Posted on 03/27/2002 1:30:53 PM PST by knak
STATE HOUSE, BOSTON, MAY 29, 2001...A band of state lawmakers today said mortgage statistics show a pattern of racial and income-based injustice, and urged approval of a bill to foster home ownership.
The measure would require mortgage companies to actively seek loan opportunities for low and moderate income borrowers, the same way banks do under the Community Reinvestment Act.
Opponents from the mortgage industry said the requirements, based on a federal bank law, could force small companies out of business and reduce credit availability in the inner city.
But chief sponsor Rep. Jarrett Barrios (D-Cambridge) said the bank law, called the Community Reinvestment Act, must be extended to mortgage companies to ensure equal access to credit. Congress passed the federal Community Reinvestment Act (CRA) in 1977 after it was discovered that banks were “redlining.” The practice involved drawing exclusionary boundaries around poor communities and forbidding loans within them. The law says banks must actively seek investments and loans in the neighborhoods from which they accept deposits.
Barrios said the CRA’s success in promoting bank loans to people of color and low-income borrowers should be duplicated in the private mortgage lending industry. “It would work the same way it’s worked for 20 years in banks,” he said. “What we’ve seen in the banking industry is banks taking sort of a second look at people they would have turned down for credit because of the neighborhood they lived in.”
Since passage of the CRA in 1977, Barrios said mortgage companies are gobbling up an ever-larger share of the home loan market but not meeting the same commitment to poor communities.
An economist at Umass-Boston and supporter of the legislation, Prof. James Campen said in 1998 black borrowers received 28.4 percent of the loans made by major Boston banks, but only 7.3 percent of those made by mortgage companies. At the same time, Campen said mortgage lenders increased their Greater Boston market share to 56.9 percent of all home loans, up from 23.5 percent in 1990.
As state leaders scour for measures to pry open Massachusetts’ tight housing market, asking mortgage companies to meet the same reinvestment strictures as banks will yield greater home ownership opportunities for low income people, supporters said. “To some it’s a civil rights issue,” Barrios said. “To others, it’s economics.”
At the Banking Committee hearing today, mortgage industry representatives said they had the unenviable task of opposing a noble, but misguided, bill.
The CRA is based on the principle that banks that benefit from local depositors should reinvest in their host communities. Mortgage companies don’t accept deposits, however, and opponents said lack the capital needed to make the same reinvestments as banks.
“We’re really not comparing apples to apples,” said Susan Zuber, president of the Massachusetts Mortgage Bankers Association. “Our primary concern is that mortgage companies would be required to make loans and participate in community development investments for which they don’t have a ready source of funds.”
Zuber also disputed Campen’s numbers, saying mortgage companies are responsible for 52 percent of low and moderate income communities.
In addition, she said large, federally chartered lenders would be exempt from the legislation, placing an unfair burden on smaller, locally owned companies. The result will be small lenders forced out of business and fewer loan opportunities in urban districts, she said.
I agree with everything you said, but believe it's mostly about money. Very few lenders, who make their money by lending, would refuse to make money simply because the person giving him the money is a different skin color. As you said, if the person qualified, everyone would work hard to get him the loan.
Bankruptcy, bad credit, foreclosure.. it's almost all about money, and a little bit about esteem. Even if you had a bankruptcy and bad credit, you could get a loan for a home (not a great one, but you'd get one) if you had a recent history of solid earning power and a down payment.
We are in business to make loans. We treat ALL applicants the same. The only bottom line is whether or not that person has good credit, has the income to support the payment, and has a stake in the property. PERIOD. Your either qualified to recieve a mortgage or not qualified ...underwriting today is done by computer models and they have no idea what color you are. The onus of home ownership opportunities to lower income people has to be figured out by some social agencies,not by the companies that are lending their depositors money. We are a business, not a social agency.
Once that happens maybe we'll be entertained by bike rides to find a "cure" for mortgage foreclosures.
I completely agree.
Sounds to me like the lobby representing major corporations is trying to squeeze small lenders out of the market. The people who will suffer will be the clients/customers of mortgage lenders. What a corrupt state! And they don't realize - minorities pay the dearest price, when it's all said and done...
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