Justice Dpt. Forcing Banks into Unsafe Loans Again

Clean

Clean

5,000+ Posts
According to Mary Kissel of the WSJ, the Obama Justice department is once again intimidating banks into lending to minority borrowers at below-market rates, all in the name of combating "discrimination." Sound familiar?

This time it's a "fair lending" unit overseen by Civil Rights Division head Thomas Perez. Mr. Perez is quoted as saying;

"The foreclosure crisis has touched virtually every community in this country, but it disproportionately touches communities of color, in particular African-Americans and Latinos." And: "[C]ross burnings are the most overt form of discrimination and bigotry. Lending discrimination is some of the most subtle. It's what I call discrimination with a smile."

Most banks don't want the publicity of being labeled "racist" so they just roll over and settle with the government.
Kissel states that in less than two years, the Justice Dept. has extorted (i.e. settled with) money from AIG ($6.1 million), PrimeLending ($2 million), Midwest BankCentre ($1.5 million) and Citizens Republic Bancorp ($3.5 million), to name a few.

The Link
 
This is astounding but not surprising.

But this isn't fair to the minorities who really can't afford it and it surely isn't fair to taxpayers. Did we learn nothing?

is there any defense of this?
 
This precisely why my bank sold off its mortgage unit long ago and expressly avoids consumer / retail lending. This type of **** is retarded.
 
So despite the fact that we are still trying programs to help people keep their houses, we are forcing banks to lend. Maybe we should let the market actually settle and get the foreclosure mess sorted first. Instead of more force social engineering.
 
I guess Obama decided it makes sense to quit trying to get the economy "out of the ditch."

Much better to repeat what drove us into the ditch to begin with.

Insane.
 
That's just it. These Daybreak Zero types don't believe in market economies. Having them collapse is an essential step in the transformation of America to the pined for, desired and coveted dictatorial command economies.

For those who genuinely want government to help (i.e. socialism), make sure it is done at the individual and municipal level where the light of accountability shines 1000 times brighter than that of any centralized federal level.
 
This is pretty much what happened during the Clinton administration. Clinton and the Democrats wanted everyone to own a house regardless of their credit and whether they could pay it back or not.

If you told them no or told them it was a bad idea, they branded you a racist or minority-hater and shouted you out of D.C.

Then Bush acclerated this process for several years.

Eventually, giving out bad loans to people where there was no way to from them to pay them back anyways, crushed the Real Estate economy and we had that worthless TARP failure.

What Clean mentions in his post is just a big repeat of Clinton's Bad Real Estate process under a different name.
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I fail what crossburning has to do with anything besides an awful comparison of the two.
 
I would not expect a whole lot of defending of this policy or clarification on why this isn't intimidation or why THIS TIME it will work. I would, however expect either silence or name-calling from the usual suspects.
 
so the obama admin is forcing banks to do the same thing, what amounts to giving homes to people they know will not be able to pay for them..
seriously is there a sound reason to repeat this mistake?
 
I am not wholly against the idea of trying to prime the pump of home ownership in areas where banks have traditionally made no effort to provide credit and other similar situtaions. This may mean extending loans below the rate that would usually control, though I don't think that this is necessarily a death knell for the lending institutions.

I assume that the idea behind this is trying to get as many people as possible invested in the economy in a way that will pay them dividends in the long run, something that will promote a sort of socio-economic justice, as some use the terms, and a more solid citizenry. I don't believe that the invisible hand is to be trusted without guidance and adjustment, so the social engineering aspect is not anathema to me, though I recognize that there are a number of good reasons to be wary, even opposed, to such governmental activities.

I also assume that there have been some safeguards put into place that will keep bad loans, which happen regardless of the impetus behind the loans or the rates utilized by the lending agencies, from being mis-labeled and bundled into speculative instruments supposedly based on good loans. If this is allowed to happen again we will have trouble again, regardless of the government's position on lending to economically marginal groups.
 
I would think that a Wall Street Journal editorial sort of provides its own rebuttal (if it is ever to be taken seriously in the first place). The myth that loans to the poor were at the core of the housing market collapse is just more entertaining nonsense from the party of myths.

The Link

You know what the best part is though? I will give you one guess what Investment Bank the author of the WSJ opinion piece worked for?
 
Buck
I think all of us would like to see everyone own a home IF they can afford to and actually do make the payments.

Why though would we want to make loans to people who have bad credit ? Who picks up the pieces when people with bad credit are given loans they do not repay?

If the gov't wants to start a program where people with bad credit dig themselves out of bad credit by paying off their current bad debts and saving even 10% toward a down payment , then the gov't backs loans to them for slightly less than prevailing market rates I would be ok with that.

But to force banks to give loans to people with a history of and current bad debt is insane. if they aren't paying off what they owe now what idiot thinks they would pay off a mortgage?

No one on here said forced loans to minorites were the core of the problem BUT certainly they were part of it so why repeat any part of it?
 
6721

I think that there is alot in your last post that constitutes mischaracterization or allusions to inaccurate assumptions.

I don't think banks are going to be forced to lend to people with bad credit who can't pay back the loans (those are two different categories of people you have forced into a single bloc).

Poor people, people without strong credit, do not necessarily fail on their loan repayments. Do you have evidence that they fail more often or more quickly than other groups of borrowers?

The real issue is will we allow derivatives and the like to be boiled together by way of bad paper mixed with the good. Speculation is necessarily part of the overall deal, but fast profits shouldn't be allowed to created big, fat hot potatoes based on bad paper. If we hammer that under some criss-cross nails we should be on the right track.
 
And what were these banks accused of and what claims did they settle?

And do these settlements mean the banks are forced to make loans to people with bad credit scores?

This was an opinion piece and some people fell for it hook, line, and sinker. Goldman Sachs along with its mentor, PT Barnum, would be very proud.
 
Maybe i am reading it wrong but it looks like the obama admin guy IS saying minorities defaulted on loans at a high rate.
From the link
quoting the head of of the Civil Rights divions before Congress:
'A sampling of Mr. Perez's thinking, from April 2010 congressional testimony: "The foreclosure crisis has touched virtually every community in this country, but it disproportionately touches communities of color, in particular African-Americans and Latinos."

For anyone to be in foreclosure don't you have to be pretty deliquent on your loan repayment?
The quote from the link seems to mean that a larger % of the minority community, percentage wise to toal of community?,went into forclosure.
This means they didn't pay on their loans, right?

Your point about poor people with no credit versus people with bad credit is a good one.
For poor people with no credit what would be wrong with letting them borrow money and pay it back on time to establish credit?
if they can show they can do that more than one time they deserve a chance at a home loan . Maybe part of amounts they pay back on time could be counted toward part of a down payment.

You are not suggesting we gurantee a loan to someone who is poor and with no credit history just because they are a minority are you?
 
The thread title, opinion piece, and most of the thread replies say this. The banks were sued or threatened with suits for discriminatory lending. They were not sued nor threatened with suits for failing to loan money to credit risks.
 
there is tons of statistical evidence to validate the use of credit scores as a predictor of future likelihood to pay obligations as agreed (on time).

And poor people most certainly fail to pay more often than non-poor people. Their Debt ratios are already stretched, assuming poor is roughly equivalent to low-income, then they also has very, very low reserves and very, very low non-committed funds. One little hiccup (ER visit, blown engine, new roof) and they are toast (financially speaking). That's why lenders look at it all (credit history, debt ratio, residual income, reserves). It's all part of the ledning calculus.

And 'poor people' have a substantially different repayment profile as a group than non-poor.

Banks in the past were forced to lend in certain areas, and then when they made loans in those areas that were priced commensurate with the risk (higher points/fees/rates) they were then railroaded by regulation and forced to make unsound lending decisions. Do banks deserve a lot of the blame due to derivatives, absolutely yes!! but so does the government system and so do many, many individuals in all income brackets that bought waaaayyy more house than they could really afford.
 
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