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At the Economic Policy Institute, Gregory D.Squires, Derek S. Hyra and Robert N.Renner write:

While there has been widespread recognition that racial minorities are among the hardest hit by the subprime mortgage crisis, racial residential segregation has not been considered a factor behind the crisis in minority communities. Blame is being directed at ill-informed consumers, lax underwriting by loan originators, the failure of regulatory agencies, predatory lending practices, greedy investors, misguided appraisers and credit rating agencies, job loss in economically distressed regions, and a range of other institutional and individual factors. ... Virtually ignored in this debate is racial segregation.

[...]

Racial segregation is a significant predictor of the share of subprime loans, even after controlling for the percent of minorities, credit score, median home value, poverty, and education. Black segregation has a stronger effect than Hispanic segregation. These findings reveal that segregation explains, in part, the high rates of subprime lending in America’s most segregated metropolitan areas.

Major findings include:

• A 10% increase in black segregation, on average, is associated with a 1.4% increase in high-cost lending.

• In a highly segregated black area, the percent increase in high-cost loans is 7%; in a highly segregated Hispanic metropolitan area the increase is 4.2%.

• Metropolitan areas with higher education levels have a lower proportion of high-cost loans.

Although there are several reasons why subprime lending proliferated in the last 10 years and various approaches that might ameliorate such lending, the findings here suggest that reducing the level of residential segregation would decrease a metropolitan area’s vulnerability to subprime lending. While we did not explore the specific mechanisms by which segregation leads to higher rates of high-cost lending, it is evident that areas where minority groups are more concentrated are more susceptible to subprime lending.

Solutions, according to the report's authors:

  1. Decrease segregation and increase affordable housing
  1. Regulate the lending industry
  1. Educate borrowers: Financial literacy

More specifically,

Reduce discrimination in the housing industry Housing market discrimination clearly contributes to segregation. To more effectively enforce fair housing laws already in place, the proposed Housing Fairness Act of 2009 (H.R. 476) (which supports non-profit fair housing around the country) should be enacted. This bill would increase funding for the Fair Housing Initiatives Program to $52 million and would fund a $20 million nationwide paired-testing program providing for 5,000 tests, approximately 50 in each of the nation’s 100 largest metropolitan areas. In paired-testing investigations, equally qualified white and non-white auditors posing as homebuyers or renters approach housing providers, such as real estate and rental agents, mortgage lenders, and insurance agents, and inquire about the availability of the same or similar housing units or housing related services like home insurance or mortgage loans. Any differences in treatment they receive likely reflect discrimination since these auditors or testers are assigned identical qualifications and interests. Such investigations have routinely revealed discrimination in approximately one out of every five initial visits to real estate or rental agents.

• • • • •

palantir has posted the Overnight News Digest.

Originally posted to Daily Kos on Thu Nov 12, 2009 at 09:05 PM PST.

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Comment Preferences

  •  This is Real! (6+ / 0-)

    Thanks for the information.

    •  Yes, it is real. There is a link that will (8+ / 0-)

      show the percentage of subprime loans of each county in each State. It is at

      http://www.nytimes.com/...

      It was written November 3, 2007.

      Subprime Mortgages Across the U.S.
      Does your area have a higher or lower percentage of subprime loans than the national average?

      Source: 2000 Census and the Federal Financial Institutions Examination Council Matthew Bloch and Ford Fessenden

      When I grow up, I want to be just like Keith Olbermann. ♥

      by 0hio on Thu Nov 12, 2009 at 09:18:24 PM PST

      [ Parent ]

      •  Firsthand knowledge...it's pervasive to this day (10+ / 0-)

        Having worked with a handful of mortgage firms over the past few years, mostly as a byproduct of my work with my small software company (we process credit applications for retailers/consumers--our focus now is primarily in "big-ticket retail" [i.e.: furniture, jewelery, home improvements, etc.]), let me share with you a little of our "experience" with mortgages and home equity lines of credit (HELOC's), too.  

        I can tell you firsthand how disgustingly pervasive mortgage discrimination is in this country, even now. And, the sad thing is, it's a lot more simply executed than most people may realize.

        In its simplest iteration, it's usually something along the lines of this:

        1.) Mortgage Company "X" markets its services/products

        2.) Company "flags" leads from certain zip codes for a variety of levels of follow-up

        3.) If a company doesn't want to lend in a given area/zip code, they just don't follow-up on the leads they generate from it.

        Yeah, it is THAT simple.

        It's a major part of the reason why we chose to no longer work with the mortgage industry. (And, we made that decision back in 2006, after dabbling in it for a couple of years with two or three companies. IT WAS JUST TOO DAMN SLEAZY!)

        "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

        by bobswern on Thu Nov 12, 2009 at 10:12:30 PM PST

        [ Parent ]

        •  Predatory Lenders Targeted Sick, Poor (6+ / 0-)
          Recommended by:
          shanikka, 0hio, bobswern, Deoliver47, ems97007, CMYK

          The problem with the "blame the victim" crowd is that they are completely ignoring the fact that these lenders targeted these vulnerable groups and charged them more in advance supposedly to insulate themselves from risk. So they already made the money, that was supposed to be their "insurance" its long gone.

          They actually trolled hospitals looking for sick people who owned property, and bought lists of people with bad credit, secure in the knowledge that the government would bail them out when the people they had victimized fell as they knew they would.

          Listen to the radio show "The giant pool of money" its really pretty disgusting.

          I think its a similar situation to the situation with health insurance, or slavery or indentured servitude. The coercive businesses are always the most profitable.

          If you can't afford COBRA, you wont be able to afford "public option". Affordability IS important! Insulating the government from responsibility ISN'T!

          by Andiamo on Thu Nov 12, 2009 at 10:25:07 PM PST

          [ Parent ]

          •  Plus, they target church groups and aid groups (5+ / 0-)
            Recommended by:
            shanikka, 0hio, the fan man, arlene, Deoliver47

            with deceptive selling techniques design to make people  feel better about getting either a home equity loan or a subprime mortgage. The banks will often have a member of a minority all in a suit to tout their bank as being 'friendly to the community', like WF bank. Then they hit you with excuses not to give you a market rate loan or a covered FHA loan and try to sell  a garbage loan instead.

            I was nearly a victim of this. Despite a good credit score, I was REPEATEDLY steered to bullshit loans when I was in the market to buy a home. The reasoning? My credit score, although good, showed I did not have a high history of credit and so this would build up my payments and I could refinance.

            I called the people on their BS. And during these past few years it was harder than hell to get a so called regular loan with floor market rates. You guys have to understand, the banks made so much fucking money off subprime loans, and they needed racial segregation to make that money.

            Consider that next time when you watch a bank commercial.

            Why yes, I am Catholic.

            by ems97007 on Thu Nov 12, 2009 at 10:38:51 PM PST

            [ Parent ]

            •  Church groups are often run by these kinds of (1+ / 0-)
              Recommended by:
              bobswern

              sleaze bags. What's the best cover if you're a con man? Become a reverend, pastor, etc. You're then the "authority" in a group of people who believe themselves to be composed of particularly moral people -- thereby putting their guard down relative to their usual behavior.

              •  And God makes it good. (0+ / 0-)

                Seriously, concurrent with this was this whole "Gospel of plenty" rise in eh late 90s and into this decade. It's a fantasy view of Christianity, in which these con men (or women) will tell people if they just take out this loan, and just pray FOR MONEY AND STUFF, and God in Heaven will give you stuff and money.

                STUFF. AND MONEY.

                And so many people fall for this shit, especially the TJ Jakes crowd. Just yikes.

                Why yes, I am Catholic.

                by ems97007 on Fri Nov 13, 2009 at 02:18:14 PM PST

                [ Parent ]

          •  wait til you get the credit card offers (2+ / 0-)
            Recommended by:
            shanikka, bobswern

            once your credit score gets low enough you start getting card offers for cards which are only for the amount you deposit with the card issuer and usually a $500 limit carries a $200 transaction fee, not to mention a transaction fee on each purchase, not to mention hefty overdraft fees and a sizable interest rate (on purchases made against the amount you have deposited, so you receive no interest for your deposit but pay interest on your purchase til your purchase is charged against your deposit.
            Sweet huh?

            •  First Premier (2+ / 0-)
              Recommended by:
              0hio, bobswern

              Continues to predate.  They are still sending that $250 limit card that has $183 in charges on it before you even get your first bill.

              If you don't stand for something, you will go for anything. Visit Maat's Feather

              by shanikka on Fri Nov 13, 2009 at 07:41:27 AM PST

              [ Parent ]

              •  And they have a national charter, which... (1+ / 0-)
                Recommended by:
                0hio

                ...entitles them to "preemption" (governed by federal rules as opposed to stricter state regs and enforcement authorities) and "rate exportation," which enables them to structure their offers to consumers based upon whatever they might get away with in their home/headquarters state and then "exporting" those requirements to wherever they wish to conduct business, nationally; thus further trumping tighter controls on these predatory rates at the state level, too.

                In fact, it is the PREEMPTION issue which is at the heart of much regulatory reform being pushed through our legislative branch right now. Lenders, in general, would much rather be regulated at the federal level, where there are fewer than 50 folks responsible for supervision/compliance, than at the state level where almost 800 folks are enforcing state laws.

                "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

                by bobswern on Fri Nov 13, 2009 at 01:36:03 PM PST

                [ Parent ]

    •  Of course not; we are in the post racial world (0+ / 0-)

      Rush told me so yesterday right after he finished telling me that Muslims in the military were a Fifth Column (though almost 8.5% of troops are immigrants or noncitizens and the Fort Hood shooter was Native born)

      After reassuring me of this he then went on to prove that the Ft Hood shooter was a member of al Qaeda sent here as a mole. How does El Rushbo know?
      The guy was a physician making almost 100K per annum but lived in a spartan apartment so he had to be sending his money elsewhere. Most radical Muslims send their money to radical Muslim organizations like al Qaeda and send it to a third country.
      So he could have been sending his money to Pakistan and we all know that Pakistan is where bin Laden is hiding out so that proves he was sending his spare change directly to bin Laden.
      Worse, he made regular phone calls to al Qaeda operatives in Yemen (this turned out to be calls to his former mullah who is identified as an al Qaeda sympathizer and the calls were monitored by the FBI and judged harmless). This proves he was an active undercover agent for al Qaeda.
      Finally, he was in regular active contact with the 9/11 hijackers (two went to his mosque at one time; no indication they were buddies) so this proves again he was an al Qaeda operative.

      Now let me prove to you that only reverse racism still exists in post racial America
       

  •  I have to think the subprime loan scandal (5+ / 0-)
    Recommended by:
    shanikka, zett, Mike Taylor, Egalitare, CMYK

    was/is a way for landlords (who double as real estate agents) to snatch up periphery housing on the cheap.

    The rings between the black/latino ghettos and the artsy former ghettos now populated by white yuppies (decent enough people don't get me wrong)... all that real estate was just too valuable not to rent out (so they thought). How could they leave it in the hands of minorities unwilling to sell and leave their neighborhoods? Or why would they let these minorities reap the rewards of owning the properties in hot new development zones?

    I think this was a very cynical game by landlords and real estate agents.

    I'm just glad it's biting landlords in the ass wrt their mortgages too. Instead of laying all the fallout on the renters when these landlords fail to make their payments, there should be organizers working to turn some of those buildings into co-ops.

    •  The really major gentrification is on hold (2+ / 0-)
      Recommended by:
      the fan man, certainly

      until the economy heats up and the price of gas starts rising again. In many cities investment companies bought up huge developments with thousands of rent controlled apartments secure in the knowledge that they could drive the tenants out one way or another and sell them as condos. But now the whole cost curve has been bent by the tight credit market and people have some time to save money for when it comes back,

      For all of its problems, urban life can be very nice, compared to the suburbs its much more crazy, in your face, dynamic.. Its either way too expensive or affordable and rent controlled, rarely anything in between.

      If you can't afford COBRA, you wont be able to afford "public option". Affordability IS important! Insulating the government from responsibility ISN'T!

      by Andiamo on Thu Nov 12, 2009 at 10:35:28 PM PST

      [ Parent ]

    •  I am already seeing the flip infomercials today (0+ / 0-)

      with one guy proclaiming a 34K profit on a townhouse which he put no money down for but only "had an option". Somebody should investigage these programs because distressed property does not work the way they say it does and it is really a very specialized niche investment area

  •  thanks - have already forwarded this to friends (3+ / 0-)
    Recommended by:
    shanikka, sceptical observer, CMYK

    who follow these issues...

    unfortunately, "it was ever thus" I'm afraid.

    but being aware of it should help...eventually

  •  Stupid arguement. (2+ / 0-)
    Recommended by:
    publicv, Dr Marcos

    I don't think the color of your skin makes you read a document different than someone with different colored skin.  This is not a matter of race.  This is a matter of class.

    I do agree with the 68 Fair Housing act.  I do not agree with the Community Renivestment Act by Clinton.  This is the real cause of the housing market decline.  We can blame Wall Street cause they are so evil.  But at the end of the day we either can afford the house or not. This is not dependent on the color of our skin.

    BTW, my skin color is not white, or black, but rather an olive tanned Hispanic color.

    At the end of the day, you either can afford the house or not.  If you can't understand the contract, why blame that on race?  Personal Responsibility has to mean something to you.  

    •  Personal responsibility is one side of this coin, (7+ / 0-)

      but slick loan salespeople foisting subprime products on populations with less sophistication in finance is the other. I'm a lily white fucker, and I can see this is mainly about exploitation, not responsibility.

      BTW, I also have a graduate degree and a 15 year, simple interest mortgage note at 4.75%. Is it any surprise that someone with my background has better chances from the get-go at being able to read a contract? Immoral business practices bear as much "responsibility" as poorly informed consumers that see a loan as a chance to a better life.    

      It's not a campaign anymore, Mr. Obama.

      by huntergeo on Thu Nov 12, 2009 at 09:26:09 PM PST

      [ Parent ]

      •  You have to take race out of this. (1+ / 0-)
        Recommended by:
        Sparhawk

        I don't really care what color you claim.  Did you read the document?  Did you research?  Did you plan a budget?

        I never knew what an ARM was untill I looked it up.  

        Your claim about exploitation and then mentioning your education made me laugh.  That would be true no matter what color your skin.  Do you understand that?

        Exploitation will always be there.  My parents told me nothing would ever be free.  I understand that to mean that I would have to look out for myself and do what it took to provide for self and family.  

        Your arguement of "Less sophistication" is correct, but how does that relate to race?  

        If you are a poorly informed consumer, then maybe you shouldn't be allowed to purchase a home if you can't pay.  Remember my complaint was with the CRA by Clinton, that stated that banks had to loan to minorities no matter what their ability to pay was.  

        It is class and not skin color.  Ability to pay.  The only color the banks care about is green.

        •  It makes you laugh that I see exploitation (6+ / 0-)

          is class and race based? I mentioned race because you did, frankly.

          What I get from your points is that if you aren't street-wise or book-smart, you are a chump, and no government oversight should there to help protect you from legalized loan sharking. What CRA needed was more constraints on unfair practices.

          Exploitation will always be there.

          And it will run rabidly wild under free-market fundamentalism.  

          Please. You sound like Galt and Greenspan might be your heroes, and that tripe has been empirically discredited by the occurrence of the Great Recession and its financial industry roots.

          It's not a campaign anymore, Mr. Obama.

          by huntergeo on Thu Nov 12, 2009 at 10:10:53 PM PST

          [ Parent ]

          •  Read the article. Or just the headline. (0+ / 0-)

            I didn't bring up race.  The article is about race.

          •  Not just smart -- but lucky. (0+ / 0-)

            That's what these idiots don't seem to understand (and yeah, I think OSCJP is a narcissistic chump).

            Most life events are largely determined by luck -- who you happen to have run into, what data you found, what book you picked up, which friend gave you advice... They are highly influenced by random variables. These variables are random, but they have specific distributions depending on your social condition.

            But folks who got lucky want to pretend that it all happened due to their own personal genius -- which makes them chumps-in-waiting. They want to take credit for something which is 10% creditable to a personal characteristic, and 90% creditable to the random flow of events through the social scene. Otherwise, they might have to feel bad at the distribution of goods -- which might mean they'd feel bad about themselves.

            Boo-hoo. Whiny chumps, sitting there for the day the con-man happens to cross their path.

            •  Culture encourages extreme overconsumption (0+ / 0-)

              Americans are strongly encouraged,
              I would say almost forced,
              to live far beyond their means.

              Americans could learn a lot from immigrants as to how to survive. Live on much less, do everything they can to make whatever money they make last longer.

              :-[

              If you can't afford COBRA, you wont be able to afford "public option". Affordability IS important! Insulating the government from responsibility ISN'T!

              by Andiamo on Fri Nov 13, 2009 at 06:37:25 PM PST

              [ Parent ]

        •  Misinformed or misled? (2+ / 0-)
          Recommended by:
          shanikka, Deoliver47

          Serious literacy functional literacy studies in this country by NIE show that it is highly unlikely that more than 13-14% of the population actually understand documents of the kind associated with mortgages.  That is, only 13-14% of the population in 2002 could read something like credit card terms and be able to compare and choose between credit cards.  If you take the Clinton years' data, it's really only 3-4%.  I'd be willing to bet that unless you have really studied things like mortgage disclosure documents, you yourself don't really understand them.  But you probably think you do.  The less educated you are, the more likely you are to be misled by underhanded subprime mortgage sellers. If people actually understood what their payments would be when their ARM resets, then they probably wouldn't have signed.  But, gee, the reset payment isn't actually on the mortage disclosure form because, goodness, we don't know what the interest rate published in the Wall Street Journal will be on the day it resets.  So we don't have to tell you.

          Compass -7.63, -7.49

          by cinnamon68 on Fri Nov 13, 2009 at 12:46:29 AM PST

          [ Parent ]

          •  Thats not true.. (0+ / 0-)

            They understand, but they buy stuff because society basically seems designed to create a feeling of worthlessness in people who don't keep on buying stuff.

            If anybody wants a VERY interesting read, read Thorsten Velben's "The Theory of the Leisure Class"

            Its an analysis of how we value people by their distance from practical forms of knowledge and their willingness to spend money on useless things. Its old but it still holds true.

            This is from Wikipedia

            The Theory of the Leisure Class is a book, first published in 1899, by the Norwegian-American economist Thorstein Veblen while he was a professor at the University of Chicago.

            Veblen claimed he wrote the book as a perceptive personal essay criticizing contemporary culture, rather than as an economics textbook. Critics claim this was an excuse for his failure to cite sources.[citation needed] Nonetheless, Theory of the Leisure Class is considered one of the great works of economics as well as the first detailed critique of consumerism.

            In the book, Veblen argues that economic life is driven not by notions of utility, but by social vestiges from pre-historic times. Drawing examples from his time (turn-of-the-Twentieth-Century America) and anthropology, he held that much of today's society is a variation on early tribal life.

            According to Veblen, beginning with primitive tribes, people began to adopt a division of labor along certain lines. The "higher-status" group monopolized war and hunting while farming and cooking were considered inferior work.

            He argued this was due to barbarism and conquest of some tribes over others. Once conquerors took control, they relegated the more menial and labor-intensive jobs to the subjugated people, while retaining the more warlike and violent work for themselves. It did not matter that these "menial" jobs did more to support society (in Veblen's view) than the "higher" ones. Even within tribes that were initially free of conquerors or violence, Veblen argued that certain individuals, upon watching this labor division take place in other groups, began to mimic (or, in Veblen's term, emulate) the higher-status groups.

            Veblen referred to the emerging ruling class as the "leisure class." He argued that while this class did perform some work and contributed to the tribe's well-being, it did so in only a minor, peripheral, and largely symbolic manner. For example, although hunting could provide the tribe with food, it was not as productive or reliable as farming or animal domestication, and compared with the latter types of work, was relatively easier to perform. Likewise, while tribes occasionally required warriors if a conflict broke out, Veblen argued that militaristic members of the leisure class retained their position—and, with it, exemption from menial work—even during the extremely long stretches of time when there was no war, even though they were perfectly capable of contributing to the tribe's "menial" work during times of peace.

            At the same time, Veblen claimed that the leisure class managed to retain its position through both direct and indirect coercion. For example, the leisure class reserved for itself the "honor" of warfare, and often prevented members of the lower classes from owning weapons or learning how to fight. At the same time, it made the rest of the tribe feel dependent on the leisure class's continued existence due to the fear of hostilities from other tribes or, as religions began to form, the hostility of imagined deities (Veblen argued that the first priests and religious leaders were members of the leisure class).

            To Veblen, society never grew out of this stage; it simply adapted into different forms and expressions. For example, he noted that during the Middle Ages, only the nobility was allowed to hunt and fight wars. Likewise, in modern times, he noted that manual laborers usually make less money than white-collar workers.

            If you can't afford COBRA, you wont be able to afford "public option". Affordability IS important! Insulating the government from responsibility ISN'T!

            by Andiamo on Fri Nov 13, 2009 at 06:51:52 PM PST

            [ Parent ]

        •  You cannot take "race" out of any equations (5+ / 0-)

          in the USA - housing, health care, employment, education.  If you don't understand how race/class are linked, you need to do some more study.

          "If you're in a coalition and you're comfortable, you know it's not a broad enough coalition" Bernice Johnson Reagon

          by Denise Oliver Velez on Fri Nov 13, 2009 at 02:56:30 AM PST

          [ Parent ]

        •  Why? The exploiters certainly have not n/t (0+ / 0-)

          "Power concedes nothing without a demand. It never did and it never will." -- Frederick Douglass

          by Egalitare on Fri Nov 13, 2009 at 03:43:43 AM PST

          [ Parent ]

        •  That's simply not true (1+ / 0-)
          Recommended by:
          shanikka

          Remember my complaint was with the CRA by Clinton, that stated that banks had to loan to minorities no matter what their ability to pay was.  

          The CRA did no such thing. It required loans to made based on ability to pay, not denied on the basis of race - or area, which was being used as a proxy for race.

          Many of the institutions with the biggest sub-prime problems were not regulated by the CRA.

          The Empire never ended.

          by thejeff on Fri Nov 13, 2009 at 07:02:02 AM PST

          [ Parent ]

          •  From Wikipedia. (0+ / 0-)

            Its a toss up.  I believe one thing and you another.  The rest of the world is split.  I know govt intended to the correct thing here and it did help redlining.  But at the end of the day, the only color the bank sees is green (Your ability to pay).  I've never met any of my lenders, nor have I divulged my race at any time.  

            Some economists, politicians and other commentators have charged that the CRA contributed in part to the 2008 financial crisis by encouraging banks to make unsafe loans. Others however, including the economists from the Federal Reserve and the FDIC, dispute this contention. The Federal Reserve and the FDIC holds that empirical research has not validated any relationship between the CRA and the 2008 financial crisis.[98][99]

            Economist Stan Liebowitz wrote in the New York Post that a strengthening of the CRA in the 1990s encouraged a loosening of lending standards throughout the banking industry. He also charges the Federal Reserve with ignoring the negative impact of the CRA.[93] In a commentary for CNN, Congressman Ron Paul, who serves on the United States House Committee on Financial Services, charged the CRA with "forcing banks to lend to people who normally would be rejected as bad credit risks."[100] In a Wall Street Journal opinion piece, Austrian school economist Russell Roberts wrote that the CRA subsidized low-income housing by pressuring banks to serve poor borrowers and poor regions of the country.[101] Jeffrey A. Miron, a senior lecturer in economics at Harvard University, in an opinion piece for CNN, calls for "getting rid" of Fannie Mae and Freddie Mac, as well as policies like the Community Reinvestment Act that "pressure banks into subprime lending."[102]

            However, others dispute the involvement of the CRA in the subprime crisis. According to San Francisco Federal Reserve Bank Governor Randall Kroszner, the claim that "the law pushed banking institutions to undertake high-risk mortgage lending" was contrary to their experience, and that no empirical evidence had been presented to support the claim.[98] In a Bank for International Settlements (BIS) working paper, economist Luci Ellis concluded that "there is no evidence that the Community Reinvestment Act was responsible for encouraging the subprime lending boom and subsequent housing bust," relying partly on evidence that the housing bust has been a largely exurban event.[103] Others have also concluded that the CRA did not contribute to the financial crisis, for example, FDIC Chairman Sheila Bair,[99] Comptroller of the Currency John C. Dugan,[104] Tim Westrich of the Center for American Progress,[105] Robert Gordon of the American Prospect,[106] Ellen Seidman of the New America Foundation,[107] Daniel Gross of Slate,[108] and Aaron Pressman from BusinessWeek.[109]

            Some legal and financial experts note that CRA regulated loans tend to be safe and profitable, and that subprime excesses came mainly from institutions not regulated by the CRA. In the February 2008 House hearing, law professor Michael S. Barr, a Treasury Department official under President Clinton,[65][110] stated that a Federal Reserve survey showed that affected institutions considered CRA loans profitable and not overly risky. He noted that approximately 50% of the subprime loans were made by independent mortgage companies that were not regulated by the CRA, and another 25% to 30% came from only partially CRA regulated bank subsidiaries and affiliates. Barr noted that institutions fully regulated by CRA made "perhaps one in four" sub-prime loans, and that "the worst and most widespread abuses occurred in the institutions with the least federal oversight".[111] According to Janet L. Yellen, President of the Federal Reserve Bank of San Francisco, independent mortgage companies made risky "high-priced loans" at more than twice the rate of the banks and thrifts; most CRA loans were responsibly made, and were not the higher-priced loans that have contributed to the current crisis.[112] A 2008 study by Traiger & Hinckley LLP, a law firm that counsels financial institutions on CRA compliance, found that CRA regulated institutions were less likely to make subprime loans, and when they did the interest rates were lower. CRA banks were also half as likely to resell the loans.[113] Emre Ergungor of the Federal Reserve Bank of Cleveland found that there was no statistical difference in foreclosure rates between regulated and less-regulated banks, although a local bank presence resulted in fewer foreclosures.[114]

            During a 2008 House Committee on Oversight and Government Reform hearing on the role of Fannie Mae and Freddie Mac in the financial crisis, including in relation to the Community Reinvestment Act, asked if the CRA provided the "fuel" for increasing subprime loans, former Fannie Mae CEO Franklin Raines said it might have been a catalyst encouraging bad behavior, but it was difficult to know. Raines also cited information that only a small percentage of risky loans originated as a result of the CRA. Bob McTeer, president of the Dallas Federal Reserve Bank from 1991 to 2004, said "There was a lot of pressure from Congress and generally everywhere to make homeownership affordable for poor and low-income people. Some mortgages were made that would not have ordinarily been made." He also said "When a bank made a decision to purchase mortgaged-backed securities, they would somehow determine if some of them were in zip codes covered by the CRA, and therefore they could get CRA credit."[115][116]

            •  If You Go by Wikipedia (0+ / 0-)

              For your facts, then I truly feel sorry for you.  It would take you about 10 minutes to actually go to legitimate websites of the organizations involved and learn the truth.

              But of course that might be inconvenient for you.......

              If you don't stand for something, you will go for anything. Visit Maat's Feather

              by shanikka on Fri Nov 13, 2009 at 08:47:20 AM PST

              [ Parent ]

              •  Reply (0+ / 0-)

                For your facts, then I truly feel sorry for you.  It would take you about 10 minutes to actually go to legitimate websites of the organizations involved and learn the truth.

                But of course that might be inconvenient for you.......

                Sometimes people have to go to work.  I could post websites all day showing you the sky is red and you could do the same telling me it is yellow.  I showed you a center of gravity that was neither right or left.  

                But lets go to the FCC website.  Dot Gov and all, with the update to the 2004 CRA.

                http://www.fcc.gov/...

                Background – The CRA Regulations
                The Joint Rule. Beginning in 1993, all four federal regulatory agencies began a collective effort to develop new joint CRA regulations.18 This effort culminated in the promulgation of a joint rule by all four agencies on May 4, 1995.19 That joint rule replaced the previous CRA regulations in their entirety. The provisions of the joint rule were phased in over a two-year period, from July 1, 1995, to July 1, 1997, when all provisions of the joint rule went into effect.20

                Scope. The joint rule applies to substantially all the banks operating in the U.S.24 There are limited exceptions for "special purpose" banks (such as "banker’s banks" and banks that provide only cash management controlled disbursement services, correspondent banking services, trust company services, or clearing agent services) and for certain types of uninsured banks.25 There are also special provisions for "small banks."26 The rules specifically apply, however, to limited purpose banks, wholesale banks and insured Federal or state branches of foreign banks.27

                The Credit Needs of the Community. The joint rule generally provides that each agency will base a bank’s CRA rating on an evaluation of the bank’s performance record in meeting the credit needs of its community.28 The concept of a community’s credit needs used in the joint rule explicitly incorporates the concept of community development.29 Community development under the regulations is an active concept that requires a bank to take affirmative action to address the needs of its community. This contrasts with the prior CRA regulations which listed as the first two criteria for evaluating a bank’s CRA performance the activities conducted by the bank to ascertain the credit needs of the community and the bank’s activities to make the community aware of the credit services that the bank had to offer.30

                The Definition of a Bank’s Community. The joint rule requires a bank to specify the geographic area that it considers to be the community in which the bank operates.31 This defined community is referred to as the "assessment area."32 In general, a bank’s assessment area is defined in terms of the consolidated metropolitan statistical areas or other political subdivisions within which the bank’s headquarters, branches and deposit-taking ATM machines are located, as well as any contiguous surrounding areas in which the bank originated or purchased a substantial portion of its loans.33 In addition to a bank’s local community (defined by its assessment area), a bank can define a larger statewide or regional area within which it operates. This larger "region" must include the bank’s assessment area or areas, must be contiguous, and must be defined in terms of political units (such as states, counties or cities). 34

                Evaluating a Bank’s CRA Performance. A bank’s overall CRA performance is rated as "Outstanding," "Satisfactory," "Needs to Improve," or "Substantial Noncompliance."35 To determine a bank’s overall CRA rating, the agencies rate the bank on the basis of its performance in each of three performance categories: lending, service, and investment.36 In determining the CRA rating, a bank’s performance in each of the three areas is scored separately.37 In this regard, the joint rule specifically provides that activities considered for purposes of evaluating performance under the lending and service tests may not be considered
                when evaluating performance under the investment test.38 Performance in each category is rated numerically, but the three tests are not all of equal weight. The overall CRA rating is determined by a matrix, which takes both the individual test scores and the bank’s combined score on all three tests into account in determining the bank’s overall CRA rating.39 Subject to some exceptions, the matrix gives the lending test a 50% weight and each of the service and investment tests a 25% weight in determining the overall CRA rating.

                Regulatory Compliance. The CRA does not permit the bank regulatory agencies to require banks to achieve any specified CRA performance rating.14 Banks are strongly motivated to achieve high ratings, however, because the agencies are expressly authorized by the CRA to take a bank’s CRA performance into account when reviewing an application by the bank for approval of an activity relating to deposit-taking facilities (e.g., acquisitions, new branches, and the like).15 Historically, the bank regulatory agencies have made it clear that the quality of a bank’s CRA performance can have a significant impact, both positive and negative, on obtaining regulatory approvals desired by the bank, making CRA performance important to the overall operations of the bank.16

                Other Effects. A bank’s CRA rating can also have effects beyond the CRA regulations, for example Federal Housing Finance Board regulations restrict long terms advances by Federal Home Loan Banks to a member bank unless the member bank has at least a "Satisfactory" CRA rating.17 For many banks, an "Outstanding" CRA rating is also an important aspect of the bank’s corporate image of quality, community involvement and industry leadership, and has a significance that extends beyond the bank’s relationship with its regulating agency.

              •  Please reply if it is convenient for you..... (0+ / 0-)

                Okay, in 1994 Clinton Admin wrote Amendments to the CRA.  I made banks wanting to grow or take long term loans from the govt or mergers get the approval of the HUD.  

                Their decision was based on a CRA rating.  They needed to have a high enough one to be able to take loans, expand, merge and enter into new ventures.  

                This was based on the banks ability to meet the credit needs of the geographic area they served.  (Please read pages 2-4 it states this plainly)

                Meet the credit needs of a geographic area?  What interpretation are you going to use here?  

                Would you loan YOUR money to anyone in a Geographic area, or only people with good credit, jobs and the ability to pay?

                This is not about Clinton either as Bush did the same thing in 2004.  Both wanted the Political Power associated with putting people in homes.  They didn't care if they could afford them or not.

                CRA is the evil one here.  Loans should be based on ability to pay and credit scores.  The last four houses I have bought I never met with the loan agency and they never asked the color of my skin.  

                Get real.  Please Respond.

    •  Well . . . (7+ / 0-)

      skirting over the spelling -- what makes you think the housing debacle was "caused" by the Community Reinvestment Act?  Isn't it possible that it was largely caused by the fact that interest rates were really, really low and that by the fact that when there is a bunch of cash out there with nowhere to go, someone will invent some scheme in which to funnel it -- that is, in this case, mortgage-backs and derivatives thereof?  Which lead, in this particular case, to a whole bunch of fraud -- real estate folks pairing with "appraisers" to "appraise" real estate significantly above what anyone could (in a real world) possibly belive it could be worth, which lead to banks approving loans for more money than was realistic . . . etc.  

      And, as the FACTS show, all of this hit our minority communities disproportionately hard.  I mean, read the post!

      Finally, as this post points out, quite correctly, the subprime mortgage market affected minority borrowers disproportionately because EVEN WHEN such buyers were equally qualified for non subprime loans as their white counterparts, they DID NOT GET THEM.

      "Let reverence for the laws . . . become the political religion of the nation." ~ Abraham Lincoln

      by noweasels on Thu Nov 12, 2009 at 09:36:14 PM PST

      [ Parent ]

      •  I agree that Derivatives are the issue. (0+ / 0-)

        To the tune of 1.2 Quadrillion dollars.  But at the end of the day, no matter what your skin color is you sign the loan.  You own it.

        Stop blaming others for praying on minorities.  I am one and have never blamed anyone for the color of my skin.  I have had to work harder but I understand the rules and want to excel and understand the upside.  

        It hit the minority communities hard, because their earning power is less.  This is the problem.  I will not grant a free pass to my brothers and sisters because.

        - The didn't understand the contract. - Are inferior in any way. - The ability to buy a house is based on skin color and not ability to pay.

        How can you say minorities are equal in every way when you keep making excuses?

        Personal Responsibility is standing up and taking the hand dealt to you and making the best you can.

        Or you can sit back and blame others.  I will never sit and wait for the govt to take care of me.  

        •  I disagree. (6+ / 0-)
          Recommended by:
          shanikka, zett, Eloise, geez53, huntergeo, CMYK

          I am not "blaming others."  I am blaming those who are principally responsible for this -- and those people are not (by any stretch of any Right Wing imagination or talking point) the hundreds of thousands of good, hard-working Americans who were lured into loans they could not afford by unscrupulous lenders.  Of course people should read documents and be responsible -- no one is saying otherwise.  But you seem to be blind to what happened in this country during the 2005-2007 bubble - seriously!  There was a story on NPR just a couple of weeks ago about a soldier (!) whose credit/net worth was forged by the lender for the purpose of securing a loan for him -- he never saw the crap his "lender" was sending in.  You think this didn't happen?  Yes, there were excesses on both sides, but, again, that is NOT the point of this post.  The point was: minority communities didn't get loans they were qualified to get

          "Let reverence for the laws . . . become the political religion of the nation." ~ Abraham Lincoln

          by noweasels on Thu Nov 12, 2009 at 09:54:06 PM PST

          [ Parent ]

          •  I do simple math (0+ / 0-)

            Add up mortgage, flood insurance and all the escrows.  If it is 30% or less I can easily afford.  I still have the right and responsibility to refuse what the lender offers.

            People are going to be taken advantage of.  I teach this to my kids.  I tell them not to be these people.  They can either choose to be ignorant and accept what the govt has negotiated for them or stand on their own two feet.  

        •  Or, if you were actually smart, (0+ / 0-)

          you'd BOTH take personal responsibility for what you control AND organize with folks in a similar situation as you to improve the "rules" instead of shitting on them and pretending that you're so much better than they are.

          This naive cynicism is just so, so stupid.

    •  Problem was lending officers faking (0+ / 0-)

      the numbers on apps to make sure people qualified. Thanks to years of benign and not so benign neglect of public education, some 25% of Americans read at something along a 4th grade level and they are being asked to read boilerplate which gives me a headache to read and I have always considered myself moderately literate  

      •  And for the Record (0+ / 0-)

        At least as far as the loans I've seen, virtually none of the low-income borrowers had any idea that their documents were being manufacturered.  They were told to sign, and sign blank.

        Now, that wasn't smart, but they didn't commit the fraud, like the rightwingnuts want you to believe. Their brokers and lenders did.

        If you don't stand for something, you will go for anything. Visit Maat's Feather

        by shanikka on Fri Nov 13, 2009 at 08:49:01 AM PST

        [ Parent ]

    •  Just too simple. (0+ / 0-)

      Class and race in the US are interlinked. It has everything to do with skin-tone, because skin-tone has everything to do with class, which then constrains education, inheritance, culture...

      To say that it has nothing to do with melanin concentration is to forget 500 years of history, and pretend that these events occur in a vacuum. It's to look at these events as a series of individual transactions, and disregard the group dynamics. It's just stupid to reduce mass events involving many random variables as "personal responsibility".

      That's like trying to analyze the stock market by looking at stock sales one by one. That's just not how the world works, unless you are really just interested in a particular sale and not the pattern of sales.

      It's not how physics is done -- why would anyone imagine that human relations are simpler than the behavior of water?

  •  I was working on this issue with a (13+ / 0-)

    coalition of community organizers and organizations who initially collected all this data 10 years ago.

    Reverse redlining and the CRA.

    Lenders have maps with red circles around black neighborhoods and no loans were to be made within those red lines because of riots in the black communities in the 60s and 70s. They considered these areas off limits and too high risk for any kind of loans.

    The org. I worked for in the 2000s helped bring about the passage of The Community Reinvestment Act in 1977. The CRA was supposed to force banks to take the red lines from around black communities and start making FAIR loans there to whomever qualified. (Like they are SUPPOSED to anyway)

    The slick banksters figured out that they could just satisfy the CRA by making only subprime loans within those red lines. They still refused most people in black redlined communities fair loans even when they QUALIFIED. Instead, many times they were STEERED to subprime loans and sometimes without their knowledge.

    Their bogus fulfillment of the CRA with bad subprime loans was worse than when people couldn't get any loans at all.

    •  Well (1+ / 0-)
      Recommended by:
      shanikka

      The CRA has actually been found to have produced highly stable loans, due to the high regulation it imposes on banks. But it was only properly designed for banks of the past, not the convoluted "financial institutions" that exist today. A lot of talk around how to modernize the CRA has included extending it past just typical banks but also mortgage brokers, credit unions, investment banks, etc.

      Still, the CRA was shaped in response to something (red-lining) that is no longer an issue today. It does need to be modernized.

      •  But only with community based banks (1+ / 0-)
        Recommended by:
        shanikka

        So if there was a local thrift based bank or a credit union, CRA were really good at getting good loans for small businesses and home to regenerate an area.

        But what was not good was when the big banks, aided by foreign cash and so called innovative investing techinques, got into the game. It was marketing, showing pretty minority actors in a properous looking home, laughing and having the god life, courtesy of that bank.

        When you went into a branch, though, you were sold a song and dance loan!

        Why yes, I am Catholic.

        by ems97007 on Thu Nov 12, 2009 at 10:43:36 PM PST

        [ Parent ]

      •  The CRA was supposed to erase the redlines. (1+ / 0-)
        Recommended by:
        shanikka

        That's how black people ended up getting targeted in large groups in the first place. They just kept those red lines up and set loose their predatory loans on the inner city and the poor rural areas in those lines.

        Black people are considered high risk just for being black sometimes and living in a certain neighborhood. That's discrimination. When statistics point to the fact that white people with low incomes are getting better rates than black people with higher credit scores and higher income, something is rotten about that.

    •  yep new wrinkle on old game (0+ / 0-)

      dating back at least into the 50's and the housing boom then

  •  All of this presumes, of course... (1+ / 0-)
    Recommended by:
    shanikka

    that white folks actually want to be part of the solution, rather than the perpetrators.

    Such a presumption naturally flies in the face of every single piece of American history.

    But hey - we can dream.

  •  I have observations to share. I will agree (8+ / 0-)

    that it's more class than race these days.  Some races are more concentrated in a particular class than others.  I'll just stop here.

    1.  Having worked during the pinnacle of this mortgage mess in the secondary mortgage market, I can tell you, from individual review of loan files,  they were giving loans to 80 year and older co signers to younger less seasoned and credit worthy borrowers.  
    1.  Some new home builders were giving cash back to the least of the credit worthy borrowers and suites of furniture as their originators went out and coralled them in.  
    1.  Realtor/originators were falsifying documentation to help their borrowers meet criteria.

    They were basically preying on the unsophisticated/financially uneducated or greedy borrower, young old, rich, poor, because not only poor people were taken by this scam.

    There were so many middle men (appraisers, realtors, originators and such, that stood to make tons of money per loan.  Quantity over quality, and Wall Street was the overseer of it all)

    Anyway, I dealt with loan portfolios, and I kid you not, we got one portfolio of loan customers from X region of the country and every name was middle eastern/ asian.  So I know they were preying on the financially uneducated/unsophisticated.

    'If we lift our voice as one, there's nothing that can't be done' MJ

    by publicv on Thu Nov 12, 2009 at 09:38:17 PM PST

    •  You speak the truth. (7+ / 0-)

      Those are all the things that went on with the loans. We caught situations where an 80 year old's birth year was deliberately off by 20 or 30 years on the documents. Drive-by home appraisals that listed the house worth more than what it was etc...

      People who had 100% equity were targeted. Old people that had paid off their homes before the banks started redlining and refusing loans to black neighborhoods. They preyed on those people.

      I uncovered plots within my own city that looked as if the city was citing homes that were unpainted (with 100% equity) and fined them, forcing the homeowner to hook up with a shoddy contractor and then a home equity lender. By the time it was over, dozens of people had gotten kickbacks on the loan and the homeowner owed $250,000 to the bank.

      Its heartbreaking to see that happen to 100s of elderly people.

      •  Also (1+ / 0-)
        Recommended by:
        publicv

        Cut and paste appraisals made by the brokers, multiple sets of loan documents with different information on them, and even cut and paste forgery of underlying proof of income documents.

        None done by the borrowers.

        I've been in this game now more than a decade fighting for homeowners.  Which is why I always want to slap folks like some of those in this thread that just insist it's about people purposefully borrowing money they couldn't afford, or people being stupid.  A lot of these borrowers had no idea what was being done --they just knew that they were promised that they could afford a loan and that all was on the up-and-up.

        If you don't stand for something, you will go for anything. Visit Maat's Feather

        by shanikka on Fri Nov 13, 2009 at 08:52:11 AM PST

        [ Parent ]

    •  It's A Shame You Weren't A Prosecuting Attorney (3+ / 0-)
      Being so close to all that evidence of discriminatory criminality.
      Racism hurts just like it's meant to. And tinges of its mistreatment cause every kind of social, psychological, physical and emotional damage. Intentional cruelty, indifference to it, profiting from it are poisonous sins threatening civil rule, fracturing justice and perpetuating the saddest misery all around the struggling to survive world. Effective and moral governments do their best to prevent such atrocity.
      Life in poverty is often at risk where no check on its exploitation exists.

      Enact good solutions, you get contributions. Big Business dotes can't deliver votes.

      by renzo capetti on Thu Nov 12, 2009 at 10:40:25 PM PST

      [ Parent ]

      •  Very Few DA's Offices (1+ / 0-)
        Recommended by:
        publicv

        Had a real estate fraud unit and if you know these files, you know that you need one. I'm fortunate because here in the Bay Area, at least 2 DA's offices had such a unit and did take these loans seriously.

        If you don't stand for something, you will go for anything. Visit Maat's Feather

        by shanikka on Fri Nov 13, 2009 at 08:53:05 AM PST

        [ Parent ]

  •  Re (0+ / 0-)

    Decrease segregation and increase affordable housing

    It is gratifying to me that someone thinks falling real estate prices will help solve some of these problems.

  •  The solution. (1+ / 0-)
    Recommended by:
    shanikka

    Reward failure, by bailing out the same lenders who wrecked the housing market with these used-to-be-illegal sub-prime loans, which in turn killed consumer demand for durable goods and the general economy, which finally made its way up to the stock market, then to the financial sector, (the same people who lobbied the government to make these used-to-be-illegal sub-prime loans legal, who probably lobbied for their own bailouts and are probably using their bailout money to keep lobbying for more bailouts).
    Yea, that the ticket.

  •  How do you get white people to not (1+ / 0-)
    Recommended by:
    Geotpf

    flee and jerk the tax base out of a community once it gets integrated? That's what I want to know.

    •  It doesn't get integrated (0+ / 0-)

      If "they" would stick around it, the area becomes "gentrified."

      The usual people with the guts to re-hab areas which need it are usually marginalized themselves, i.e. gay, and may not necessarily be, erm, "white"

      How colossally rude of you.

    •  In the long term, it solves itself. (0+ / 0-)

      Whites will no longer be the majority within a generation. Hispanic racism is more complicated, being that even within most national groups, skin tone and ancestry vary visibly. That makes segregation more difficult.

      Unless all the white people are planning to move to Idaho, they'll be locked out of the market in a generation or two if they want lily-white communities.

      The future is coming -- and it's got the Pat Buchanan's of the world afraid. The era of segregation is dying; not just legally, but in fact.

  •  Class is Partially and Mostly Determined By Race (3+ / 0-)
    Recommended by:
    shanikka, the fan man, Deoliver47

    Sad, but true.

    I worked in home mortgages and CRA lending 10 years ago. Was dismissed in '99 when Chase bought Mellon Mortgage. "Valuation is not an issue; take your things and leave."

    Was working on fraud in Bedford-Stuyvesant; the fraudsters were the lenders, not the borrowers/homeowners.

    Of course that was the same year when Glass-Steagall was repealed, and Graham-Leach-Bliley passed.

    And let me tell you; the protections we had prior to Graham? They're gone. We won't get them back either.

    •  Lest I am not clear (6+ / 0-)

      LSI (at the time, Lender's Services Inc) was a terrible clearinghouse.

      What would happen is this;

      Unscrupulous developers [flippers] would buy properties, at or below market in depressed/CRA areas. They would then slap a coat of paint and pretend to gentrify the dwelling.

      Further unscrupulous yet connected entities [LSI] would move the sale down the road, with ARMs, Interest only, that sort of arrangement.

      There was no real improvement to the actual property; only a fake one. What Atrios calls "Big Shit Pile"

      It wasn't on the borrower, who was the good faith rube in the deal; the fraud was in the allegeed PROFESSIONALS.

      They robbed the poor brown people, once, in the actual transaction, and twice in the meltdown of Big Shitpile.

      The real problem is in the next, or continuing wave; ARMs + unemployment.

    •  No, class is determined by people who (0+ / 0-)

      prefer to live in a stratified society so they can feel superior.
      Things don't just happen.  Consequences don't create themselves.  People do it and people need to be called out and removed.

      How do you tell a predator from a protector? The predator will eat you sooner rather than later.

      by hannah on Fri Nov 13, 2009 at 01:16:23 AM PST

      [ Parent ]

  •  Segregation is White Flight. (8+ / 0-)

    The only segregation there is is white people who move away the minute they see more than one black family. I've seen it happen all my life. Its happening to my neighborhood right now. Its called White Flight.

    Most of the poor people are black. Poor people live together. I have been one of those people. I have lived in all-black suburbs where all you hear is crickets at night and kids are pampered and clueless. Where did the white people go? They left long before I moved there, I guess.

    Black people dont live together on purpose, everybody else just leaves. You end up developing your own subculture because you can almost forget everyone else exists if you are unlucky or lucky enough to live on the fringes. Most of us cant live in blackworld.

    Its dangerous when we are all concentrated in one area. Housing prices drop, police brutality increases, banks redline communities and refuse to lend because its considered a "black" community when there's too many of us. The banks only give redlined communities subprime loans mostly--especially the poor black neighborhoods. You cant build a community and own anything if you cant get a loan.

    Racism is not the problem of black people to solve. Its up to people to understand what REVERSE REDLINING is and understand how a nice neighborhood can become a ghetto starting with white flight, redlining and then reverse redlining. The ghetto is even worse now.

    Banks are the lifeblood of any community. When you refuse to give certain people a fair loan at a prime rate like you would a white person with the same income, you deny them the American Dream. Now you've got a decaying neighborhood nobody can afford to fix up and slumlords and renters.

    •  You left out insurance companies that (4+ / 0-)

      refuse to cover properties in such neighborhoods, giving the lenders an immediate reason not to make a loan.  The deprivation is systematic.  

      It's funny.  I had never noticed that the words "deprived" and "deprivation" are rather common.  But, there's no commonly used word to refer to the people responsible for the resulting state.  So, I've been writing about deprivators and applying it to people like Tom Coburn who's trying to deprive military families of help with their injured relatives.
      "Deprivation under law" is actually a legal category.  But, as long as the focus is on the victims, the perps get off scot free.

      What's the charge to our agents of government but to protect the person from being deprived of life, liberty and the pursuit of happiness?  What should we call those who step to the other side and take part in the deprivation?  Who are the deprivators in Washington?

      How do you tell a predator from a protector? The predator will eat you sooner rather than later.

      by hannah on Fri Nov 13, 2009 at 01:13:04 AM PST

      [ Parent ]

  •  Are there agencies in these communities (1+ / 0-)
    Recommended by:
    Deoliver47

    that can help people understand the terms of mortgages and can witness closings? Even for a fee it would be an invaluable asset.

    "The human eye is a wonderful device. With a little effort, it can fail to see even the most glaring injustice." Richard K. Morgan

    by sceptical observer on Thu Nov 12, 2009 at 10:53:55 PM PST

    •  Yes, they're called ACORN. n/t (6+ / 0-)

      How do you tell a predator from a protector? The predator will eat you sooner rather than later.

      by hannah on Fri Nov 13, 2009 at 01:02:56 AM PST

      [ Parent ]

      •  Thanks. (1+ / 0-)
        Recommended by:
        Deoliver47

        I didn't know they helped with the legal end.

        "The human eye is a wonderful device. With a little effort, it can fail to see even the most glaring injustice." Richard K. Morgan

        by sceptical observer on Fri Nov 13, 2009 at 01:14:50 AM PST

        [ Parent ]

        •  Yes, that's why they're perceived to be (6+ / 0-)

          such a threat.  The voter registration is a red herring.  The money bags don't want to talk about what they're really upset about.

          You'll recall that at the beginning of the collapse, there were many efforts to blame the Community Reinvestment Act.  The CRA has been a thorn in the side of the money bags for a long time because it makes it possible for the public to inspect the banksters' books.  
          One of the drawbacks of corporations having the status of person is that it allows them to exploit their right to privacy to let them hide their accounts from public inspection.  And, of course, if we don't know how a corporation does what it does, it's difficult if not impossible to impose effective regulations to make them honest.  Not knowing how the "private" sector works is the biggest stumbling block to exercising effective control.
          For a long time, the federal government has tried to use special benefits, like monopoly jurisdictions or patent extensions or outright grants, to get a handle on how private enterprise operates.  Airlines, for example, were given exclusive service areas and landing rights in exchange for complying with safety regulations.  Deregulators argued that planes falling out of the air and business failure would be sufficient to make airlines follow safety procedures--also the threat of business failure.  What we've discovered since is that business failure has become SOP in the industry, if only because it permits one enterprise to acquire another on the cheap.

          Getting people to do what you want them to is very difficult.  That's why we set up governments--to do the things that are basically unpleasant.  Government is really the ultimate DIY enterprise on a gigantic scale.  Since the things that are to be done are basically unpleasant (fight war, crime, disease, fire, flood, ignorance, etc.) and not inherently rewarding, economies of scale are doubly important.  On the other hand, as we now know, when we privatize these unpleasant functions, the economies of scale are lost and the costs go through the roof.

          How do you tell a predator from a protector? The predator will eat you sooner rather than later.

          by hannah on Fri Nov 13, 2009 at 03:02:21 AM PST

          [ Parent ]

          •  the voting issue is really two pronged (1+ / 0-)
            Recommended by:
            renzo capetti

            on one hand suppressing votes in these areas is a concern for the Haves and in the meantime crippling community based organizations such as ACORN so they are less effective or totally ineffective is the other goal as they work to cut off public funds from these organizations

            •  ACORN doesn't need public funds. (3+ / 0-)

              That too was a charade.  Both Georgia and Louisiana passed resolutions barring ACORN from receiving funds and then discovered they weren't slated to get any.

              I think the attack on ACORN was designed to get Obama to come to their rescue.  He didn't bite.  Instead of making a big thing about not dealing with hostage-takers, he just didn't.  Instead, ACORN filed another law suit, which they are really experienced at, and did exactly what was to be prevented.  ACORN's law suits don't get much coverage in the press, because they're most often settled before discovery takes place.  Banksters always opt to pay up, rather than open their books to inspection.  That was also true in the USB case where a Swiss bank handed over the names of account-holders to settle a suit with the IRS.  Secrecy is the banksters' highest priority.  
              The CRA is actually a model for more effective regulation.  The Community Reinvestment Act.  The use of that word in the American Recovery and Reinvestment Act sent a volley across the bow of the investment community about what's coming down the pike.  The CRA was the banksters opportunity to do the right thing on their own--i.e. treat borrowers equally and fairly.  They fluffed it.  The carrot didn't work; now comes the stick.  Dodd's got the bill in the hopper.

              How do you tell a predator from a protector? The predator will eat you sooner rather than later.

              by hannah on Fri Nov 13, 2009 at 04:52:50 AM PST

              [ Parent ]

        •  Absolutely (1+ / 0-)
          Recommended by:
          sceptical observer

          ACORN is one of the most effective work-out agencies in the entire country and has been for years.  They were in front of the predatory/subprime debacle long long before anyone else even noticed.

          You knew there was a reason folks have been going out of their way to take down ACORN, didn't you?

          If you don't stand for something, you will go for anything. Visit Maat's Feather

          by shanikka on Fri Nov 13, 2009 at 07:39:03 AM PST

          [ Parent ]

  •  When my brother was getting his house financed (2+ / 0-)

    Countrywide tried to get him to go with a variable rate. Told him by the time the new rate kicked in he would receive a "cost of living" increase with his job and be able to still afford it, also tried to tell him he would be able to refinance before the new rate kicked in to keep the rate low. He didn't fall for any of it. He told the guy he had never gotten a "cost of living increase" in wages, that he wanted a rate that he could afford regardless as to whether or not something changed, and got a fixed rate loan. I don't know the details of the transaction, and I don't know if it's considered subprime or not.

    Yes, consumers should be more informed. The problem is, that when it comes to buying a house, many see finance companies/banks as the "good guys". On their side. Someone wouldn't lie or mislead.  Also the trend has always been to deny black folks loans, even when they were very qualified. To get APPROVED, is to have someone who is again, on your side. The common thought is that they WANT to get repaid, so they wouldn't approve you if you were too high risk. They are in a high pressure situation, with a smooth talker trying to get them to go with a loan right that minute, and they are looking at the monthly payment amounts, which anyone could afford until the new rates kicked in a year later.

    I don't completely understand everything that happened with this sub prime thing, but this isn't like getting taken on a 3-5 year car loan where you might get gorged, but still have a roof over your head. There should be some sort of consumer protections in place to help people who only want the American dream of home ownership from getting ripped off, especially if it will cause them and their families to end up out on the street.

    "Science is mans way of discovering what God has already created." - My Mom

    by S C B on Thu Nov 12, 2009 at 11:03:43 PM PST

    •  Most people think that being good (1+ / 0-)
      Recommended by:
      S C B

      protects them from evil.  I suppose that's the efficient assumption.  It's very time consuming to have to be on constant alert for the con.  But the fact is that evil targets good.  There's little satisfaction in undermining people who are already bad.

      How do you tell a predator from a protector? The predator will eat you sooner rather than later.

      by hannah on Fri Nov 13, 2009 at 01:02:14 AM PST

      [ Parent ]

    •  don't forget the interest only loans (3+ / 0-)
      Recommended by:
      shanikka, S C B, renzo capetti

      and balloon payments; in order to ensure that clients met financial requirements, banks dreamed up all sorts of exotic loan arrangements that were meant to implode a few years down the road

    •  A Key Component (1+ / 0-)
      Recommended by:
      S C B

      Of the subprime lending targeted at Black borrowers was that at the time these loans were really taking off, the normal assumption (that lenders don't want to foreclose) was absolutely FALSE.  So you are right to mention the assumption that lenders wanted to be repaid.

      My decade long experience with these loans says that was NOT true wiht many subprime (I call them bottom feeder) lenders.  Not even.

      At that time, most homeowners had huge stores of equity as the balloon kept growing and growing.  And with that came the development of subprime lending servicing practices that were purposefully designed to manufacture an incurable default:  drawering of payments received on time, refusal to apply full payments to past due months if any portion of a current payment was still due, misdirection of escrow payments made by the borrower and, when the taxes and/or insurance were therefore late (both instances of default under the standard DOT), forced place payment of insurance and double payments of property taxes by the lender when it wasn't necessary, then reporting the next payment as late (begining the cycle to entrap the homeowner) and making it impossible to straighten things out.  You name it.  

      The subprime lenders (many of which were purposefully created as affiliates of the mainstream lenders just so they could keep the parent's rep clean while doing this crap) and their servicers went out of their way to create a default and, once created, to maintain it until the property was sold at foreclosure.  A win-win for everyone in the food chain - except the homeowner.

      If you don't stand for something, you will go for anything. Visit Maat's Feather

      by shanikka on Fri Nov 13, 2009 at 07:37:21 AM PST

      [ Parent ]

  •  Criminalize Bigotry in Housing & Employment (0+ / 0-)

    That way the bigots and assholes responsible for it and the resulting personal problems it causes can experience first-hand the contributions they make to American society by rubbing elbows in a prison setting with people they victimized and disenfranchised.

  •  I don't think throwing more money at this (1+ / 0-)
    Recommended by:
    shanikka

    problem will get rid of it.  We have to confront that the segregationist attitude is alive and well and that those who give in to it are predators and parasites.  The total monetization of the economy has provided a cover for this kind of behavior behind the rationalization that everyone's being objective and the presence or absence of money is determinative.  That some people have no money because the predator class is busy stealing it from them is routinely overlooked.

    The predators and parasites leave victims on both sides of the fence.  The beneficiaries of their offal, inadvertent participants, are left with the sense of guilt that the predators seem incapable of feeling.

    How do you tell a predator from a protector? The predator will eat you sooner rather than later.

    by hannah on Fri Nov 13, 2009 at 12:57:58 AM PST

  •  Correlation . . . Causality (0+ / 0-)

    I'm not sure I see a convincing argument here.  It would be great to reduce housing segregation but I didn't see anything that proves that it causes, rather than just coexists with, high-rate loans.

    Please enlighten me.

    •  It's a problem with most sociological surveys. (0+ / 0-)

      Causation is almost impossible to determine. You can only get correlations, which leads folks to mistake (at least subliminally) correlation for causation.

      You ain't going to get causation -- I'm not even sure it really exists. Even in the sciences where you nominally get causation, I don't know that it's actually a robust concept.

  •  Probably not qualified to talk on this... (0+ / 0-)

    ... As someone from Europe I wouldn't be too informed about whether the choice was racial in the US or not.

    But in Ireland, which seems to have had a housing crash similar in scale to Florida I would view it through a class war lens as opposed to a racial lens certainly in Ireland anyway.

    As the piece mentions:

    Metropolitan areas with higher education levels have a lower proportion of high-cost loans.

    Again probably reflects Class War more so than racial. No doubt racial groups were hit disproportionally hard but could have been because they have been historically poorer.

    I would like to see if the figures for white poor people to compare.

     

    Non Violence is fine... so long as it works. - Malcolm X

    by Dr Marcos on Fri Nov 13, 2009 at 04:10:48 AM PST

  •  Kinda sick of (0+ / 0-)

    the libs trying to have this both ways. Some of us remember a 15-20 years ago when libs were fighting to get more minorities into home ownership. And now that the economy & real estate markets have collapsed, libs are blaming everyone else but themselves that a lot of poorer people were put in this position.

    Look in the mirror first...

    •  That's plain stupid. (1+ / 0-)
      Recommended by:
      shanikka

      No one ever said "home ownership at any cost". Fixing something systematically is completely different from simply deregulating. Just a completely obvious false dichotomy.

      Just more evidence that you don't have to be a moran to be conservative -- but it sure helps.

      •  Putting words in my mouth (0+ / 0-)

        I'm talking about personal and institutional responsibility. I understand that no one wants the 5% (or whatever the figure is) of bad loans to drag everybody else down, but going forward we need to recognize the problem and not make the same mistakes again.  Business decisions should be left to business for the most part, not to the govt. Regulation is necessary and good, but turning the market upside down to allow people who shouldn't qualify for a mortgage isn't smart. That's the definition of moron.

        And if your argument is to simply call people who disagree with you names, then it's not worth much of anything.

        And I'm not a conservative.

        •  No, the definition of moron (0+ / 0-)

          is someone who believes that markets will inherently make intelligent decisions. Markets are to make money -- they will maximize short term profit at all costs.

          The structure of the market has to be imposed externally to meet ends, either by other markets or external institutions. "Business" don't make any smarter decisions than "governments". The former maximize short-term profits, the latter maximize short-term political gains. They function when they are properly regulated to direct those activities in socially desirable directions -- they are directed in one way or the other, always.

          It's not whether you turn the market upside-down, but how. You always do turn the market "upside down" -- markets don't exist except in terms of how they are defined by society -- governments, armies, oligarchies, clubs, communities, families, etc.

  •  My Plan Exactly (1+ / 0-)
    Recommended by:
    shanikka

    For years I've been saying on DKos that we should create a "creditor rating" of lenders the way that we already rule the lives of borrowers with their credit rating. Bank performance in lending money to borrowers would determine their creditor rating. They'd get points for collecting on time. For lending at retail rates closer to what they borrow at wholesale rates (which is what they then lend to us), sacrificing profit for freer credit. Points for lending to higher risk individuals when those individuals repay on time. For training borrowers, especially when the training reduces borrower risk as proven by ontime repayments. And lose points for screwing any of that up, by lending to people who don't pay it back, or who pay too high an interest rate, or for not lending enough.

    That creditor rating would then determine the interest rate at which banks borrow from the Federal Reserve, or from the Treasury, or from anywhere else (they'll find other places if the creditor rating isn't universal). The better their creditor rating, the closer to the base (lowest) rate they borrow the money they lend, invest and spend. The worse their rating, the more they pay in interest to borrow that money.

    This is a simple but directly effective way to force banks to lend well, and to pay the price when they don't.

    Solutions, according to the report's authors:
      1. Decrease segregation and increase affordable housing
      2. Regulate the lending industry
      3. Educate borrowers: Financial literacy

    This is exactly the "2. Regulate the lending industry" that we need. It gives banks direct incentive to "3. Educate borrowers: Financial literacy" that is essential for a market to work properly. And while serving all credit market customers (and the government that assures its liquidity), it will work especially well to "1. Decrease segregation and increase affordable housing". The "lowest hanging fruit" with which to score points for successfully lending (and getting repaid) is those people in "redlined" neighborhoods or groups like minorities or the merely disadvantaged poor. Lending to the people in those groups who can repay better than their discriminatory current credit ratings (or other exclusions) will find easy points among those who can repay as well as (or better than) the privileged people who haven't been discriminated against to date. Increasing credit to those people will lift them out of the lowest tier of housing cost, which will reduce demand for it, so prices will go down for those left towards the bottom. While also increasing the liquidity across the board (for people who will repay), which will incent building more housing to get the money available to pay for it.

    Creditor rating is the fairest, most direct and simple way to reregulate lending. It would finally assign risk and penalties/rewards to the banks the way we've all learned it's assigned to us, the borrowers. It would even feel like revenge watching banks cut their profits when their own interest payments go higher in response to their bad lending, if they want to stay in the business. And it could be installed quickly, perhaps even before the 2010 elections - and surely enough before the 2012 elections, in time for us to give credit where it's due to those who voted for or against the new system.

    "When the going gets weird, the weird turn pro." - HST

    by DocGonzo on Fri Nov 13, 2009 at 05:35:15 AM PST

  •  Dag Nabit (1+ / 0-)
    Recommended by:
    arlene

    I missed this diary until I saw a link at BlackKOS this morning for it.

    Thank you for calling out this important foundation of the mortgage crisis - subprime lending techniques which were developed, and perfected beginning in the mid-1990's in historically redlined Black homeowner communities  (It later moved to Latino communities and then, finally, to everyone.)  The percentages of subprime loans which existed in historic Black communities prior to the Great Recession were telling, and I wrote a diary what's now I think 2 years ago about the fact that these neighborhoods were being destroyed by them.

    Yet many of the homeowners would have qualified for traditional, far more low-cost mortgages, were they not discriminated against in the lending market despite their incomes and credit scores.

    If you don't stand for something, you will go for anything. Visit Maat's Feather

    by shanikka on Fri Nov 13, 2009 at 07:30:02 AM PST

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