Don't Blame the Housing Crash on Governmental Lending-Standards

Some of the correlation as causality is taken for granted on both sides of this homeownership debate, but the following part of the article is well worth repeating:

Don't Blame the Housing Crash on Governmental Lending-StandardsMuch of today's attack on the principle of homeownership doesn't address that principle at all. It deals instead with the housing crash, and purports to find that the crash was the result of excessive encouragement of homeownership, especially among low-income families.

The culprit, according to this argument, is the Community Reinvestment Act, a President Carter-era initiative that targeted banks' discrimination against home buyers in low- and moderate-income neighborhoods. The claim is that the CRA induced banks to lower their lending standards to meet CRA lending goals in disadvantaged neighborhoods, setting the nation up for the subprime crash.

This notion has been thoroughly debunked. As early as 2008 it was systematically demolished by Federal Reserve Gov. Randall Kroszner. In 2011 it was so discredited that even the Republican minority of the Financial Crisis Inquiry Commission disavowed it as a cause of the crash.

Make no mistake: Blaming the CRA for the housing crash borders on racism — it's a way of blaming minority borrowers for a disaster that was wholly the responsibility of Wall Street bankers.

In fact, mortgage banking firms such as Countrywide, not banks subject to the CRA, took the lead in pushing low-quality mortgages on any applicant who could hold a pen. And it was those risky products — bristling with hidden fees, prepayment penalties, exposure to variable interest rates — not risky borrowers, that produced the crisis.

Source: Homeownership remains a goal that should be encouraged - latimes.com

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  • Tom Usher

    About Tom Usher

    Employment: 2008 - present, website developer and writer. 2015 - present, insurance broker. Education: Arizona State University, Bachelor of Science in Political Science. City University of Seattle, graduate studies in Public Administration. Volunteerism: 2007 - present, president of the Real Liberal Christian Church and Christian Commons Project.
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