Sub-prime, from the archives
I wrote this April 25, 2007, complaining about the way the topic was written up in USAToday. It began with the obligatory sob story, and it wasn't until the middle of the article you found what was going down. Even so, I gleaned these facts from the article (perhaps the reporter figured the editor wouldn't read that far). I haven't changed a word of it, so all this was well known 18 months ago long before we knew this meltdown was going to happen. The only words missing are CRA and ACORN. It was reported in the news, discussed on talk radio and cable panels, and commented on in the blogosphere. And still people are falling for Obama's ridiculous lies.A closer look at the middle paragraphs:
- Minority home buyers helped fuel the housing boom--49% of the increase between 1995-2005. [Note that this trend of "empowering" minorities by burdening them with impossible debt began under Clinton, and any attempt to reverse it has brought condemnation on Bush.]
- 73% of high income ($92,000-$152,000) blacks and 70% of high income Hispanics had subprime loans, compared to 17% whites.
- Lenders were supported by politicians and "community leaders" eager to promote minority home ownership.
- When Illinois (Cook Co.) tried to establish credit counseling programs for new minority buyers by targeting ZIP codes, the program was pulled as being "racist".
- Access became a buzz word at the expense of sound lending policies.
- Buyers/borrowers with poor credit or low salaries who wanted a cheap deal is a large part of the problem.
- Investigation by a counseling group found 9% of those in trouble were victims of fraud; the rest was poor judgement and poor financial skills.
- Rather than focus on the borrowers' poor financial skills, it appears that new regulations and programs will pounce on predatory lenders.
- Government investigations of charges even before the current problem came to light showed a "good chunk" [not my term] of higher loan cost is attributed to borrower's income, not to race or ethnicity.
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2 comments:
"73% of high income (92,000-$152,000) blacks and 70% of high income Hispanics had subprime loans, compared to 17% whites."
Now ask yourself why this is. Why would there be such a disparity between high income hispanics and blacks, on the one hand, and high income whites on the other.
The reason is the banks and realtors both were under the gun to sign up as many blacks and hispanics as possible. They would go out of business, otherwise, and subprime (on paper) had a lot of appeal, esp. if you were a 1st time buyer. Also, they weren't stupid. They looked for as many sound buyers as possible with the carrot of very low downpayment for a home that would increase in value. I'm guessing most of those people haven't gone into foreclosure, but they are part of the picture.
I don't know when you last bought a house, but the realty co. steers you to their own contacts (and banks and loan companies steer people to real estate agents). In 2001, our real estate agent took us to Countrywide, which we didn't use (went to our own local bank), which is heavily involved in subprime. Subprime wasn't being offered to us; I'm just using this as an example. Many of the companies doing the steering to subprime were themselves minorities, and they were doing extremely well. They also weren't doing anything illegal, nor were the banks. The pressure groups threatening the banks with charges of discrimination and redlining probably saw themselves as "helping the poor." There may have been a thousand good intentions that got us to September/October 2008. But here we are, collectively 8 trillion poorer because social scientists and politicians of the the 60s and 70s thought everyone had the right to a mortgage they couldn't possibly afford, not just the middle class and wealthy.
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