The subprime = CRA big lie

[LuckyTheDog]

I have seen a lot on the Web that tries to blame the credit crisis on the Community Reinvestment Act, which is total nonsense, but something we need to confront.

Basically, the commentators are trying to com-mingle the idea of CRA-related activity and subprime mortgage lending – as if they were the same thing. The problem, or course, is that a lot of subprime lending (including some of the worst) was done by mortgage brokers who are not even covered by the CRA.

Also: A lot of banks that have high CRA ratings were never in the subprime business. If CRA = subprime and subprime = CRA, then that could not possibly be true.

We really, really need to debunk this big lie before it gets any bigger.

[Jersey Devil]

1. It's all those shiftless, lazy, deadbeat minorities that caused the mortgage crisis

Pretty sick crap but this kind of scapegoating sells with those who are receptive to racism.

[orwell]

2. Subprime lending foreclosures...

...are running around 500,000 or 1/2 of 1% of all mortgages.

This is hardly the root cause that the Con RW has been touting.

But it makes for a good storyline to stoke race and class war partisans.

[peacetalksforall]

3. It's all part of the destroy anything FDR or community. Especially if it

helps minorities or any of the needy - take your pick.

[sinkingfeeling]

4. Here's the independent study that shows CRA banks were not a part of irresponsible lending.

http://www.traigerlaw.com/publications/traiger_hinckley_llp_cra_foreclosure_study_1-7-08.pdf

[LuckyTheDog]

6. That's great!

Thanks!

[Kitty Herder]

5. Thanks for this post. This needs more attention.

I'm really fucking tired of the scapegoating of minorities and the poor.

[LuckyTheDog]

7. No shit

This lie is REALLY picking up steam. Glenn Beck has picked it up. And of course, it's all over Fox News.

[yodoobo]

8. The knowledgable folks that I've talked to about this

Folks that in the banking industry tell me most of the problems are with the "McMansion" crowd, and far less so in the poor neighborhoods.

The homes in poor neighborhoods are pretty much worth what they were a few years ago. Even if those loans are non-performing, the bank can recover most of its losses via foreclosure. (still tragic, but its not killing the banks)

Its the monster 5,000 sq ft houses that had rapid price appreciation...and then depreciation. As a percentage, banks are recovering far far less here.