Subprimes and minorities:
"just speculation that links subprimes to the poor" according to CJ - Well looky at these articles from liberal news outlets reporting on hardships that subprime loans are causing blacks and hispanics:
Minorities Hit Hardest by Subprime Mortgage Crisis
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And for years, we’ve had these maps that show that where subprime loans—in fact, the maps are being shown right now—where subprime loans are being made and where foreclosures are occurring are all concentrated in neighborhoods of color. So wherever you find a neighborhood of color and a high degree of homeownership, you will see foreclosures and you will see a high incidence of subprime lending.
democracynow.org
Minorities are the emerging face of the subprime crisis
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Last week, a coalition of civil rights groups, including the National Council of La Raza, the Center for Responsible Lending and the NAACP, called for a national six-month moratorium on foreclosures -- after observing that the subprime crisis disproportionately affected minorities.
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According to NCLR, "[f]orty percent of Latino families and over half of African Americans who receive home loans get higher-cost mortgages, predominately subprime loans." In a study released last month, an analysis of 2005 federal mortgage lending data of large subprime originators in six metropolitan areas, African American borrowers were 3.8 times and Latino borrowers were 3.6 times more likely to receive a higher-cost home purchase loan than white borrowers. One argument is that these groups naturally get subprime loans because they have bad credit or are buying in riskier neighborhoods.
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But for Rosa and Alberto Ramirez and many others like them, a foreclosure moratorium won't help. It's not that a better loan would have remedied their situation -- it's that they can't afford the home they bought. "Many of my clients can't afford their homes in any circumstance," says Simmons. "I have a dishwasher who bought a house and never even moved in. The moment he saw the first payment, he knew he couldn't afford it."
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sfgate.com
Minorities depend on subprime loans
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Subprime loans were more prevalent among blacks in 98.5% of the metropolitan areas, while Hispanics were more apt to hold a subprime mortgage or refinance loan in nearly 89.1%, according to the National Community Reinvestment Coalition (NCRC), a non-profit focused on lending and community- development issues.
Lower-income borrowers also turned to subprime lenders in large numbers, with prime lenders lagging the subprime industry in serving those with incomes 80% or less of their area median, in about 86% of cities studied. In neighborhoods with a concentration of low-income households, that rose to 98%.
An industry expert says differences in lending patterns don't, on their face, prove discrimination, and could instead show differences in credit worthiness or the fact subprime lenders are reaching hard-to-serve populations. Federal housing data don't outline such financial factors as credit scores and income that are key to lending.
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usatoday.com
Subprime Mortgages Concentrated in City’s Minority Neighborhoods
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New data from the federal government show that subprime loans made up 32 percent of mortgages on 1- to 4-family residences in the city in 2006, up from 28 percent in 2005. Most of these loans went to minority borrowers.
An interactive graphic by The New York Times allows users to compare neighborhoods according to the rate of subprime mortgages. In the city, subprime loans have been particularly prevalent in predominantly black and Hispanic neighborhoods, including eastern Brooklyn, southeastern Queens and the south-central Bronx.
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cityroom.blogs.nytimes.com
Now was Fannie pressured to make a market in subprime mortgages? Yep:
Fannie Mae and Freddie Mac hold billions in subprime-backed securities
Jody Shenn Bloomberg NewsPublished: July 30, 2007
NEW YORK: Fannie Mae, the largest provider of money for U.S. home loans, said it held $47.2 billion of securities backed by subprime mortgages at the end of June. Freddie Mac, the second-largest, held $120.8 billion of such debt as of May 31.
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iht.com
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By purchasing tens of billions of dollars worth of dubious mortgages, you will recall, Fannie Mae (nyse: FNM - news - people ) and Freddie Mac (nyse: FRE - news - people ) created the market for subprime instruments that caused this crisis.
Why did Fannie Mae and Freddie Mac behave so recklessly? Because they came under intense political pressure to do so--often from the chairman of the House Committee on Financial Services, Barney Frank. In the name of "affordable housing"--a term, we now know, that refers to putting people into homes they cannot afford--Frank leaned on Fannie Mae and Freddie Mac repeatedly. Ignoring credit risks, he declared, was their "mission." When analysts questioned Fannie Mae and Freddie Mac's solvency, Frank exclaimed, in effect, "How dare they?"
"The more people exaggerate a threat of safety and soundness," he said. "Then the less I think we see in terms of affordable housing."
The invisible hand of Adam Smith didn't create this mess. That honor belongs to ham-fisted politicians such as Barney Frank.
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forbes.com
Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES
Published: September 30, 1999
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.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
'From the perspective of many people, including me, this is another thrift industry growing up around us,' said Peter Wallison a resident fellow at the American Enterprise Institute. 'If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.'
Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.
Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.
In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.
Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.
In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.
The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.
query.nytimes.com |
