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Reply #13: the Community REinvestment act never forced anybody to make a subprime loan. [View All]

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JohnWxy Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Mar-19-09 06:45 PM
Response to Reply #4
13. the Community REinvestment act never forced anybody to make a subprime loan.
Edited on Thu Mar-19-09 07:08 PM by JohnWxy
I realize this runs counter to the fantasy world Conservatives are stuck in. But I offer these insights for those who prefer to stay in touch with reality the rest of us live in._JW

http://www.ocregister.com/articles/loans-subprime-banks...

http://2securedloans.blogspot.com/2008/11/most-subprime...


Most subprime lenders weren't subject to federal lending law

Did a 31-year-old law giving poor people a break at the bank accidentally break the bank?

A lot of opinion leaders think so. From the editorial pages of The Wall Street Journal to talk shows to the op-ed page of The Register, people are charging that the Community Reinvestment Act of 1977 forced banks to make bad loans, leading to financial Armageddon.

There's just one problem: It isn't true.

A Register analysis of more than 12 million subprime mortgages worth nearly $2 trillion shows that most of the lenders who made risky subprime loans were exempt from the Community Reinvestment Act. And many of the lenders covered by the law that did make subprime loans came late to that market after smaller, unregulated players showed there was money to be made.

Among our conclusions:

Nearly $3 of every $4 in subprime loans made from 2004 through 2007 came from lenders who were exempt from the law.

State-regulated mortgage companies such as Irvine-based New Century Financial made just over half of all subprime loans. These companies, which CRA does not cover, controlled more than 60 percent of the market before 2006, when banks jumped in.

Another 22 percent came from federally regulated lenders like Countrywide Home Loans and Long Beach Mortgage. These lenders weren't subject to the law, though some were owned by banks that could choose to include them in their CRA reports.




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Bob Davis, executive vice president of the American Bankers Association, which lobbies Congress to streamline community reinvestment rules, said "it just isn't credible" to blame the law CRA for the crisis.

"Institutions that are subject to CRA that is, banks and savings asociations were largely not involved in subprime lending," Davis said. "The bulk of the loans came through a channel that was not subject to CRA."




The criticisms of the reinvestment act don't make sense to Glenn Hayes. He runs Neighborhood Housing Services of Orange County, which works with banks to provide CRA loans to first-time homebuyers. In its 14-year history, the nonprofit has helped 1,200 families buy their first homes. Score so far: No foreclosures and a delinquency rate under 1 percent.

"It is subprime that's really causing it," Hayes said of the mortgage crisis. "But CRA did not force anyone to do subprime."
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