Join the Meeting Place for Moms!
Talk to other moms, share advice, and have fun!

(minimum 6 characters)

5 Bumps

Mandate, fail, repeat?



In what could be a repeat of the easy-lending cycle that led to the housing crisis, the Justice Department has asked several banks to relax their mortgage underwriting standards and approve loans for minorities with poor credit as part of a new crackdown on alleged discrimination, according to court documents reviewed by IBD.

Prosecutions have already generated more than $20 million in loan set-asides and other subsidies from banks that have settled out of court rather than battle the federal government and risk being branded racist. An additional 60 banks are under investigation, a DOJ spokeswoman says.

No Job, No Problem

Settlements include setting aside prime-rate mortgages for low-income blacks and Hispanics with blemished credit and even counting "public assistance" as valid income in mortgage applications.

In several cases, the government has ordered bank defendants to post in all their branches and marketing materials a notice informing minority customers that they cannot be turned down for credit because they receive public aid, such as unemployment benefits, welfare payments or food stamps.

Among other remedies: favorable interest rates and down-payment assistance for minority borrowers with weak credit.

For example, the government has ordered Midwest BankCentre to set aside almost $1 million in "special financing" for residents living in predominantly black areas of St. Louis. The program includes originating conventional home loans at fixed prime rates for African-American borrowers "who would ordinarily not qualify for such rates for reasons including the lack of required credit quality, income or down payment."

The same federal order, signed last month, praises Midwest for adopting "less stringent underwriting criteria" while under investigation.

In the case against Citizens Bank of Detroit, settled in May, the U.S. decrees that "the bank may choose to apply more flexible underwriting standards in connection with the programs under this order."

Such efforts risk recreating the government-imposed lax underwriting that led to the housing boom and bust, critics fear.

"It's absolutely outrageous after what we've just gone through," said former Rep. Ernest Istook, a Heritage Foundation fellow. "How can someone both be financially stable enough to merit a mortgage at the same time they're on public assistance? By definition, you don't have the kind of employment that can support such a loan."

Justice March

Justice spokeswoman Xochitl Hinojosa said the anti-discrimination notice "does not compel the banks to make loans to people who do not qualify." She said such measures are "essential to remedy the harmful effects of the banks' conduct."

http://www.investors.com/NewsAndAnalysis/Article/577794/201107081851/DOJ-Begins-Bank-Witch-Hunt.htm

Answer Question
 
Carpy

Asked by Carpy at 5:19 PM on Jul. 11, 2011 in Politics & Current Events

Level 39 (114,053 Credits)
Answers (15)
  • Seriously??? Isn't that how they collapsed the housing market the first time? And I remember reading that those sub-prime mortgages that were bailed out because they were in foreclosure promptly went into foreclosure again.

    I'm beginning to think that since they haven't been able to redistribute wealth they way they want to "level the playing field" they are instead leveling the playing field by devaluing everyone's house so that no one has any equity left.
    DSamuels

    Answer by DSamuels at 5:25 PM on Jul. 11, 2011

  • Some never learn regardless of race standard lending practices should apply.
    Anonymous

    Answer by Anonymous at 5:29 PM on Jul. 11, 2011

  • Wow.  Maybe they should just give all the low income people a home that has been foreclosed on, that will teach people some responsibility! 


    Lets just keep giving and giving and digging ourselves into a hole to avoid someone thinking they are being discriminated against.... because whats really important is not hurting any one's feelings, its ok that we have no money and no one will have value in their home anymore as long as nobody's feelings got hurt.

    amazinggrace83

    Answer by amazinggrace83 at 5:31 PM on Jul. 11, 2011

  • banging head into wall

    QuinnMae

    Answer by QuinnMae at 5:42 PM on Jul. 11, 2011

  • OMG. That is stupid. That will be a disaster. They still need to use the "Debt to earnings" ratio as standards, doesn't matter who the person is.
    minnesotanice

    Answer by minnesotanice at 6:04 PM on Jul. 11, 2011

  • Out of the frying pan and straight into the fire, their agenda just keeps on, keeping on...
    agentwanda

    Answer by agentwanda at 6:08 PM on Jul. 11, 2011

  • WOW. I'm actually a little speechless on this one. I can usually dig up at least a sarcastic comment but this is just unbelievable.
    Trinity001

    Answer by Trinity001 at 7:11 PM on Jul. 11, 2011

  • This is what we get when we have agenda driven idiots lacking common sense in DC.
    Carpy

    Comment by Carpy (original poster) at 7:12 PM on Jul. 11, 2011

  • This is what we get when we have agenda driven idiots lacking common sense in DC.

    The trouble is, they are not idiots...they are doing this intentionally to keep the chaos in play. They are gambling that the electorate will be too afraid to switch horses in mid-stream with an economy teetering on the brink of collapse.
    annabarred

    Answer by annabarred at 7:24 PM on Jul. 11, 2011

  • That sounds like a great idea.
    UpSheRises

    Answer by UpSheRises at 8:11 PM on Jul. 11, 2011

Join CafeMom now to contribute your answer and become part of our community. It's free and takes just a minute.