Final-Fan said:
Kasz216 said:
Final-Fan said:
Kasz216 said:
Final-Fan said:
I did not think the (paragraph 4) deregulation was specifically CRA; I thought it was general lowering of standards at Fannie Mae/Freddie Mac. Wrong? The source I saw certainly does not specify. |
I don't have time to look... but I thought the lowering of standards at Fannie/Freddie I'm pretty sure had to do with reforms in the CRA. It was either reforms in the CRA, or heavy government pressue because the CRA didn't work as well as expected.
This more or less was the impetus behind the rise in liar loans as well. A lot of people who are poorer wouldn't qualify for housing becuase often because of things like past employment history which is taken in consideration with how "stable" you are in your job.
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Indeed, it seems to have been lobbyism from people trying to increase CRA applicability, but you can hardly blame the CRA for that. More like the people that passed the CRA in the first place went a bridge too far.
As for liar loans, I simply don't believe you can pin that on anyone but the banks that begged people to lie to them.
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A) The CRA is what caused it to happen though. Otherwise it would of been illegal to basically do reverse redlining.
B) Even if the government is threatening to sue you and harass you if you don't find ways to loan more to poor people even though there are very specific guidlines that prevent loaning to well... people who are poor?
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A) If the CRA caused this to happen, why did it take 25-30 years to become a problem? It was the later deregulation which is not the same thing as the CRA and was not limited to the CRA loans.
B) So wait, you're saying there was some kind of quota banks had to fill or something or face sanctions?! I had had the impression that the government only "applied pressure" insofar as removing restrictions, and activists (NOT government) and the banks' own profit motives did the rest.
Am I misunderstanding "lending standards"? I thought it meant "you are allowed to give this person a mortgage", not "you are required to give this person a mortgage".
C) And even if it's the latter, I still don't see how blame for liar loans can go anywhere but to the banks and the liars. No matter how low the standards were, the whole point was that the liars couldn't even meet those standards. Right?
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A) Because the community reinvestment act has been changes repeatidly over the years.
B) Some banks did have specific quotas to fill inacted in 1992 as a sister bill was passed that lead to heavy enforcement of the CRA due to the creation HUD. (Department of Housing and Federal Development.) Federal Banks like Freddie and Fannie actually had direct quotas.. which were 50% actually.
While other banks were threatened with Lawsuits if they didn't increase their morgages to minorities with weak credit by the DOJ and HUD. Even ones that don't fit standards.
It's actually happening right now as well.
http://weaselzippers.us/2011/07/11/holder-to-launch-crackdown-on-racist-banks-force-them-to-lend-to-minorities-with-weak-credit/
The only difference is now they are also sueing them for giving out too many loans to minorities with bad credit as well.
http://newsone.com/nation/casey-gane-mccalla/doj-will-sue-wells-fargo/
There weren't enough people who fit Bank Standards, yet the DOJ demanded that they make more loans or be sued.
C) Actually, those "liar loans" do fit CRA standards. They qualified for CRA credit. Not making such loans would force the HUD for coming after you for not having enough poor or minority loans. There is nothing in the CRA that prevents you to make bad loans, in fact, it basically encourages you to make bad loans. I don't believe there are any CRA standards other then "If you don't give loans to enough minority people, women and poor people, we will sue you."
With no actual definition of "enough" outside of what the government says.
