Posted on 08/04/2015 7:52:58 AM PDT by Jan_Sobieski
Democrats and the media insist the Community Reinvestment Act, the anti-redlining law beefed up by President Clinton, had nothing to do with the subprime mortgage crisis and recession. But a new study by the respected National Bureau of Economic Research finds, "Yes, it did. We find that adherence to that act led to riskier lending by banks."
Added NBER: "There is a clear pattern of increased defaults for loans made by these banks in quarters around the (CRA) exam. Moreover, the effects are larger for loans made within CRA tracts," or predominantly low-income and minority areas. To satisfy CRA examiners, "flexible" lending by large banks rose an average 5% and those loans defaulted about 15% more often, the 43-page study found.
The strongest link between CRA lending and defaults took place in the runup to the crisis — 2004 to 2006 — when banks rapidly sold CRA mortgages for securitization by Fannie Mae and Freddie Mac and Wall Street. CRA regulations are at the core of Fannie's and Freddie's so-called affordable housing mission. In the early 1990s, a Democrat Congress gave HUD the authority to set and enforce (through fines) CRA-grade loan quotas at Fannie and Freddie.
It passed a law requiring the government-backed agencies to "assist insured depository institutions to meet their obligations under the (CRA)." The goal was to help banks meet lending quotas by buying their CRA loans...
(Excerpt) Read more at news.investors.com ...
>>Why..?
“It’s my nature”, said the [organized criminal] scorpion to the frog...
My mortgages were never sold. My clients with less than stellar credit? Most of them were “sold”. So here’s my thinking.
If I owned a bank and I had loans that I was nervous about defaulting, then I would sell off those loans and keep the ones I was confident in collecting.
Do you understand what I mean? Bundle up the risk, sell it off and keep the gravy. How were these “Bundled loans” rated for risk? Am I making any sense?
>>If I owned a bank and I had loans that I was nervous about defaulting
A bank lends on deposits - Argent/Ameriquest wasn’t a bank. It had no deposits.
Everything it originated was securitized and flushed into the sewer pipe.
>>How were these “Bundled loans” rated for risk?
Fraudulently and/or negligently.
Fraudulently because Argent simply made up FICO scores for thousands or loan apps.
Negligently because the ratings agencies evidently failed to compare the FICO score on the loan app against what the score the consumer had on the various credit services.
Ricky lending was FORCED on the lenders by Marxist government legislation.
Clearly! Thank you.
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