Originally Posted by rafterman2007
Riparin: Where's the mention of the forcing of the private mortgage brokers to furnish loans to low income and unworthy borrowers via the CRIA?
Gawd - if you're going to drag out the CRA (Community Reinvestment Act; not CRIA); at least do your fucking research. You too, Mike; although it's typical that you'd parrot some idea about government regulations 'forcing' the banks to make wacky loans....'cause it sounds cool. No surprise that you actually know nothing about it.
And Rafterman2007 - you're right that both parties have allowed financial
deregulation to run rampant (deregulation of other industries being another topic altogether), but you had better do you homework before coming in here with weak sauce like this.
So here's the deal: The number of CRA loans, as part of the greater subprime crisis, is just a fraction of the overall defaulted loans:
Source? Oh yeah - the pinko rag Businessweek
Moreover - that doesn't mean all those 20-22% of CRA defaulted- just a percentage of them. As a point of fact, those CRA loans actually defaulted at a rate lower than loans made outside of government regulation
So we know that the overall default rate for ALL subprime loans was about 25% at last count - let's say that the CRA loans defaulted at 24%.
That means that defaulted CRA loans accounted for, in the worst case scenario, only 5% of the entire subprime foreclosures. Because those CRA loans were more likely to be retained and not re-sold, the financial impact is even less.
You can look this shit up on your own if you don't buy these sources. I mean, you can always quote some talking head on the Opinion section of the WSJ, but the facts are there for you to find, and you end up looking like a partisan idiot when you make some uninformed statement.
BTW- that Traiger and Hinckley
paper is full of verifiable facts. Their analysis:
(1) CRA Banks were significantly less likely than other lenders to make a high cost loan;
(2) The average APR on high cost loans originated by CRA Banks was appreciably lower than the average APR on high cost loans originated by other lenders;
(3) CRA Banks were more than twice as likely as other lenders to retain originated loans in their portfolio [meaning the loans were less likely to be sold & rolled up into Mortgage Banked Securities & Credit Default Swaps - the ones that greatly exacerbated the banking crisis]; and
(4) Foreclosure rates were lower in MSAs with greater concentrations of bank branches.
The fact that they were regulated - despite those rules being relaxed under the Bush Administration - clearly made most of the loans work despite an inflated and dangerous climate.
Itís telling that, amid all the recent recriminations, even lenders have not fingered CRA. Thatís because CRA didnít bring about the reckless lending at the heart of the crisis. Just as sub-prime lending was exploding, CRA was losing force and relevance. And the worst offenders, the independent mortgage companies, were never subject to CRA ó or any federal regulator. Law didnít make them lend. The profit motive did. And that is not political correctness. It is correctness.
Robert Gordon, senior fellow at the Center for American Progress (A liberal, to be sure, but that doesn't mean he's not right.)