While you’re reading this, keep in mind that the Community Reinvestment Act is still the law:
Smoking-Gun Document Ties Policy To Housing Crisis
Excerpt (emphasis added):
The unusual full-court press was predicated on a Boston Fed study showing mortgage lenders rejecting blacks and Hispanics in greater proportion than whites. The author of the 1992 study, hired by the Clinton White House, claimed it was racial “discrimination.” But it was simply good underwriting.
It took private analysts, as well as at least one FDIC economist, little time to determine the Boston Fed study was terminally flawed. In addition to finding embarrassing mistakes in the data, they concluded that more relevant measures of a borrower’s credit history — such as past delinquencies and whether the borrower met lenders credit standards — explained the gap in lending between whites and blacks, who on average had poorer credit and higher defaults.
The study did not take into account a host of other relevant data factoring into denials, including applicants’ net worth, debt burden and employment record. Other variables, such as the size of down payments and the amount of the loans sought to the value of the property being bought, also were left out of the analysis.
Insanely,
It also failed to consider whether the borrower submitted information that could not be verified, the presence of a cosigner and even the loan amount.
Not surprisingly,
When these missing data were factored in, it became clear that the rejection rates were based on legitimate business decisions, not racism.
Still, the study was used to support a wholesale abandonment of traditional underwriting standards — the root cause of the mortgage crisis.
Now comes the scary part,
And it’s still alive today. Obama is building on the fair-lending infrastructure Clinton put in place.
As IBD first reported in July, Attorney General Eric Holder has launched a witch hunt vs. “racist” banks.
“It’s a more aggressive fair-lending enforcement approach now,” said Washington lawyer Andrew Sandler of Buckley Sandler LLP in a recent interview. “It is well beyond anything we saw during the Clinton administration.”
Go read every word.
