurtz – let’s say specific demographic data that showed foreclosures among poor minorities to be significantly greater and for a larger aggregate amount than those for over-extended suburbanites.
Anyway, here are my reasons for skepticism:
a. From Kurtz’ article:
And Talbott continued her effort to, as she put it, drag banks “kicking and screaming” into high-risk loans. A September 1993 story in The Chicago Sun-Times presents her as the leader of an initiative in which five area financial institutions (including two of her former targets, now plainly cowed - Bell Federal Savings and Avondale Federal Savings) were “participating in a $55 million national pilot program with affordable-housing group ACORN to make mortgages for low- and moderate-income people with troubled credit histories.”
A $55 million pilot program. Ummm…we’re looking at a trillion dollar disaster right now. $55 million is a drop in the bucket. So there’d have to be a lot of similar programs. Just how well-funded and wide-spread is ACORN? Law suits are expensive and banks have lots of lawyers.
b. Poor minorities are not buying the primo properties – the million dollar McMansions. So if those mortgages go south, the damage is constrained.
c. If we’re blaming this on the Clinton years – well, real estate was in a bubble in the late 80’s, slumped mostly through the 90’s and only really exploded in the 2001 years. Again, the aggregate total debt accrued by urban minorities would be minimized by this condition.
So I would be (without actual data) that most of the properties being foreclosed on now were bought within the last 8 years and have very little to do with the CRA program. Granted, poor minorities who bought in at the bottom of the market in the 90’s might have seen their property values soar and have taken out home equity loans and spent the money wildly, just as their suburban brethren did. But that again has nothing to do with CRA and everything to do with being a dumbass.
No, it’s easy for banks to claim that “someone twisted my arm” to make the bad loans. But I have a mailbox and I got all the junk mail everyone else here got. I got the offers for the shady refinancing deals, the just interest loans, the home equity deals. It was pretty clear that after the banks had pretty much saturated the market by lending to anyone who was qualified to get a mortgage, they then aggressively went after the subprime market and the people betting that the bubble would never end and those banks did it of their own free will.
Well, what we’re arguing in this thread is whether or not Clinton Administration policies are at fault. You seem to be referencing policy that would have been enacted from 2001 on forwards. So…does that mean we’re done here?
Subprime mortgages were enacted in the Clinton administration, as were some of the other rules we are talking about.
Yup. Totally agree. Every group listed above threw in their fair share of their own ingredients for one huge pot of American Shit Stew. Dinner is served…Bon Apetite!
To spin it anyway else is disingenuous and pointless.
I love it when you guys blame the victim and exonerate the thief in charge. Heres an article from the extremely LIBERAL Wall Street Journal. It says blaming Fannie and Freddie is wrong because they did not originate any mortgages. ,unregulated ,private companies did. ,for bubble type logic, to make a quick buck,
The FBI estimates that 80 % of reported fraud losses are from for profit schemes originated by industrial insiders.
You guys blame the victim for crimes originated from the insiders at the top. Fannie and Freddie dealt with mortgages that were already written. They were not involved in their creation.
Here’s the summary of the Republican talking point, courtesy of Ann Coulter:
*Instead of looking at “outdated criteria,” such as the mortgage applicant’s credit history and ability to make a down payment, banks were encouraged to consider nontraditional measures of credit-worthiness, such as having a good jump shot or having a missing child named “Caylee.” *
She has a way of skipping past the pleasantries and getting right to the truth of the beleif, doesn’t she?