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Response to Igel (Reply #42)

Tue Aug 13, 2013, 10:52 PM

77. Funny, someone should mention ...

 

this "blame the poor" explanation, as it was all the rage of Cavato and all the business networks ... one of the Feds every mentioned it in its analysis of what went wrong.

I am in the process of reading a paper presenting an alternate view ... one informed by me professional observations working in the Fair Housing field, followed by my involvement in prosecuting Mortgage Discrimination Claims. Based on that experience, the "Blame the Poor" narrative never seemed to ring true to me ... So I began researching the matter.

My preliminary findings are (long story short): Yes, the CRA and "Onwership Society" of Clinton and Bush played a part; but there was another, frequently (completely) ignored factor ... that of real estate "investors.

The CRA/Ownership Society programming was designed to get the "redlined" groups into home ownership; but right around 2001, we saw lenders designing the ."exotic loan products" that my research suggests was at the root of the mortgage melt down.

These exotic loans were not designed to get poor folks into homes; but rather, were designed to allow middle-incomed/upper-incomed to purchase houses to "flip" 6-12 months after purchase. When flipping failed because housing appreciation stalled, these "liar loans" began financing rental property (because the houses wouldn't sell), but this was far less attractive than flipping, because it actually involved work. These investments were fine until there was a critical mass of non-qualified (financially or a real estate professionals) investors that suddenly found they couldn't turn a profit, they simply walked away from their mortgages.

The numbers are there for anyone willing to look ... low and moderate income/CRA borrower default rate was stable (about 6%) until well after the 2007 "beginning of the melt-down." I suspect (and this is the next area of research) that the up-tick in low and moderate income/CRA borrower default rate was the result of the banks aggressive collection efforts when it became clear the investors weren't going to pay.

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LineLineLineLineLineReply Funny, someone should mention ...
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