News ATF disrupts skinhead plot to assassinate Obama

[Astronuc]

Yesterday, I listened to a bank president being interviewed on NPR. He talked about how his bank didn't get into subprime loans, and in fact, rejected a number of applications during the review process. In one case, one of their agents questioned a couple who claimed they made $150K income. They mentioned that they earned about $90K. Asked why they had put $150 K, the couple informed the reviewer that they were told to put that in order to qualify for the loan!

Texas Banks Draw On Lessons From The S&L Crisis
http://www.npr.org/templates/story/story.php?storyId=96260663

"We'd ask the people, 'Do you make $150,000 a year?' And they'd say, 'Naw, I make $90,000 a year,' " Hickman recounts. "'Well, why does it say 150?' 'Well, the guy representing XYZ Mortgage Co. told me that's what I had to have on the application to qualify for the loan.' Well, we'd look at them and say, 'Sorry, we can't do that.' "

 

[mheslep]

Please provide the evidence to support this claim, which I've heard frequently recently.

The CRA mandated that companies not discriminate. I don't see where it forced companies to make fraudulent mortgages/loans, or loans to 'unqualified buyers/lenders'. The objective was to stop discrimination. How the companies put that into practice was up to them.

Here's the law:

SEC. 802. (a) The Congress finds that--
(1) regulated financial institutions are required by law to demonstrate that their deposit facilities serve the convenience and needs of the communities in which they are chartered to do business;
(2) the convenience and needs of communities include the need for credit services as well as deposit services; and
(3) regulated financial institutions have continuing and affirmative obligation to help meet the credit needs of the local communities in which they are chartered.
(b) It is the purpose of this title to require each appropriate Federal financial supervisory agency to use its authority when examining financial institutions, to encourage such institutions to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such institutions.
...
SEC. 807. WRITTEN EVALUATIONS.
...
(2) ASSIGNED RATING.--The institution's rating referred to in paragraph (1)(C) shall be 1 of the following:
(A) "Outstanding record of meeting community credit needs."
(B) "Satisfactory record of meeting community credit needs."
(C) "Needs to improve record of meeting community credit needs."
(D) "Substantial noncompliance in meeting community credit needs."

http://www.fdic.gov/regulations/laws/rules/6500-2515.html
It appears to me that the lendors are totally at the mercy of a given regulator to decide whether or not a lendor "serves the convenience and needs of the communities."

 

[mheslep]

...Let's say that a modest home sold for $100,000 at the standard (around here, anyway) realtor's commission of 7%. The agency gets half of the commission ($3500), the listing agent gets a quarter ($1750), and the selling agent gets a quarter ($1750). You've got agents helping buyers decide how much of a mortgage they can afford, and advising them about filling out credit applications... "The way housing prices are soaring, you'll be able to re-finance before the adjustable rate ever kicks in." "Just put down any income level that you think will allow you to make the payments. You'll be making more money in the future, anyway. They'll never check."

There is plenty of blame to go around, though the bubble probably couldn't have gotten so badly out-of-control if the speculators were not allowed to bundle the debt and resell it. Years ago, if you borrowed money from your bank to buy a house, they held the mortgage and they were on the hook if you defaulted. For this reason, they were quite diligent in their evaluation of your finances, the value of the home in question, the trends in the local real-estate market, etc, etc. That connection between borrower and lender is lost today, and lenders make deals, collect their closing costs and points, and pass on the note to a holding company who bundles and resells it.

Yes, exactly. I'll go further and say that the situation described in your first paragraph, someone attempting to bending the rules or otherwise acting irresponsibly, takes place not only in mortgages, but at the margins of every commercial endeavour of society. Usually that kind of behaviour stays at the margins because there are consequences, either legal or financial. The difference this time is your 2nd paragraph, the wholesale bundling of the risk by the bullet proof (for awhile) GSEs so that there were no consequences to the actions described in the first.

 

[Astronuc]

It appears to me that the lendors are totally at the mercy of a given regulator to decide whether or not a lendor "serves the convenience and needs of the communities."

All it means is that a bank provides banking services in the community in which they have an office, i.e. they can't take deposits in an area, and then refuse to provide banking services in that area. They are not forced to give mortgages at all, if the bank doesn't provide mortgages, and they are certainly not obliged or forced to give sub-prime mortgages. The point of the CRA was to prohibit discrimination, which was a big problem still in the early 70's.

 

[mheslep]

All it means is that a bank provides banking services in the community in which they have an office, i.e. they can't take deposits in an area, and then refuse to provide banking services in that area. They are not forced to give mortgages at all, if the bank doesn't provide mortgages, and they are certainly not obliged or forced to give sub-prime mortgages. ...

How do you know this given the letter of the law? All that is required is for a regulator to assess that a bank doing business in the area, in his/her mostly subjective opinion, is failing to meet the 'communities needs'. The bank might very well find that it continues to be cited for 'failing to meet needs' until it either a) gives up and stops doing business in the area, or b) agrees to make bad credit loans. I don't have evidence that this has been the case, but as I read the law it logically enables such actions.

 

[NeoDevin]

I don't have evidence that this has been the case

Then why are you claiming it is the cause of the current crisis?

 

[mheslep]

Then why are you claiming it is the cause of the current crisis?

Why are you attributing to me things I never said?

 

[NeoDevin]

Why are you attributing to me things I never said?

Sorry, I was thinking one of Benzoate's posts was yours. I retract my question.

 

[LowlyPion]

This thread has been sent so far afield that it should be shot as some rogue thread or renamed or something. I went back looking for where it was that anyone actually discussed the original post and I really think that after post 8 or so some variant strain of Forum Alzheimers or Chat Site Dementia has set in.

ATF - the government agency that in Palin's America is named for a shopping list?

Now that was funny and that's not even from this thread.

 

[Evo]

This thread has been sent so far afield that it should be shot as some rogue thread or renamed or something. I went back looking for where it was that anyone actually discussed the original post and I really think that after post 8 or so some variant strain of Forum Alzheimers or Chat Site Dementia has set in.

ATF - the government agency that in Palin's America is named for a shopping list?

Now that was funny and that's not even from this thread.

Yep, thread closed.