2009-01-05wsj.com

But a close look at the network of organizations pushing for increased mortgage lending reveals a more complicated picture. Subprime-industry executives were advisers to the Hogar housing initiative, and bankrolled more than $2 million of its research. Lawmakers and advocacy groups pushed hard for the easy credit that fueled the subprime phenomenon among Latinos. Members of the Congressional Hispanic Caucus, who received donations from the lending industry and saw their constituents moving into new homes, pushed for eased lending standards, which led to problems.

And don't forget Pay Option loans (Loan Center of California, we're looking at you, if you're still out there...)

This part is particularly funny:

Nahrep's 2006 convention in Las Vegas was called "Place Your Bets on Home Ownership." Countrywide Chairman Angelo Mozilo spoke, as did former Housing and Urban Development Secretary Henry Cisneros, a force in Latino housing developments in the West.

Towards the peak, there was little attempt to camoflauge the speculative nature that homeownership had taken on. After all, a loan with little or no money down is just a highly leveraged loan, which implies a "hedge-fund-like" speculation on market conditions -- regardless of what the borrowers intended.

Also notably, this piece mentions seller-funded downpayment assistance lending (SFDPA -- see our statement here.). Baca co-sponsors HR 6694 to bring it back. The article mentions some of the cozy relationships between Baca and SFDPA ringleader Ameridream:

In October 2008, a charitable foundation set up by Mr. Baca received $25,000 from AmeriDream Inc., a nonprofit housing company and Hogar sponsor. Mr. Baca has long backed AmeriDream's controversial seller-financed down-payment assistance program. AmeriDream provided down-payment money to buyers, a cost that was covered by home builders in the form of donations to the nonprofit.

New housing legislation last fall outlawed the program. Mr. Baca is cosponsoring a bill that would allow AmeriDream and similar nonprofits to resume arranging seller-financed down-payment assistance to low-income Federal Housing Administration borrowers.

Such seller-financed loans comprise one-third of the loans backed by the FHA, and have defaulted at nearly triple the rate of other FHA-insured loans, according to agency spokesman William Glavin.

Update: Housingwire also has some commentary related to this topic.

The number of abuses that took place in originating loans in this market sector is wide-ranging, and clearly involves lax lending standards and aggressive lending policies. But many of those now fingering blame upon lenders shouldn’t allow community groups to whitewash history; after all, many such groups had a direct role in enabling — and, in some cases, profiting from the push into subprime mortgages.



Comments:

Mr. X at 00:54 2009-01-06 said:
But but..they all had high credit scores, and Latinos like Asians don't default on their liabilities unlike all the rest of the white folk. ;) Permalink
michaelblomquist at 04:07 2009-01-06 said:
Here is a pending case between a lender (PHH/Plaintiff) and a mortgage broker. The broker is being sued to repurchase 26 fraudulent loans. Every single one of the loans was for a hispanic borrower.

(pgs 24-26)

http://michaelblomquist.com/CaseFogel/507CV00369JF/1Complaint.pdf Almost every file had missing or non-existent socials.

Surely, these were not the only fraudulent loans that PHH was purchasing from the broker, but once PHH had to buy them back from the investors it became a problem.

What a mess!

The broker should be locked up and PHH execs disgorged of all bonuses received since 2004. Did PHH receive any TARP money? Permalink

taps65 at 02:42 2009-01-07 said:
Antelope Valley, Ca. Our area garnered all the top spots in zip codes hardest hit by foreclosures. Here is another example of how this is carried out. I wish every Hispanic borrower knew this for reference. Permalink

add a comment | go to forum thread