Posted on 09/15/2008 3:41:17 PM PDT by Laissez-faire capitalist
With the collapse of Freddie Mac & Fannie Mae, we can see what happens when some people (be they black, white, hispanic, etc) who do not have a good credit rating, live in areas that are dangerous and/or clearly aren't able to make mortgage payments, but allowed to make mortgage payments anyway.
Democrats argued that it was bigotted and racist to not allow these people access to a quality home, so they pushed for making it possible, and now when we see what happens when you allow people who cannot afford mortgage payments to make morgage payments:e a tax-payr - funded bailout becomes necessary and Democrats are more than will to oblige and come in with a bailout of these and other sectors of the American economy.
Democrats castigated the old housing pratice as "redlining," calling it bigotry and racism.
When things fall apart in the housing industry, they want the gov't to come in and run it - and blame Republicans for the mess they created!!! Democrats want taxpayers to foot the bill for the mess they caused.
Conservatives are going to have to take things back to the way they used to be: If you can't afford a home, taxpayers aren't going to help you. Taxpayers aren't going to be forced to foot the bill when you can't make your payments, and they aren't going to do any more bailouts.
Conservatives are going to have to stand up to the Democrats, otherwise the auto industry will most likely be next. Didn't Pelosi say that she was willing to support a bailout of the auto industry? Conservatives need to take it back to where gov't does not run the housing industry, they don't run Fannie Mae or Freddie Mac, and they sure aren't going to run or bailout the auto industry.
Democrats though, will respond with charges of racism, bigotry, etc - the usual bull.
Conservatives must respond by saying that Americans are tired of Democrats engaging in race-baiting and phony outrage. They must respond by saying that Democrats don't care about the poor, they show - by their actions - that they want gov't to run the housing industry. Conservatives must respond by saying that Democrats must not expect taxpayers to foot the bill when people cannot afford to make payments and falter on them.
What Dems say: All people have a “right” to quality healthcare, a quality home, etc.
Next it will probably be a “right” to a quality car.
Bingo!
And we’ll call it the “Undo Andrew Cuomo’s Disaster Law”
Redlining was awful - glad it’s outlawed. But we do need to change the incentive system. And yeah, everyone needs to qualify for a loan...
People are buying cars they can't afford, putting in pools, putting on additions....Anything they can think of.
So, they're not using their credit card, taking a deduction, mortgaging their ONLY real asset to the hilt...and scr**ing up the whole damn system.
If a person lived in a dangerous area, it was called “redlining” if they were refused a home loan.
If a person was poor, happened to live in a predominantly black area (for example), had bad credit and could not afford to make payments, they still called it redlining, even though they couldn’t afford to make the payments.
Race-baiters said that the ‘no’ on the home loan was due to race, not the ability to not make payments, bad credit, etc.
It is about time for this wake up call and this pins the tail on the right donkey.
Credit Card Companies should never have offered so many credit cards to people who abused and used the system and then defaulted or declared bankruptcy. Lending institutions should NEVER have allowed INTEREST ONLY LOANS! THere are many groups that got GREEDY and lost the ability to JUST SAY NO or REFUSE loans to those UNABLE to qualify or have credit for such loans!
What some people called “Redlining” I called the Free Market. Why should ANY business be FORCED to do business in neighborhoods, cities, or states where they don’t want to do business?
That is a part of the problem, too.
But... Thomas Sowell had a recent column in which he talked about how the term “redlining,” was created to allow people who could not afford to make payments, had bad credit, lived in dangerous areas, etc, then had it opened up for them to get home loans that they could not afford to make payments on.
Our present regulatory environment tends to focus loan policies on the collateral. But collateral only comes into play when the borrow stops servicing the loan as it was written.
I detest redlining. However, we clearly were not well served by allowing “liar loans” or “no-doc loans”. This points us back to a credit scoring system based on experience. It also begs for lenders who have a preexisting relationship with the borrower.
The Free Market is bigoted and racist, though.
Didn’t you get the memo from the Democrat party?
Well, are we talking a BMW or Mercedes?
It would be very interesting to find some of the old lender maps with the redlines on them and compare those areas to the addresses of foreclosed properties. I wonder just how much overlap there would be?
People are being real loan snobs. By and large, most people pay.
Home ownership rates, and for lower working class people, in the US is the envy of the world. By the way, Europe has something like half the home ownership rates as the US. Is that what we want?
The present system/mess, even in minority/previously red lined areas, has worked out pretty good.
Like I said are we to go back to slums? Or back to public housing ghettos like Pruitt-Igloe, Caprinni Green? Or Europe?
This is present event, is only a problem because the gooberment is involved. There is no government problem with selling, renting, supplying, repo-ing cars because it isn't involved.
bookmark
I heard on Rush today that HUD back in the 90’s under Andrew Cuomo mandated that freddie and fannie had to make loans to low income households–ie high risk households. And this on top of the loans to low income neighborhoods (ie high risk loans) fostered by the Community Reinvestment Act 1979.
The CDO concept was developed by (convicted) Michael Milken of (now-defunct) Drexel Burnham Lambert. After the securities scandal, the vehicle lay dormant until picked up by the mortgage industry around 1999/2000. CSPAN aired an interview with a journalist who looked into the subject; took more than a few calls from some articulate folks who objected to placing the blame on Fannie/Freddie for exactly the reason I stated. The CDO package - courtesy of Mikey Milken - is flawed.
You need to define redlining very carefully. I believe the left calls redlining any practice that does not produce desired results. For housing, the left probably defines redlining as not making loans in sufficient levels to favored areas. This definition can be applied to any area of life. Certain groups will have low grades, low incomes, poor athletic performance, and so on.
The key question is whether redlining indicates market failure. If loans are not made in some areas, are lenders acting irrationally. I have a hard time believing that redlining can exist in todays climate. If some lenders will not loan just because of racist beliefs, other groups will find an opportunity and lend money. With the incredible regulations on lenders today, racism is not an element in lending practices.
The rats are not going to allow community reinvestment requirements to be stopped just because of the housing crisis. The rats will insist that home ownership is an entitlement. The borrowers from rat favored areas will be directly subsidized. The rats do not think that favored groups should pay higher interest rats just because they are poor credit risks.
My recollection too is that this mess got started with Congressmen complaining about “red-lining.”
The mortgage industry picked up on the CDO concept long before 1999/2000. Collateralized Mortgage Obligations (CMOs) became big news back in the mid-1980s when falling interest rates led to many S&L failures and the U.S. government began passing banking laws that encouraged @&Ls to raise cash by selling their mortgages to institutional investors.
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