Black Plague
09-24-2008, 03:10 AM
New York Times, 1999:
http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F9582 60&sec=&spon=&pagewanted=1
http://www.freerepublic.com/focus/f-news/2095055/posts
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
Jet Magazine, 1994 :
http://findarticles.com/p/articles/mi_m1355/is_n19_v86/ai_15779827?tag=content
http://www.freerepublic.com/focus/f-news/2088795/posts
Reno urges banks to market services to minority areas
Following a landmark lending discrimination settlement, U.S. Attorney General Janet Reno recently issued a stern warning to all banks which practice red-lining--you're breaking the law and face possible litigation.
Reno's warning came on the heels of a recent settlement of an unprecedented lending-bias case against Chevy Chase Federal Savings Bank, a suburban Washington, D.C., bank that was accused of bias in marketing services to predominantly Black and minority areas.
It was revealed that until recently, Chevy Chase had no branches located in predominantly Black neighborhoods.
As part of the settlement, Chevy Chase and its B.F. Saul Mortgage unit agreed to invest $11 million in neighborhoods that the Justice Department claims they refused to serve.
USA Today recently reported from 1976 to 1992 that Chevy Chase underwrote 97 percent of its loans in predominantly White areas.
The bank denied the charges of bias, but did agree to make $140 million in subsidized or below-marketrate mortgage loans to neighborhoods it is accused of discriminating against.
U.S. Attorney Eric Holder added the settlement is also unique because the cash will be funneled directly to the community rather than to the government.
National Review, 1993 :
Assault on the mortgage lenders: in the name of racial justice, the Clintonites want the power to decide who gets a home of his own - efforts to impose regulations on banks to make loans even if applicants are not creditworthy
http://findarticles.com/p/articles/mi_m1282/is_/ai_14779796
http://www.freerepublic.com/focus/f-news/2088728/posts
QUIETLY, behind the scenes, the Clinton Administration is preparing for the biggest regulatory crackdown of recent years. Attorney General Janet Reno is linking up with banking regulators and with HUD Secretary Henry Cisneros to end the supposed epidemic of discrimination against minorities in making home loans. The implications for society at large are ominous.
Here, as in affirmative-action efforts in hiring, college admissions, and the drawing of voting districts, the Washington establishment is obsessed with "disparate impact," which it equates with racism. In the mortgage-lending area, there is ample evidence of disparate impact to feed this obsession. Data collected by the Federal Government reveal that in 1992, while 16 per cent of white applicants for mortgage loans were rejected, 36 per cent of black applicants were rejected.
But does disparate impact indicate racism? According to Lawrence Lindsey, the Federal Reserve governor who oversees the collection of mortgagelending data, even the celebrated Boston Fed study that inspired this crusade found that factors other than race--such as one's credit record and whether one has sufficient income to meet the payments--are enough to account for nearly all the difference in rejection rates.
MR. LUDWIG'S idea of ending discrimination is for blacks and whites to have the same rejection rates, regardless of the legitimate reasons for differences. The crackdown is already well under way, as the Administration turns many of its bank examiners into discrimination police by re-interpreting the Fair Lending Act of 1968 and the Equal Credit Opportunity Act of 1974.
The primary responsibility of banking regulators--the Office of the Comptroller of the Currency (OCC), the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and the Office of Thrift Supervision--has always been the safety and soundness of banks and thrift institutions. In the last few decades a separate cadre of bank examiners for fairness and consumer protection has been established. These so-called "compliance examiners" represent the shock troops of the Clinton assault. Ludwig is increasing the number of OCC compliance examiners from 330 to 530 by next year. Already they've been busy examining loan files; their work has resulted in four referrals to the Department of Justice for further investigation. Miss Reno, meanwhile, has chastised the other bank regulatory agencies, including the Federal Reserve, before the Senate Banking Committee for failing to get with the program.
THE SHAPE of the future may be seen in a case that actually pre-dated the Clinton Administration-the case against the Decatur Federal Savings & Loan of Atlanta. That case was referred to Justice during the Bush Administration, and, under the threat of litigation, Decatur Federal agreed to a draconian settlement last year that permeates almost every activity the bank conducts. The settlement includes Maoist-sounding sensitivity training for Decatur's loan officers and recommends bonuses for those who bring in minority loans.
Mr. Ludwig is in the process of rewriting regulations for the Community Reinvestment Act so as to offer further inducements for banks to allocate credit by race. In the past, banks and thrifts were rated on the efforts they made to reach out to minorities. Under a directive from President Clinton, however, Ludwig plans to introduce new CRA regulations that will require lenders to meet certain numerical guidelines in total minority loans.
Congressional supporters of the performance-based CRA standards, such as Senators Paul Sarbanes (D., Md.) and Carol Moseley Braun (D., Ill.), :nigbanand Representatives Joseph Kennedy (D., Mass.) and Maxine Waters (D. Calif.), :nigban deny they are quotas--but some CRA consultants and Wall Street banking analysts say that banks having trouble finding qualified minority candidates will simply approve the minimum number of bad loans and consider them, as one put it, "blood money for the politicians."
MISS RENO, like other mortgage militants, believes banks discriminate by such means as telling white applicants how to correct their applications so as to get loan approval, but not telling black applicants. The authors of the controversial Boston Fed study concur. The truth is, however, that most banks now routinely review all rejected minority applications, sometimes passing the loan file to the president's office.
The HUD crackdown on mortgage bankers is being administered by Assistant Housing Secretary Roberta Achtenberg, who before being tapped for the Clinton Administration gained fame in San Francisco for pressuring big corporations to stop funding the Boy Scouts. She has hired an independent testing firm that has been for several months sending out phony black, white, Hispanic, and AsianAmerican mortgage applicants to see if minorities are treated differently from whites. If a single loan officer or other employee in any way treats a single black applicant less favorably than a white applicant, then it can be considered a case of discrimination. Discrimination can be something as simple as not smiling at the black tester, having smiled at the white one.
Miss Achtenberg has considerable leverage against mortgage bankers, since HUD oversees the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Home Association (Fannie Mae), two government-sponsored private enterprises which buy mortgages from mortgage lenders and sell them to investors in the secondary market. If HUD denied a mortgage banker the right to sell its mortgages to Freddie Mac or Fannie Mae, that would force the banker out of business.
The Consumer Bankers Association reports that 69 per cent of banks in its affordable-housing survey subsidize their minority-outreach programs, usually by offering lower interest rates, but also by incurring higher operating costs to administer the loans. Among banks that subsidize, 76 per cent of the subsidies come from bank profits, while the remaining subsidies come from government programs and non-profit organizations. The Clinton Administration's heavy-handed, raceconscious approach threatens to forcibly expand this small subsidy foothold.
If it succeeds in driving banks to make bad loans in order to improve their minority-approval rates, this will eventually lead to more foreclosures in troubled inner-city communities. It will also reduce the available capital to credit-worthy borrowers, forcing more Americans to settle for a less attractive home than they had expected. Some whites who formerly would have qualified at the margins for a mortgage will be denied their chance at the American dream. And mortgage rates will rise for everyone to cover the losses from bad loans.
http://www.city-journal.org/html/10_1_the_trillion_dollar.html
The Trillion-Dollar Bank Shakedown That Bodes Ill for Cities
Winter 2000
The Clinton administration has turned the Community Reinvestment Act, a once-obscure and lightly enforced banking regulation law, into one of the most powerful mandates shaping American cities—and, as Senate Banking Committee chairman Phil Gramm memorably put it, a vast extortion scheme against the nation's banks. Under its provisions, U.S. banks have committed nearly $1 trillion for inner-city and low-income mortgages and real estate development projects, most of it funneled through a nationwide network of left-wing community groups, intent, in some cases, on teaching their low-income clients that the financial system is their enemy and, implicitly, that government, rather than their own striving, is the key to their well-being.
A September 1999 study by Freddie Mac, for instance, confirmed what previous Federal Reserve and Federal Deposit Insurance Corporation studies had found: that African-Americans have disproportionate levels of credit problems, which explains why they have a harder time qualifying for mortgage money. As Freddie Mac found, blacks with incomes of $65,000 to $75,000 a year have on average worse credit records than whites making under $25,000.
There is no surer way to destabilize a neighborhood than for its new generation of home buyers to lack the means to pay their mortgages—which is likely to be the case for a significant percentage of those granted a no-down-payment mortgage based on their low-income classification rather than their good credit history. Even if such buyers do not lose their homes, they are a group more likely to defer maintenance on their properties, creating the problems that lead to streets going bad and neighborhoods going downhill. Stable or increasing property values grow out of the efforts of many; one unpainted house, one sagging porch, one abandoned property is a threat to the work of dozens, because such signs of neglect discourage prospective buyers.
A no-down-payment policy reflects a belief that poor families should qualify for home ownership because they are poor, in contrast to the reality that some poor families are prepared to make the sacrifices necessary to own property, and some are not.
Even without a no-down-payment policy, the pressure on banks to make CRA-related loans may be leading to foreclosures. Though bankers generally cheerlead for CRA out of fear of being branded racists if they do not, the CEO of one midsize bank grumbles that 20 percent of his institution's CRA-related mortgages, which required only $500 down payments, were delinquent in their very first year, and probably 7 percent will end in foreclosure. "The problem with CRA," says an executive with a major national financial-services firm, "is that banks will simply throw money at things because they want that CRA rating." From the banks' point of view, CRA lending is simply a price of doing business—even if some of the mortgages must be written off.
http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F9582 60&sec=&spon=&pagewanted=1
http://www.freerepublic.com/focus/f-news/2095055/posts
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
Jet Magazine, 1994 :
http://findarticles.com/p/articles/mi_m1355/is_n19_v86/ai_15779827?tag=content
http://www.freerepublic.com/focus/f-news/2088795/posts
Reno urges banks to market services to minority areas
Following a landmark lending discrimination settlement, U.S. Attorney General Janet Reno recently issued a stern warning to all banks which practice red-lining--you're breaking the law and face possible litigation.
Reno's warning came on the heels of a recent settlement of an unprecedented lending-bias case against Chevy Chase Federal Savings Bank, a suburban Washington, D.C., bank that was accused of bias in marketing services to predominantly Black and minority areas.
It was revealed that until recently, Chevy Chase had no branches located in predominantly Black neighborhoods.
As part of the settlement, Chevy Chase and its B.F. Saul Mortgage unit agreed to invest $11 million in neighborhoods that the Justice Department claims they refused to serve.
USA Today recently reported from 1976 to 1992 that Chevy Chase underwrote 97 percent of its loans in predominantly White areas.
The bank denied the charges of bias, but did agree to make $140 million in subsidized or below-marketrate mortgage loans to neighborhoods it is accused of discriminating against.
U.S. Attorney Eric Holder added the settlement is also unique because the cash will be funneled directly to the community rather than to the government.
National Review, 1993 :
Assault on the mortgage lenders: in the name of racial justice, the Clintonites want the power to decide who gets a home of his own - efforts to impose regulations on banks to make loans even if applicants are not creditworthy
http://findarticles.com/p/articles/mi_m1282/is_/ai_14779796
http://www.freerepublic.com/focus/f-news/2088728/posts
QUIETLY, behind the scenes, the Clinton Administration is preparing for the biggest regulatory crackdown of recent years. Attorney General Janet Reno is linking up with banking regulators and with HUD Secretary Henry Cisneros to end the supposed epidemic of discrimination against minorities in making home loans. The implications for society at large are ominous.
Here, as in affirmative-action efforts in hiring, college admissions, and the drawing of voting districts, the Washington establishment is obsessed with "disparate impact," which it equates with racism. In the mortgage-lending area, there is ample evidence of disparate impact to feed this obsession. Data collected by the Federal Government reveal that in 1992, while 16 per cent of white applicants for mortgage loans were rejected, 36 per cent of black applicants were rejected.
But does disparate impact indicate racism? According to Lawrence Lindsey, the Federal Reserve governor who oversees the collection of mortgagelending data, even the celebrated Boston Fed study that inspired this crusade found that factors other than race--such as one's credit record and whether one has sufficient income to meet the payments--are enough to account for nearly all the difference in rejection rates.
MR. LUDWIG'S idea of ending discrimination is for blacks and whites to have the same rejection rates, regardless of the legitimate reasons for differences. The crackdown is already well under way, as the Administration turns many of its bank examiners into discrimination police by re-interpreting the Fair Lending Act of 1968 and the Equal Credit Opportunity Act of 1974.
The primary responsibility of banking regulators--the Office of the Comptroller of the Currency (OCC), the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and the Office of Thrift Supervision--has always been the safety and soundness of banks and thrift institutions. In the last few decades a separate cadre of bank examiners for fairness and consumer protection has been established. These so-called "compliance examiners" represent the shock troops of the Clinton assault. Ludwig is increasing the number of OCC compliance examiners from 330 to 530 by next year. Already they've been busy examining loan files; their work has resulted in four referrals to the Department of Justice for further investigation. Miss Reno, meanwhile, has chastised the other bank regulatory agencies, including the Federal Reserve, before the Senate Banking Committee for failing to get with the program.
THE SHAPE of the future may be seen in a case that actually pre-dated the Clinton Administration-the case against the Decatur Federal Savings & Loan of Atlanta. That case was referred to Justice during the Bush Administration, and, under the threat of litigation, Decatur Federal agreed to a draconian settlement last year that permeates almost every activity the bank conducts. The settlement includes Maoist-sounding sensitivity training for Decatur's loan officers and recommends bonuses for those who bring in minority loans.
Mr. Ludwig is in the process of rewriting regulations for the Community Reinvestment Act so as to offer further inducements for banks to allocate credit by race. In the past, banks and thrifts were rated on the efforts they made to reach out to minorities. Under a directive from President Clinton, however, Ludwig plans to introduce new CRA regulations that will require lenders to meet certain numerical guidelines in total minority loans.
Congressional supporters of the performance-based CRA standards, such as Senators Paul Sarbanes (D., Md.) and Carol Moseley Braun (D., Ill.), :nigbanand Representatives Joseph Kennedy (D., Mass.) and Maxine Waters (D. Calif.), :nigban deny they are quotas--but some CRA consultants and Wall Street banking analysts say that banks having trouble finding qualified minority candidates will simply approve the minimum number of bad loans and consider them, as one put it, "blood money for the politicians."
MISS RENO, like other mortgage militants, believes banks discriminate by such means as telling white applicants how to correct their applications so as to get loan approval, but not telling black applicants. The authors of the controversial Boston Fed study concur. The truth is, however, that most banks now routinely review all rejected minority applications, sometimes passing the loan file to the president's office.
The HUD crackdown on mortgage bankers is being administered by Assistant Housing Secretary Roberta Achtenberg, who before being tapped for the Clinton Administration gained fame in San Francisco for pressuring big corporations to stop funding the Boy Scouts. She has hired an independent testing firm that has been for several months sending out phony black, white, Hispanic, and AsianAmerican mortgage applicants to see if minorities are treated differently from whites. If a single loan officer or other employee in any way treats a single black applicant less favorably than a white applicant, then it can be considered a case of discrimination. Discrimination can be something as simple as not smiling at the black tester, having smiled at the white one.
Miss Achtenberg has considerable leverage against mortgage bankers, since HUD oversees the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Home Association (Fannie Mae), two government-sponsored private enterprises which buy mortgages from mortgage lenders and sell them to investors in the secondary market. If HUD denied a mortgage banker the right to sell its mortgages to Freddie Mac or Fannie Mae, that would force the banker out of business.
The Consumer Bankers Association reports that 69 per cent of banks in its affordable-housing survey subsidize their minority-outreach programs, usually by offering lower interest rates, but also by incurring higher operating costs to administer the loans. Among banks that subsidize, 76 per cent of the subsidies come from bank profits, while the remaining subsidies come from government programs and non-profit organizations. The Clinton Administration's heavy-handed, raceconscious approach threatens to forcibly expand this small subsidy foothold.
If it succeeds in driving banks to make bad loans in order to improve their minority-approval rates, this will eventually lead to more foreclosures in troubled inner-city communities. It will also reduce the available capital to credit-worthy borrowers, forcing more Americans to settle for a less attractive home than they had expected. Some whites who formerly would have qualified at the margins for a mortgage will be denied their chance at the American dream. And mortgage rates will rise for everyone to cover the losses from bad loans.
http://www.city-journal.org/html/10_1_the_trillion_dollar.html
The Trillion-Dollar Bank Shakedown That Bodes Ill for Cities
Winter 2000
The Clinton administration has turned the Community Reinvestment Act, a once-obscure and lightly enforced banking regulation law, into one of the most powerful mandates shaping American cities—and, as Senate Banking Committee chairman Phil Gramm memorably put it, a vast extortion scheme against the nation's banks. Under its provisions, U.S. banks have committed nearly $1 trillion for inner-city and low-income mortgages and real estate development projects, most of it funneled through a nationwide network of left-wing community groups, intent, in some cases, on teaching their low-income clients that the financial system is their enemy and, implicitly, that government, rather than their own striving, is the key to their well-being.
A September 1999 study by Freddie Mac, for instance, confirmed what previous Federal Reserve and Federal Deposit Insurance Corporation studies had found: that African-Americans have disproportionate levels of credit problems, which explains why they have a harder time qualifying for mortgage money. As Freddie Mac found, blacks with incomes of $65,000 to $75,000 a year have on average worse credit records than whites making under $25,000.
There is no surer way to destabilize a neighborhood than for its new generation of home buyers to lack the means to pay their mortgages—which is likely to be the case for a significant percentage of those granted a no-down-payment mortgage based on their low-income classification rather than their good credit history. Even if such buyers do not lose their homes, they are a group more likely to defer maintenance on their properties, creating the problems that lead to streets going bad and neighborhoods going downhill. Stable or increasing property values grow out of the efforts of many; one unpainted house, one sagging porch, one abandoned property is a threat to the work of dozens, because such signs of neglect discourage prospective buyers.
A no-down-payment policy reflects a belief that poor families should qualify for home ownership because they are poor, in contrast to the reality that some poor families are prepared to make the sacrifices necessary to own property, and some are not.
Even without a no-down-payment policy, the pressure on banks to make CRA-related loans may be leading to foreclosures. Though bankers generally cheerlead for CRA out of fear of being branded racists if they do not, the CEO of one midsize bank grumbles that 20 percent of his institution's CRA-related mortgages, which required only $500 down payments, were delinquent in their very first year, and probably 7 percent will end in foreclosure. "The problem with CRA," says an executive with a major national financial-services firm, "is that banks will simply throw money at things because they want that CRA rating." From the banks' point of view, CRA lending is simply a price of doing business—even if some of the mortgages must be written off.