Posted on 09/30/2011 6:52:50 AM PDT by dangus
In the late 1990's, a terrible bargain was struck: Banks would agree to federal "anti-discrimination" policies, but in return, they could trade the risks of making bad loans, bundling good loans and bad loans into CDOs, or "collateral debt obligations."
While the very intelligent Sen. Phil Gramm (Republican of Texas), was a major proponent of this deal, he doesn't really deserve the blame. If both sides of the deal played honorably, it was a reasonable deal apart from its color-consciousness: Blacks did not default on loans any less than whites did, despite greater difficulty in getting loans. Based on long term financial history, home location, educational attainment, etc., a black person earning the same money as a white person would be less likely to successfully pay off the loan. But that meant that bank loaning policies had a "disparate effect" on blacks. And given the federal role in insuring mortgages, this "disparate effect" was arguably illegal under Civil Rights law.
The problem was that the Clinton administration shortly issued an executive order (#13166) which broadened "discriminated groups" to include "language minorities." President Bush then expanded the scope of EO # 13166 to include Sallie Mae and mortgage lenders.
If you went to school in America, you're supposed to learn English. If you legally immigrated to America, you're required to know English. So who in America doesn't know English? Some elderly people who didn't attend public school way back before it was mandatory. (Such people typically spoke German and French.) But most are illegal immigrants, amnestied former illegal immigrants, refugees, and reunified family members given special exemptions to language requirements.
Such illegal and quasi-legal immigrants and refugees are not going to be good candidates for loans. But the Bush administration made clear: unless you give as many loans to these people as to English-speaking, American-born citizens, we're going to label you racists, sue you, and destroy your bank.
For years, the banks didn't mind. If a house was foreclosed on, the bank reacquired an asset which had probably appreciated in the meanwhile. But still, there weren't enough loans being made to non-English-speakers because non-English-speakers couldn't begin to apply for a loan. Banks were soon offering zero-money-down loans to illegal aliens to bulk up the proportion of loan recipients who were "protected language minorities." When that didn't work, the Bush administration forced Sallie Mae to develop an army of people to convince illegal aliens to sign up for mortgages.
Meanwhile, states and the government created an artificially tight housing market by using unreasonably zoning and environmental regulations to all but ban private development of housing across countless metropolitan areas. So illegal aliens weren't getting mortgages on reasonable, $80,000 homes, but were bidding up the prices on $600,000 homes!
Then the housing market stalled. Now banks weren't guaranteed to recoup delinquent mortgages by selling the house at prices higher than the mortgage value. But the banks COULDN'T just quit lending to "langauge minorities." They quit lending altogether. Declines in house prices accelerated.
It was very, very easy for illegal aliens to end up under water. Their jobs were the easiest to eliminate, once American citizens were also desperate to find work. But since they had paid no money down, and were financially incapable of refinancing or getting ahead on their mortgage, they were under water with slightest drop in housing prices.
Worse still, it's very difficult for an American professional to simply walk away from their identity. Their assets include not only liquidatible assets such as the mortgage, but also intangible assets such as their college degree. On the other hand, illegal aliens have few of these other assets. THE MOMENT AN ILLEGAL ALIEN'S MORTGAGE IS UNDER WATER, WALKING AWAY IS THE SENSIBLE THING TO DO.
(Is this slamming on illegal aliens? No. If someone gave me impossibly low mortgage rates to buy a house with no money down, I'd take it. Who turns down a "free house?" But who would gives illegal aliens free houses? Only someone forced by the government to do so.)
Look at where all the underwater mortgages in 2008 were: Every county in the top twenty counties had experienced massive growth between 1998 and 2008. And in every case, illegal immigrants were a massive portion of that growth: Prince William County, VA (DC metro), southern Florida, Las Vegas metro, Phoenix metro, outlying regions around Los Angeles, and so on.
Only once housing prices had fallen so far (20% or more) did defaulting mortgages go mainstream.
So which banks went under? Those who specialized in CDOs (such as Bear Stearns), community banks in communities dominated by illegal aliens, and lenders who specialized in high-risk loans (Fannie Mae).
But the economy continued to worsen. Usually, housing sales lead a recovery. Once prices are low, people who have deferred buying a house make up for lost time. Not now. Banks are still terrified to lend, because for every so many safe risks, they have to loan to someone who has no motivation for successfully paying his mortgage. Immigrants go home when the economy goes bad. That frees up jobs for American workers, but it also means fewer houses are needed. So DESPITE the lack of housing construction, there is still an excess of housing on the market.
Without such massive immigration, employers would train more workers, or improve productivity through automation, during tight labor markets. These gains in production would last through economic downturns. Instead, companies relied on a cheap workforce which is no longer available.
To fix the economy, we need a presidential candidate who recognizes that illegal immigration is a chief cause of the economic downturn, and is resolved to remove the regulations that require banks to loan to "language minorities" who are illegal immigrants and prevent employers from relying on illegal immigration as a cheap alternative to increasing productivity.
The last thing we need is to elect the governor who is the single biggest to effective border control in America, believes that massive illegal immigration is good for the economy, and who would give illegal immigrants $100,000 in tuition benefits when they can't even legally drive in Texas.
Basically, what’s wrong with “if you pay your bills on time and have sufficient assets and income, you can get a loan?”
It has, but really, even this isn’t a simple case of “easy lending” there was outright fraudulent creation of documents and such. Techincally it could have been done even using only traditional loans, although they would have had to be more selective with their straw buyers and fake documents.
No, it establishes that some people's imaginations establish patterns that exist only in their imaginations.
I imagine this is one of those.
We need some level of immigration due to the fact that our native born population (of all races included) barely keeps us at zero population growth.
However, rather than import millions of people who are poor and uneducated even by the standards of their own countries, we should look for immigrants who can contribute something besides cheap labor and anchor babies. Whatever country they come from.
OK. Got it. Still, Bush was a fool to do that. Clinton was the evil mastermind.
Nothing...as long as you are willing to accept more defaults. Contrary to what we are told, “culture” does make a difference. Other things being equal, blacks default on mortgages more often than Asians or whites. The studies showing this were completely ignored when Carter’s CRA was put in place. There would be no issue if banks could make their own lending decisions locally so that they can take into account personal knowledge gained through banking relationships. But they can’t. They are now forced to make quota loans, which is how we got the mortgage fiasco.
Where did I say he was appointed to ANY board??
Instead of getting all bent out of shape, why not read my #31 again.
You're just lookin' for a fight and I ain't gonna accommodate you.
They do, but their credit histories will reflect this. I should add "and have sufficiently good credit" to that.
Here’s Bush in a speech, pushing home loans for totally unqualified minorities.
http://www.youtube.com/watch?v=MqR15H0gNBU
Listen to this audio from Bush’s speech, demanding home loans for the unqualified.
http://www.youtube.com/watch?v=MqR15H0gNBU
The point was prospective - given the same credit scores, etc. The credit histories obviously only reflect the defaults after they occur. This aside, the feds have forced lenders to ignore “traditional” criteria in lending, which led to the NINJA loans and other absurdities.
I wonder what the causative factor is in blacks being more likely to default on mortgages vs. other types of credit.
That wasn’t what I said. I know the studies for mortgages. Perhaps it isn’t true for other kinds of credit or perhaps it is. I simply haven’t seen that studied.
Right, but if they indeed also failed to pay other debts, their credit would be bad at the time of application...
The point was that if they look the same at the time of application the credit risk is greater than for Asians or whites.
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