Minority Mortgages Brought Financial Market to Its Knees

By Jeff Davis – EURO

The financial commentators and analysts of Wall Street aren’t unaware of what has caused the present economic crisis. The crash started with the collapse of the subprime mortgage market, which is effectively a code word for Blacks and non-White Hispanics. They’re just scared to say it out loud. Fox News recently ran a story more or less admitting this was the case, a long article that spent paragraph after paragraph dancing around the truth.

Subprime loans originally were higher interest loans for people with poor credit. Gradually government pressure was applied to increase the number of minority loans for the sake of political correctness. To make this happen, the quality controls on subprime loans were thrown out one by one. Eventually, people with bad credit histories and who couldn’t make down payments and who verbally stated what their income was (without any proof) were allowed to get home loans. For the first few years these insane procedures went unnoticed because housing prices kept going up. What made it all come crashing down, was the current housing slump. As soon as housing prices dropped millions of mostly Black and Latino subprime lenders walked away from their mortgages. They had nothing to lose because they had made no down payment. They weren’t worried about destroying their credit rating because they already had bad credit ratings.

A recent Fox News article reports “Obviously some sectors of the economy have been doing well, while others, such as housing, have been in a real mess. With the government takeover of Freddie Mac and Fannie Mae as well as other bankruptcies in the financial sector, there are a lot of questions. The strangest fact is that the housing sector is having such problems when the economy otherwise has been doing well. Why have there been so many defaults when the economy has not been in a recession? Defaults have been at historically high rates despite reasonable economic growth and a relatively low unemployment rate of 6.1 percent. Some, such as James H. Carr, the CEO of the National Community Reinvestment Coalition, argue that the high default rates are a result of ‘unfair and deceptive practices, steering customers to high price loans… Surprisingly, research done by economists a decade ago in 1998, particularly by Professors Ted Day and Stan Liebowitz at the University of Texas at Dallas, predicted the current problems and tried to warn people of a different cause. Starting during the early 1990s, mortgage-underwriting standards have been consistently weakened…”

Do you see which way the wind is beginning to blow in this first paragraph?) (more…)