NYT Wants Community Reinvestment Act STRENGTHENED!

[Texas2step]

December 9, 2008
Editorial

Mortgages and Minorities

The mortgage crisis that has placed millions of Americans at risk of losing their homes has been especially devastating for black and Hispanic borrowers and their families. It seems clear at this point that minorities were more likely than whites to be steered into risky, high-priced loans — even when researchers controlled for such crucial factors as income, loan size and location.

The Congress that takes office in January can start to deal with this problem by strengthening fair-lending laws, especially the Community Reinvestment Act, which encourages fair, sound lending practices while requiring banks to lend, invest and open branches in low- and moderate-income areas.

Lawmakers should also extend that law to cover the often fly-by-night mortgage-lending companies that helped drive the subprime crisis. Those companies saddled entire neighborhoods with risky, high-priced loans that borrowers could never hope to pay back, sold those loans to Wall Street and then went out of business.

Congress needs to keep in mind that many of those players are surely to be back in operation somewhere down the line. Some already have returned in the guise of offering to help homeowners avoid foreclosure.

The need to revisit fair-lending law is evident in numerous studies of federal lending data. A particularly striking analysis in 2006 by the National Community Reinvestment Coalition found that nearly 55 percent of loans to African-Americans, 40 percent of loans to Hispanics and 35 percent of loans to American Indians fell into the high-cost category, as opposed to about 23 percent for whites. There also were troubling gender differences. Women got less-favorable terms than men.

A classic discrimination study by the reinvestment coalition found that black and Hispanic people who posed as borrowers received significantly worse treatment and were offered costlier, less-attractive loans more often than whites — even though minority testers had been given more attractive financial profiles, including better credit standings and employment tenures. That study, and others, go a long way to rebutting mortgage companies’ claims that lending patterns are explained by so-called risk characteristics like credit scores.

John Taylor, the coalition’s president, told a Congressional hearing last year, that minority borrowers were paying a “race tax.â€

[Texas2step]

Related:
Fannie Mae Didn't Cause Housing Crisis: Former Chief
Reuters | 09 Dec 2008 | 10:25 AM ET

Mortgage finance giant Fannie Mae did not make the investments that sparked the current housing market crisis, the company's former chief told the U.S. House of Representatives Tuesday.

"Fannie Mae did not cause the current crisis," Franklin Raines told the House Oversight and Government Reform Committee.

In early September, the Treasury Department effectively seized Fannie Mae and its sibling agency, Freddie Mac , as the nation's two largest housing finance companies faced billions of dollars in losses and investors feared that the companies could collapse.

At the hearing, lawmakers said the companies took irresponsible risk as the housing market boomed in recent years.

Raines, who left Fannie Mae under the cloud of an accounting scandal in 2004, said the company had simply followed a flawed market.

"By the time the (government-sponsored enterprise) began its most significant investments in riskier loans in 2005, the roots of the present crisis had long taken hold," he said in prepared testimony to lawmakers.

Last month, the mortgage finance companies suspended foreclosures during the holiday season.

The two companies say they will halt foreclosure sales between Nov. 26 and Jan. 9, while they evaluate whether borrowers qualify for a new loan modification program.

Fannie and Freddie's loan modification plan aims to help abate the foreclosure crisis by aiding homeowners who have fallen at least three months behind on their payments, but only if their loans are held by the two companies.

Under the program, the new primary mortgage payments—including taxes and insurance—shouldn't total more than 38 percent of homeowners' pretax monthly income.

Copyright 2008 Reuters. Click for restrictions.
URL: http://www.cnbc.com//id/28139735/

[WorriedAmerican]

Mortgage finance giant Fannie Mae did not make the investments that sparked the current housing market crisis, the company's former chief told the U.S. House of Representatives Tuesday.

"Fannie Mae did not cause the current crisis," Franklin Raines told the House Oversight and Government Reform Committee.

I say it was ACORN and La Raza constantly sueing or picketing the banks that would not lend to the illegals or the poor, that caused the housing bubble. The mortgage people figured they might as well give-in, rather than have all the court cases.
Some of these people could NOT PAY the first house payment for christs sake!