Friday, December 02, 2011 4:42:54 AM
A Banker Speaks, With Regret
By NICHOLAS D. KRISTOF
Published: November 30, 2011
If you want to understand why the Occupy movement has found such traction, it helps to listen to a former banker like James Theckston. He fully acknowledges that he and other bankers are mostly responsible for the country’s housing mess.
As a regional vice president for Chase Home Finance in southern Florida, Theckston shoveled money at home borrowers. In 2007, his team wrote $2 billion in mortgages, he says. Sometimes those were “no documentation” mortgages.
“On the application, you don’t put down a job; you don’t show income; you don’t show assets,” he said. “But you still got a nod.”
“If you had some old bag lady walking down the street and she had a decent credit score, she got a loan,” he added.
Theckston says that borrowers made harebrained decisions and exaggerated their resources but that bankers were far more culpable — and that all this was driven by pressure from the top.
“You’ve got somebody making $20,000 buying a $500,000 home, thinking that she’d flip it,” he said. “That was crazy, but the banks put programs together to make those kinds of loans.”
Especially when mortgages were securitized and sold off to investors, he said, senior bankers turned a blind eye to shortcuts.
“The bigwigs of the corporations knew this, but they figured we’re going to make billions out of it, so who cares? The government is going to bail us out. And the problem loans will be out of here, maybe even overseas.”
One memory particularly troubles Theckston. He says that some account executives earned a commission seven times higher from subprime loans, rather than prime mortgages. So they looked for less savvy borrowers — those with less education, without previous mortgage experience, or without fluent English — and nudged them toward subprime loans.
These less savvy borrowers were disproportionately blacks and Latinos, he said, and they ended up paying a higher rate so that they were more likely to lose their homes. Senior executives seemed aware of this racial mismatch, he recalled, and frantically tried to cover it up.
Theckston, who has a shelf full of awards that he won from Chase, such as “sales manager of the year,” showed me his 2006 performance review. It indicates that 60 percent of his evaluation depended on him increasing high-risk loans.
In late 2008, when the mortgage market collapsed, Theckston and most of his colleagues were laid off. He says he bears no animus toward Chase, but he does think it is profoundly unfair that troubled banks have been rescued while troubled homeowners have been evicted.
When I called JPMorgan Chase for its side of the story, it didn’t deny the accounts of manic mortgage-writing. Its spokesmen acknowledge that banks had made huge mistakes and noted that Chase no longer writes subprime or no-document mortgages. It also said that it has offered homeowners four times as many mortgage modifications as homes it has foreclosed on.
Still, 28 percent of all American mortgages are “underwater,” according to Zillow [ http://www.zillow.com/blog/2011-11-07/home-values-flat-in-third-quarter-on-slow-road-to-housing-market-bottom/ ], a real estate Web site. That means that more is owed than the home is worth, and the figure is up from 23 percent a year ago. That overhang stifles the economy, for it’s difficult to nurture a broad recovery unless real estate and construction revive.
All this came into sharper focus this week as Bloomberg Markets magazine published [ http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html ] a terrific exposé based on lending records it pried out of the Federal Reserve in a lawsuit. It turns out that the Fed provided an astonishing sum to keep banks afloat — $7.8 trillion, equivalent to more than $25,000 per American.
The article estimated that banks earned up to $13 billion in profits by relending that money to businesses and consumers at higher rates.
The Federal Reserve action isn’t a scandal, and arguably it’s a triumph [ http://blogs.reuters.com/felix-salmon/2011/11/28/chart-of-the-day-morgan-stanley-bailout-edition/ ]. The Fed did everything imaginable to avert a financial catastrophe — and succeeded. The money was repaid.
Yet what is scandalous is the basic unfairness of what has transpired. The federal government rescued highly paid bankers from their reckless decisions. It protected bank shareholders and creditors. But it mostly turned a cold shoulder to some of the most vulnerable and least sophisticated people in America. Last year alone, banks seized [ http://www.bloomberg.com/news/2011-01-13/u-s-foreclosure-filings-may-jump-20-this-year-as-crisis-peaks.html ] more than one million homes.
Sure, some programs exist to help borrowers in trouble, but not nearly enough. We still haven’t taken such basic steps as allowing bankruptcy judges to modify the terms of a mortgage on a primary home. Legislation to address that has gotten nowhere [ http://www.politifact.com/truth-o-meter/promises/obameter/promise/313/allow-bankruptcy-judges-to-modify-terms-of-a-home-/ ].
My daughter and I are reading Steinbeck’s “Grapes of Wrath” aloud to each other, and those Depression-era injustices seem so familiar today. That’s why the Occupy movement resonates so deeply: When the federal government goes all-out to rescue errant bankers, and stiffs homeowners, that’s not just bad economics. It’s also wrong.
© 2011 The New York Times Company
http://www.nytimes.com/2011/12/01/opinion/kristof-a-banker-speaks-with-regret.html [with comments]
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Former Chase Banker Admits His Bank Pushed Minorities Into Subprime Mortgage Loans
By Pat Garofalo on Dec 1, 2011 at 9:20 am
One of the most pernicious practices in which the nation’ biggest banks engaged during the lead up to the financial crisis was pushing minority borrowers into subprime loans, even when many of them qualified for prime loans. Wells Fargo had perhaps the most horrifying practices in this department, calling the subprime loans that they pushed in poor, black neighborhoods “ghetto loans [ http://thinkprogress.org/economy/2009/06/08/172810/wells-fargo-subprime-bank/ ].”
This rampant predatory lending helped inflate the housing bubble; a Center for American Progress investigation actually found huge racial disparities [ http://thinkprogress.org/economy/2009/09/15/172933/racial-disparities-tarp-banks/ ] in lending at the big banks that wound up getting bailed out, with minority borrowers far more likely [ http://www.americanprogress.org/issues/2009/09/pdf/tarp_report.pdf ] to receive high-priced loans.
One former banker for Chase — James Theckston — told the New York Times’ Nick Kristof that not only did his bank push minority borrowers into higher-priced loans, but senior executives then tried to cover up the racial disparity [ http://www.nytimes.com/2011/12/01/opinion/kristof-a-banker-speaks-with-regret.html (above)] in their banks’ lending:
One memory particularly troubles Theckston. He says that some account executives earned a commission seven times higher from subprime loans, rather than prime mortgages. So they looked for less savvy borrowers — those with less education, without previous mortgage experience, or without fluent English — and nudged them toward subprime loans.
These less savvy borrowers were disproportionately blacks and Latinos, he said, and they ended up paying a higher rate so that they were more likely to lose their homes. Senior executives seemed aware of this racial mismatch, he recalled, and frantically tried to cover it up.
“The bigwigs of the corporations knew this [id.], but they figured we’re going to make billions out of it, so who cares? The government is going to bail us out. And the problem loans will be out of here, maybe even overseas,” Theckston explained.
In 2006, Chase made high-price loans to 16.4 percent of white borrowers, while nearly half of black borrowers [ http://www.americanprogress.org/issues/2009/09/pdf/tarp_report.pdf ] and more than one-third of Hispanic borrowers received high-price loans. These disparities help explain why, according to a new report from the Center on Responsible Lending, Latinos and blacks are twice as likely [ http://thinkprogress.org/economy/2011/11/18/372517/latinos-african-americans-housing-crisis/ ] to have been impacted by the housing crisis as whites. In fact, “approximately one quarter [ http://thinkprogress.org/economy/2011/11/18/372517/latinos-african-americans-housing-crisis/ ] of all Latino and African-American borrowers have lost their home to foreclosure or are seriously delinquent, compared to just under 12 percent for white borrowers.”
© 2011 Center for American Progress Action Fund (emphasis in original)
http://thinkprogress.org/economy/2011/12/01/379332/former-banker-subprime-pushed/ [with comments]
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CRL: Good-credit minorities received 3 times more subprime loans than whites
by JON PRIOR
Thursday, November 17th, 2011, 12:54 pm
Blacks and Hispanics with credit scores higher than 660 received subprime and option adjustable-rate mortgages three times as often as white borrowers in similar financial standing between 2004 and 2008, according to a new study from the Center for Responsible Lending.
CRL studied the loan quality, borrower characteristics and performance of 27 million mortgages made over that five-year period. Lenders foreclosed on 6.4% of those loans with another 8.3% at "immediate, serious risk" as of February, researchers said.
The study showed foreclosures on 12.8% of loans with a hybrid or option-ARM feature — defined as those that reset within five years, negative amortization or had interest-only payments — compared to 3.3% of standard or fixed-rate loans.
Lenders targeted these products to minority communities, according to the research. Roughly 25% of all black and Hispanic borrowers who took out a loan between 2004 and 2008 lost their home to foreclosure, compared to 12% of white borrowers.
The disparity exists even in the higher-income brackets.
Roughly 10% of blacks and 15% of Hispanics in higher-income brackets went through foreclosure, compared to 4.6% of whites who earned the same amount.
At the Wolters Kluwer CRA & Fair Lending colloquium in Baltimore earlier this month, mortgage bankers, regulators and other panelists defended the Community Reinvestment Act and expressed frustration with those who claim it was at the heart of the financial crisis. The act was passed in the 1970s to reduce redlining and meet the credit needs of all neighborhoods, particularly low- and moderate-income communities.
"We are having to fight the great lie put out there that the CRA caused this crisis," said Judith Kennedy, president and CEO of the National Association of Affordable Housing Lenders.
Many claim the CRA forced lenders to write loans to borrowers who couldn't afford them. The CRL research and recent investigations [ http://www.housingwire.com/2011/08/17/conn-ag-strikes-deal-with-wells-fargo-over-pick-a-payment-mortgages ] show that lenders were pushing these risky products onto borrowers who otherwise could have qualified for more standard loans.
Still, more whites went through foreclosure than minorities on a cumulative basis. According to the study, 1.5 million mortgages written to white borrowers between 2004 and 2008 foreclosed, compared to just more than 500,000 Hispanics and roughly 300,000 blacks.
"The findings presented in this report suggest that we are not even halfway through the foreclosure crisis, as millions of additional families are still at risk of losing their home. Meanwhile, Americans of every demographic group — all incomes, races and ethnicities — have been affected," researchers said.
*
Related Stories
Wealth gap widens between white and minority households
http://www.housingwire.com/2011/07/26/wealth-gap-widens-between-white-and-minority-households
TARP Recipients Sold Higher Cost Mortgages to Minorities, Says CAP
http://www.housingwire.com/2009/09/15/tarp-recipients-sold-higher-cost-mortgages-to-minorities-says-cap
Former Employees Allege Reverse Redlining at Wells Fargo
http://www.housingwire.com/2010/01/04/former-employees-allege-reverse-redlining-at-wells-fargo
Hispanic households grow, accounting for more than half of new homeowners
http://www.housingwire.com/2011/11/28/hispanic-households-grow-accounting-for-more-than-half-of-new-homeowners
Crisis cut US minority mortgage access: study
http://www.housingwire.com/2010/05/13/crisis-cut-us-minority-mortgage-access-study
*
Copyright 2011 HousingWire
http://www.housingwire.com/2011/11/17/crl-good-credit-minorities-received-3-times-more-subprime-loans-than-whites
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Minority borrowers more likely to face foreclosure in U.S.
November 18, 2011 01:45PM
Borrowers from racial minorities accounted for a large portion of the U.S. population whose homes fell into foreclosure between 2004 and 2008, according to a report by the Center for Responsible Lending cited by the Daily. Approximately 6.4 percent of mortgages taken out in that four-year period have fallen into foreclosure, and another 8.3 percent of the mortgages taken out during that period are on the brink of foreclosure.
African-Americans and Latinos [ http://therealdeal.com/newyork/articles/minority-report-lenders-disproportionately-rejecting-non-white-refinancing-hopefuls ] were more likely to be sold risky loans between 2004 and 2008, the Daily said, making them more inclined to default. Even minority borrowers with great credit scores were more likely to pay higher rates than white borrowers.
Minorities typically had less money for down payments, said Richard Green, director of the University of Southern California Lusk Center for Real Estate, and were more likely to be laid off during the downturn.
"You put all that together and it's a pretty bad brew," Green said. "I would be stunned if it weren't the case that this exacerbated separations in wealth levels."
© 2011 The Real Deal
http://therealdeal.com/newyork/articles/minority-borrowers-more-likely-to-face-foreclosure-in-u-s-according-to-center-for-responsible-lending [no comments]
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Pushed to the brink
3.6 million more homeowners close to foreclosure, new report finds
By Kyle Stock Friday, November 18, 2011
The pain from the housing bust is far from over, with millions more people on the verge of losing their homes, a new report finds.
Among mortgages taken out between 2004 and 2008, some 2.7 million, or 6.4 percent, have fallen into foreclosure and another 3.6 million, or 8.3 percent, are on the brink, according to a report released yesterday by the Center for Responsible Lending, a nonprofit consumer watchdog.
Carolina Reid, co-author of the report, said foreclosures for that group of homeowners would double in coming years. “Honestly, that’s a conservative estimate,” she said.
The subprime mortgage tremors could widen some of the country’s socioeconomic fissures. African-American and Latino borrowers between 2004 and 2008 were much more likely to be sold risky loans and have since been much more likely to default, according to the study. Even minority borrowers with impeccable credit scores were at least three times more likely to pay higher rates than white borrowers with similar ratings on fiscal responsibility.
Not surprisingly, those higher rates have buried many borrowers. Roughly one quarter of Hispanic and African-American borrowers have lost their homes or are seriously delinquent, compared with about 12 percent of non-Hispanic whites, according to the study.
Richard Green, director of the University of Southern California Lusk Center for Real Estate, said minority borrowers typically had less wealth for down payments. He also noted that they bore a greater share of the layoffs and were slammed by slowdowns in the construction industry.
“You put all that together and it’s a pretty bad brew,” Green said. “I would be stunned if it weren’t the case that this exacerbated separations in wealth levels.”
Reid noted that neighborhoods with a high proportion of dormant properties are likely to degrade further as the foreclosures drag down the value of nearby homes.
However, affluent areas were not untouched. About 11 percent of homes bought in high-income neighborhoods between 2004 and 2008 were foreclosed on or were about to be. And 10.9 million U.S. homes remain underwater, according to an October report from the Treasury Department.
Meanwhile, a rash of federal programs designed to keep remiss mortgage holders in their homes has been disappointing.
Banks have offered better payment terms on at least 5.3 million mortgages since April 2009, but many borrowers are failing to cover even the lowered bills, according to the October report from the Treasury Department.
“They have been nearly useless thus far,” Green said. “In some of the really bad markets, if there isn’t some principal write-down, we’re deluding ourselves.”
© 2011 The Daily Holdings, Inc.
http://www.thedaily.com/page/2011/11/18/111811-biz-foreclosure-1-2/
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Foreclosure Crisis Is Far From Over, Report Finds
11/17/11
Five years in, the nation is less than halfway through its foreclosure crisis, the nonpartisan Center for Responsible Lending [ http://responsiblelending.org/ ] warned in a report released Thursday.
[...]
http://www.huffingtonpost.com/2011/11/17/foreclosure-crisis-center-for-responsible-lending_n_1099120.html [with comments]
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Center for Responsible Lending
Research & Analysis
• Facing the Foreclosure Crisis: Four Urgent Needs to Address Now.
November 29, 2011
http://www.responsiblelending.org/mortgage-lending/policy-legislation/regulators/facing-the-foreclosure-crisis.html
• Disparities in Mortgage Lending and Foreclosures: Maps and Data
November 17, 2011
http://www.responsiblelending.org/mortgage-lending/research-analysis/disparities-in-mortgage-lending-and-foreclosures-maps-data.html
• Lost Ground, 2011: Disparities in Mortgage Lending and Foreclosures
November 17, 2011
http://www.responsiblelending.org/mortgage-lending/research-analysis/lost-ground-2011.html
• The Future of Homeownership
November 1, 2011
http://www.responsiblelending.org/mortgage-lending/policy-legislation/the-future-of-homeownership.html
• Coalition Urges Strong Servicing Settlement that Holds Banks Accountable
August 24, 2011
http://www.responsiblelending.org/mortgage-lending/policy-legislation/regulators/coalition-urges-strong.html
http://responsiblelending.org/
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By NICHOLAS D. KRISTOF
Published: November 30, 2011
If you want to understand why the Occupy movement has found such traction, it helps to listen to a former banker like James Theckston. He fully acknowledges that he and other bankers are mostly responsible for the country’s housing mess.
As a regional vice president for Chase Home Finance in southern Florida, Theckston shoveled money at home borrowers. In 2007, his team wrote $2 billion in mortgages, he says. Sometimes those were “no documentation” mortgages.
“On the application, you don’t put down a job; you don’t show income; you don’t show assets,” he said. “But you still got a nod.”
“If you had some old bag lady walking down the street and she had a decent credit score, she got a loan,” he added.
Theckston says that borrowers made harebrained decisions and exaggerated their resources but that bankers were far more culpable — and that all this was driven by pressure from the top.
“You’ve got somebody making $20,000 buying a $500,000 home, thinking that she’d flip it,” he said. “That was crazy, but the banks put programs together to make those kinds of loans.”
Especially when mortgages were securitized and sold off to investors, he said, senior bankers turned a blind eye to shortcuts.
“The bigwigs of the corporations knew this, but they figured we’re going to make billions out of it, so who cares? The government is going to bail us out. And the problem loans will be out of here, maybe even overseas.”
One memory particularly troubles Theckston. He says that some account executives earned a commission seven times higher from subprime loans, rather than prime mortgages. So they looked for less savvy borrowers — those with less education, without previous mortgage experience, or without fluent English — and nudged them toward subprime loans.
These less savvy borrowers were disproportionately blacks and Latinos, he said, and they ended up paying a higher rate so that they were more likely to lose their homes. Senior executives seemed aware of this racial mismatch, he recalled, and frantically tried to cover it up.
Theckston, who has a shelf full of awards that he won from Chase, such as “sales manager of the year,” showed me his 2006 performance review. It indicates that 60 percent of his evaluation depended on him increasing high-risk loans.
In late 2008, when the mortgage market collapsed, Theckston and most of his colleagues were laid off. He says he bears no animus toward Chase, but he does think it is profoundly unfair that troubled banks have been rescued while troubled homeowners have been evicted.
When I called JPMorgan Chase for its side of the story, it didn’t deny the accounts of manic mortgage-writing. Its spokesmen acknowledge that banks had made huge mistakes and noted that Chase no longer writes subprime or no-document mortgages. It also said that it has offered homeowners four times as many mortgage modifications as homes it has foreclosed on.
Still, 28 percent of all American mortgages are “underwater,” according to Zillow [ http://www.zillow.com/blog/2011-11-07/home-values-flat-in-third-quarter-on-slow-road-to-housing-market-bottom/ ], a real estate Web site. That means that more is owed than the home is worth, and the figure is up from 23 percent a year ago. That overhang stifles the economy, for it’s difficult to nurture a broad recovery unless real estate and construction revive.
All this came into sharper focus this week as Bloomberg Markets magazine published [ http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html ] a terrific exposé based on lending records it pried out of the Federal Reserve in a lawsuit. It turns out that the Fed provided an astonishing sum to keep banks afloat — $7.8 trillion, equivalent to more than $25,000 per American.
The article estimated that banks earned up to $13 billion in profits by relending that money to businesses and consumers at higher rates.
The Federal Reserve action isn’t a scandal, and arguably it’s a triumph [ http://blogs.reuters.com/felix-salmon/2011/11/28/chart-of-the-day-morgan-stanley-bailout-edition/ ]. The Fed did everything imaginable to avert a financial catastrophe — and succeeded. The money was repaid.
Yet what is scandalous is the basic unfairness of what has transpired. The federal government rescued highly paid bankers from their reckless decisions. It protected bank shareholders and creditors. But it mostly turned a cold shoulder to some of the most vulnerable and least sophisticated people in America. Last year alone, banks seized [ http://www.bloomberg.com/news/2011-01-13/u-s-foreclosure-filings-may-jump-20-this-year-as-crisis-peaks.html ] more than one million homes.
Sure, some programs exist to help borrowers in trouble, but not nearly enough. We still haven’t taken such basic steps as allowing bankruptcy judges to modify the terms of a mortgage on a primary home. Legislation to address that has gotten nowhere [ http://www.politifact.com/truth-o-meter/promises/obameter/promise/313/allow-bankruptcy-judges-to-modify-terms-of-a-home-/ ].
My daughter and I are reading Steinbeck’s “Grapes of Wrath” aloud to each other, and those Depression-era injustices seem so familiar today. That’s why the Occupy movement resonates so deeply: When the federal government goes all-out to rescue errant bankers, and stiffs homeowners, that’s not just bad economics. It’s also wrong.
© 2011 The New York Times Company
http://www.nytimes.com/2011/12/01/opinion/kristof-a-banker-speaks-with-regret.html [with comments]
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Former Chase Banker Admits His Bank Pushed Minorities Into Subprime Mortgage Loans
By Pat Garofalo on Dec 1, 2011 at 9:20 am
One of the most pernicious practices in which the nation’ biggest banks engaged during the lead up to the financial crisis was pushing minority borrowers into subprime loans, even when many of them qualified for prime loans. Wells Fargo had perhaps the most horrifying practices in this department, calling the subprime loans that they pushed in poor, black neighborhoods “ghetto loans [ http://thinkprogress.org/economy/2009/06/08/172810/wells-fargo-subprime-bank/ ].”
This rampant predatory lending helped inflate the housing bubble; a Center for American Progress investigation actually found huge racial disparities [ http://thinkprogress.org/economy/2009/09/15/172933/racial-disparities-tarp-banks/ ] in lending at the big banks that wound up getting bailed out, with minority borrowers far more likely [ http://www.americanprogress.org/issues/2009/09/pdf/tarp_report.pdf ] to receive high-priced loans.
One former banker for Chase — James Theckston — told the New York Times’ Nick Kristof that not only did his bank push minority borrowers into higher-priced loans, but senior executives then tried to cover up the racial disparity [ http://www.nytimes.com/2011/12/01/opinion/kristof-a-banker-speaks-with-regret.html (above)] in their banks’ lending:
One memory particularly troubles Theckston. He says that some account executives earned a commission seven times higher from subprime loans, rather than prime mortgages. So they looked for less savvy borrowers — those with less education, without previous mortgage experience, or without fluent English — and nudged them toward subprime loans.
These less savvy borrowers were disproportionately blacks and Latinos, he said, and they ended up paying a higher rate so that they were more likely to lose their homes. Senior executives seemed aware of this racial mismatch, he recalled, and frantically tried to cover it up.
“The bigwigs of the corporations knew this [id.], but they figured we’re going to make billions out of it, so who cares? The government is going to bail us out. And the problem loans will be out of here, maybe even overseas,” Theckston explained.
In 2006, Chase made high-price loans to 16.4 percent of white borrowers, while nearly half of black borrowers [ http://www.americanprogress.org/issues/2009/09/pdf/tarp_report.pdf ] and more than one-third of Hispanic borrowers received high-price loans. These disparities help explain why, according to a new report from the Center on Responsible Lending, Latinos and blacks are twice as likely [ http://thinkprogress.org/economy/2011/11/18/372517/latinos-african-americans-housing-crisis/ ] to have been impacted by the housing crisis as whites. In fact, “approximately one quarter [ http://thinkprogress.org/economy/2011/11/18/372517/latinos-african-americans-housing-crisis/ ] of all Latino and African-American borrowers have lost their home to foreclosure or are seriously delinquent, compared to just under 12 percent for white borrowers.”
© 2011 Center for American Progress Action Fund (emphasis in original)
http://thinkprogress.org/economy/2011/12/01/379332/former-banker-subprime-pushed/ [with comments]
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CRL: Good-credit minorities received 3 times more subprime loans than whites
by JON PRIOR
Thursday, November 17th, 2011, 12:54 pm
Blacks and Hispanics with credit scores higher than 660 received subprime and option adjustable-rate mortgages three times as often as white borrowers in similar financial standing between 2004 and 2008, according to a new study from the Center for Responsible Lending.
CRL studied the loan quality, borrower characteristics and performance of 27 million mortgages made over that five-year period. Lenders foreclosed on 6.4% of those loans with another 8.3% at "immediate, serious risk" as of February, researchers said.
The study showed foreclosures on 12.8% of loans with a hybrid or option-ARM feature — defined as those that reset within five years, negative amortization or had interest-only payments — compared to 3.3% of standard or fixed-rate loans.
Lenders targeted these products to minority communities, according to the research. Roughly 25% of all black and Hispanic borrowers who took out a loan between 2004 and 2008 lost their home to foreclosure, compared to 12% of white borrowers.
The disparity exists even in the higher-income brackets.
Roughly 10% of blacks and 15% of Hispanics in higher-income brackets went through foreclosure, compared to 4.6% of whites who earned the same amount.
At the Wolters Kluwer CRA & Fair Lending colloquium in Baltimore earlier this month, mortgage bankers, regulators and other panelists defended the Community Reinvestment Act and expressed frustration with those who claim it was at the heart of the financial crisis. The act was passed in the 1970s to reduce redlining and meet the credit needs of all neighborhoods, particularly low- and moderate-income communities.
"We are having to fight the great lie put out there that the CRA caused this crisis," said Judith Kennedy, president and CEO of the National Association of Affordable Housing Lenders.
Many claim the CRA forced lenders to write loans to borrowers who couldn't afford them. The CRL research and recent investigations [ http://www.housingwire.com/2011/08/17/conn-ag-strikes-deal-with-wells-fargo-over-pick-a-payment-mortgages ] show that lenders were pushing these risky products onto borrowers who otherwise could have qualified for more standard loans.
Still, more whites went through foreclosure than minorities on a cumulative basis. According to the study, 1.5 million mortgages written to white borrowers between 2004 and 2008 foreclosed, compared to just more than 500,000 Hispanics and roughly 300,000 blacks.
"The findings presented in this report suggest that we are not even halfway through the foreclosure crisis, as millions of additional families are still at risk of losing their home. Meanwhile, Americans of every demographic group — all incomes, races and ethnicities — have been affected," researchers said.
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Related Stories
Wealth gap widens between white and minority households
http://www.housingwire.com/2011/07/26/wealth-gap-widens-between-white-and-minority-households
TARP Recipients Sold Higher Cost Mortgages to Minorities, Says CAP
http://www.housingwire.com/2009/09/15/tarp-recipients-sold-higher-cost-mortgages-to-minorities-says-cap
Former Employees Allege Reverse Redlining at Wells Fargo
http://www.housingwire.com/2010/01/04/former-employees-allege-reverse-redlining-at-wells-fargo
Hispanic households grow, accounting for more than half of new homeowners
http://www.housingwire.com/2011/11/28/hispanic-households-grow-accounting-for-more-than-half-of-new-homeowners
Crisis cut US minority mortgage access: study
http://www.housingwire.com/2010/05/13/crisis-cut-us-minority-mortgage-access-study
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Copyright 2011 HousingWire
http://www.housingwire.com/2011/11/17/crl-good-credit-minorities-received-3-times-more-subprime-loans-than-whites
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Minority borrowers more likely to face foreclosure in U.S.
November 18, 2011 01:45PM
Borrowers from racial minorities accounted for a large portion of the U.S. population whose homes fell into foreclosure between 2004 and 2008, according to a report by the Center for Responsible Lending cited by the Daily. Approximately 6.4 percent of mortgages taken out in that four-year period have fallen into foreclosure, and another 8.3 percent of the mortgages taken out during that period are on the brink of foreclosure.
African-Americans and Latinos [ http://therealdeal.com/newyork/articles/minority-report-lenders-disproportionately-rejecting-non-white-refinancing-hopefuls ] were more likely to be sold risky loans between 2004 and 2008, the Daily said, making them more inclined to default. Even minority borrowers with great credit scores were more likely to pay higher rates than white borrowers.
Minorities typically had less money for down payments, said Richard Green, director of the University of Southern California Lusk Center for Real Estate, and were more likely to be laid off during the downturn.
"You put all that together and it's a pretty bad brew," Green said. "I would be stunned if it weren't the case that this exacerbated separations in wealth levels."
© 2011 The Real Deal
http://therealdeal.com/newyork/articles/minority-borrowers-more-likely-to-face-foreclosure-in-u-s-according-to-center-for-responsible-lending [no comments]
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Pushed to the brink
3.6 million more homeowners close to foreclosure, new report finds
By Kyle Stock Friday, November 18, 2011
The pain from the housing bust is far from over, with millions more people on the verge of losing their homes, a new report finds.
Among mortgages taken out between 2004 and 2008, some 2.7 million, or 6.4 percent, have fallen into foreclosure and another 3.6 million, or 8.3 percent, are on the brink, according to a report released yesterday by the Center for Responsible Lending, a nonprofit consumer watchdog.
Carolina Reid, co-author of the report, said foreclosures for that group of homeowners would double in coming years. “Honestly, that’s a conservative estimate,” she said.
The subprime mortgage tremors could widen some of the country’s socioeconomic fissures. African-American and Latino borrowers between 2004 and 2008 were much more likely to be sold risky loans and have since been much more likely to default, according to the study. Even minority borrowers with impeccable credit scores were at least three times more likely to pay higher rates than white borrowers with similar ratings on fiscal responsibility.
Not surprisingly, those higher rates have buried many borrowers. Roughly one quarter of Hispanic and African-American borrowers have lost their homes or are seriously delinquent, compared with about 12 percent of non-Hispanic whites, according to the study.
Richard Green, director of the University of Southern California Lusk Center for Real Estate, said minority borrowers typically had less wealth for down payments. He also noted that they bore a greater share of the layoffs and were slammed by slowdowns in the construction industry.
“You put all that together and it’s a pretty bad brew,” Green said. “I would be stunned if it weren’t the case that this exacerbated separations in wealth levels.”
Reid noted that neighborhoods with a high proportion of dormant properties are likely to degrade further as the foreclosures drag down the value of nearby homes.
However, affluent areas were not untouched. About 11 percent of homes bought in high-income neighborhoods between 2004 and 2008 were foreclosed on or were about to be. And 10.9 million U.S. homes remain underwater, according to an October report from the Treasury Department.
Meanwhile, a rash of federal programs designed to keep remiss mortgage holders in their homes has been disappointing.
Banks have offered better payment terms on at least 5.3 million mortgages since April 2009, but many borrowers are failing to cover even the lowered bills, according to the October report from the Treasury Department.
“They have been nearly useless thus far,” Green said. “In some of the really bad markets, if there isn’t some principal write-down, we’re deluding ourselves.”
© 2011 The Daily Holdings, Inc.
http://www.thedaily.com/page/2011/11/18/111811-biz-foreclosure-1-2/
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Foreclosure Crisis Is Far From Over, Report Finds
11/17/11
Five years in, the nation is less than halfway through its foreclosure crisis, the nonpartisan Center for Responsible Lending [ http://responsiblelending.org/ ] warned in a report released Thursday.
[...]
http://www.huffingtonpost.com/2011/11/17/foreclosure-crisis-center-for-responsible-lending_n_1099120.html [with comments]
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Center for Responsible Lending
Research & Analysis
• Facing the Foreclosure Crisis: Four Urgent Needs to Address Now.
November 29, 2011
http://www.responsiblelending.org/mortgage-lending/policy-legislation/regulators/facing-the-foreclosure-crisis.html
• Disparities in Mortgage Lending and Foreclosures: Maps and Data
November 17, 2011
http://www.responsiblelending.org/mortgage-lending/research-analysis/disparities-in-mortgage-lending-and-foreclosures-maps-data.html
• Lost Ground, 2011: Disparities in Mortgage Lending and Foreclosures
November 17, 2011
http://www.responsiblelending.org/mortgage-lending/research-analysis/lost-ground-2011.html
• The Future of Homeownership
November 1, 2011
http://www.responsiblelending.org/mortgage-lending/policy-legislation/the-future-of-homeownership.html
• Coalition Urges Strong Servicing Settlement that Holds Banks Accountable
August 24, 2011
http://www.responsiblelending.org/mortgage-lending/policy-legislation/regulators/coalition-urges-strong.html
http://responsiblelending.org/
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