Barney Frank's New Bill to Expand the Community Reinvestment Act

iSteve ^ | 17 September 2009 | iSteve

[Bob017]

There’s also an exchange between Sailer and Barry Ritholtz here.

http://isteve.blogspot.com/2009/06/mr-ritholtz-has-question.html

[Robwin]

Aw, geez, does this mean Barney has yet another boyfriend?

[Rickster GloucesterVA]

I want to know if anyone has ever seen Barney Frank and Elmer Fudd in the same room at the same time...

I’m just sayin’...

[parsifal]

Thanks. I had actually read this one before. Here is what i found germane way back then:

“Banks making CRA loans initially expected that defaults would be higher due to lax lending standards. When they discovered the low-income borrowers had an unexpected propensity to pay their mortgages. After years of data poured in showing that borrowers were paying mortgages despite high LTVs, low down payments and unconventional income measures, bankers began to believe that many of the traditional measure of credit worthiness were overly conservative. Recall what I said earlier about how mortgage service providers started pursuing low-income borrowers in part because of the CRA.

What they didn’t take into account was that different types of borrowers may behave differently, and that much of the data on those lax lending mortgages was warped by increasing home prices. Wealthier, more sophisticated borrowers ruthlessly default when their mortgage goes underwater, for example. What’s more, the reversal of housing prices meant that defaults across all borrower classes increased.”

What I took from this was that the poor folks didn’t cause the problem. Maybe the CRA was the first cause for lower doc standards, which is why I used the word “basically” when I first answered this post. It was the wealthier people who told banks/mortgage companies to shove the loans when they got upside down.

When you read the links above from the Wall Street guys, you don’t find any real mention of CRA being behind this. What appears to be the real culprit was the derivatives behind the lousy loans.

parsy, who appreciates links!

[parsifal]

That was a fascinating link that I haven’t read before. I will save it. Still don’t see how CRA is culpable. Still looks like it is the rich white folks making money that drove it. I think the most CRA can come in for opening a door which the sharks poured thru.

Did you read either of those two Wall Street links I provided. In one of those, the Steve Eismann one, he mentions his housekeeper and another minority. One purchased like five townhouses as part of the con, but that was certainly not CRA.

Another point is, that the real damage came from the derivatives. That Eismann article tells how they did it, and why. One of the articles also points out that many people who qualified for non sub-prime loans, were steered that way for the higher fees.

parsy, who says thanks for the links

[x_plus_one]

Expansion of Community Reinvestment Act Would Promote Economic Security and Financial Inclusion for....Barney Frank.