Tuesday, January 06, 2009

Roots of the Subprime Mess

The Wall Street Journal, which has been the enthusiastic cheerleader for the immigrant invasion (and particularly the Latino invasion) that has swamped the U.S. over the past several decades, now admits that those very immigrants and the pressure applied by immigrant-friendly politicians to advance their interests, might just possibly have contributed to the current financial meltdown.

For years, immigrants to the U.S. have viewed buying a home as the ultimate benchmark of success. Between 2000 and 2007, as the Hispanic population increased, Hispanic homeownership grew even faster, increasing by 47%, to 6.1 million from 4.1 million, according to the U.S. Census Bureau. Over that same period, homeownership nationally grew by 8%. In 2005 alone, mortgages to Hispanics jumped by 29%, with expensive nonprime mortgages soaring 169%, according to the Federal Financial Institutions Examination Council.

An examination of that borrowing spree by The Wall Street Journal reveals that it wasn't simply the mortgage market at work. It was fueled by a campaign by low-income housing groups, Hispanic lawmakers, a congressional Hispanic housing initiative, mortgage lenders and brokers, who all were pushing to increase homeownership among Latinos.

The network included Mr. Baca, chairman of the Congressional Hispanic Caucus, whose district is 58% Hispanic and ranks No. 5 among all congressional districts in percentage of home loans not tailored for prime borrowers. The caucus launched a housing initiative called Hogar -- Spanish for home -- to work with industry and community groups to increase mortgage lending to Latinos. Mortgage companies provided funding to that group, and to the National Association of Hispanic Real Estate Professionals, which fielded an army to make the loans.

In prior decades, commercial lenders understood that some groups of people were simply not good credit risks and had devised strategies to prevent lending money to people who, statistically, would not be able to pay back the loans. Fortunately, liberal politicians and pro-immigration advocates put a stop to all that evil prudence.

In years past, minority borrowers seeking loans were often stopped cold by a practice called red-lining, in which lenders were reluctant to lend within particular geographical areas, often, it appeared, on the basis of race. But combined efforts to open the mortgage pipeline to Latinos proved successful.

"We saw what we refer to in the advocacy community as reverse red-lining," says Aracely Panameno, director of Latino affairs for the Center for Responsible Lending, an advocacy group. "Lenders were seeking out those borrowers and charging them through the roof," she says.

Ms. Panameno says that during the height of the housing boom she sought to present the Hispanic Caucus with data showing how many Latinos were being steered into risky and expensive subprime loans. Hogar declined her requests, she says.

When the national housing market began unraveling, so did the fortunes of many of the new homeowners. National foreclosure statistics don't break out data by ethnicity or race. But there is evidence that Hispanic borrowers have been hard hit. In part, that's because of large Hispanic populations in areas where the housing bubble was pronounced, such as Southern California, Nevada and Florida.

In U.S. counties where Hispanics account for more than 25% of the population, banks have taken back 6.7 homes per 1,000 residents since Jan. 1, 2006, compared with 4.6 per 1,000 residents in all counties, according to a Journal analysis of U.S. Census and RealtyTrac data.

Of course, the people who engineered the crisis by forcing banks to lend money to risky borrowers are now blaming everyone but themselves.

Hispanic lawmakers and community groups have blamed subprime lenders, who specialize in making loans to customers with spotty credit histories. They complain that even solid borrowers were steered to those loans, which carry higher interest rates.

In a written statement, Mr. Baca blamed the foreclosure crisis among Hispanics on borrowers' lack of "financial literacy" and on "lenders and brokers eager to make a bigger profit." He declined to be interviewed for this story.

The Journal's reporters won't let him off that easy.

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.

The Journal also notes that Hogar, created by the Congressional Hispanic Caucus, had direct ties to many of the main players in the subprime fiasco, including Countrywide and Washington Mutual.

Hogar worked with Freddie Mac on a two-year examination of Latino homeownership in 63 congressional districts. The study found Hispanic ownership on the rise thanks to "new flexible mortgage loan products" that the industry was adopting. It recommended further easing of down-payment and underwriting standards.

Representatives for Hogar declined repeated requests for comment.

The National Association of Hispanic Real Estate Professionals, one of Hogar's sponsors, advised the group, shared research data and built a large membership to market loans to Latinos. By 2005, its ranks had grown to 16,000 agents and mortgage brokers.

The association, called Nahrep, received funding from some of the same players that funded Hogar. Some 22 corporate sponsors, including Countrywide and Washington Mutual, together paid the association $2 million a year to attend conferences and forums where lenders could pitch their loan products to loan brokers.

While home prices were rising, the lending risk seemed minimal, says Tim Sandos, Narhep's president. "We would say, 'Is he breathing? OK, we'll give him a mortgage,' " he recalls.

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.

Naturally, the politicians' advocacy did not go unrewarded...

At the height of the subprime lending boom, in 2005, banking and finance companies gave at least $2.3 million in campaign contributions to members of the Hispanic Caucus, according to data from the Center for Responsive Politics.


6 Comments:

At 8:16 AM , Anonymous Anonymous said...

Hi !.
You re, I guess , probably very interested to know how one can collect a huge starting capital .
There is no initial capital needed You may commense to receive yields with as small sum of money as 20-100 dollars.

AimTrust is what you need
AimTrust incorporates an offshore structure with advanced asset management technologies in production and delivery of pipes for oil and gas.

Its head office is in Panama with structures around the world.
Do you want to become really rich in short time?
That`s your choice That`s what you wish in the long run!

I`m happy and lucky, I began to take up income with the help of this company,
and I invite you to do the same. It`s all about how to choose a correct companion utilizes your funds in a right way - that`s it!.
I take now up to 2G every day, and what I started with was a funny sum of 500 bucks!
It`s easy to get involved , just click this link http://xaruharyf.1accesshost.com/luranem.html
and lucky you`re! Let`s take this option together to become rich

 
At 6:43 AM , Anonymous Anonymous said...

Good day !.
You may , probably very interested to know how one can collect a huge starting capital .
There is no initial capital needed You may start earning with as small sum of money as 20-100 dollars.

AimTrust is what you need
The firm represents an offshore structure with advanced asset management technologies in production and delivery of pipes for oil and gas.

It is based in Panama with offices everywhere: In USA, Canada, Cyprus.
Do you want to become really rich in short time?
That`s your chance That`s what you really need!

I`m happy and lucky, I started to take up real money with the help of this company,
and I invite you to do the same. If it gets down to choose a correct companion utilizes your money in a right way - that`s the AimTrust!.
I earn US$2,000 per day, and my first deposit was 1 grand only!
It`s easy to get involved , just click this link http://noxatyre.s-enterprize.com/elonoga.html
and lucky you`re! Let`s take our chance together to get rid of nastiness of the life

 
At 6:13 PM , Anonymous Anonymous said...

Hi there!
I would like to burn a theme at here. There is such a nicey, called HYIP, or High Yield Investment Program. It reminds of financial piramyde, but in rare cases one may happen to meet a company that really pays up to 2% daily not on invested money, but from real profits.

For several years , I make money with the help of these programs.
I don't have problems with money now, but there are heights that must be conquered . I get now up to 2G a day , and my first investment was 500 dollars only.
Right now, I managed to catch a guaranteed variant to make a sharp rise . Turn to my web site to get additional info.

[url=http://theblogmoney.com] Online investment blog[/url]

 
At 8:41 PM , Anonymous Anonymous said...

Good day, sun shines!
There have been times of hardship when I felt unhappy missing knowledge about opportunities of getting high yields on investments. I was a dump and downright pessimistic person.
I have never imagined that there weren't any need in large initial investment.
Nowadays, I feel good, I started take up real income.
It gets down to choose a correct partner who utilizes your funds in a right way - that is incorporate it in real business, and shares the income with me.

You may ask, if there are such firms? I have to answer the truth, YES, there are. Please get to know about one of them:
http://theblogmoney.com

 
At 5:13 PM , Anonymous Anonymous said...

Good day, sun shines!
There have were times of hardship when I felt unhappy missing knowledge about opportunities of getting high yields on investments. I was a dump and downright pessimistic person.
I have never imagined that there weren't any need in large initial investment.
Nowadays, I feel good, I begin to get real income.
It's all about how to select a proper partner who utilizes your funds in a right way - that is incorporate it in real deals, parts and divides the profit with me.

You can ask, if there are such firms? I have to answer the truth, YES, there are. Please get to know about one of them:
http://theinvestblog.com [url=http://theinvestblog.com]Online Investment Blog[/url]

 
At 8:51 PM , Anonymous Anonymous said...

Hi everybody!

Sure, you’ve heard about me, because my fame is running in front of me,
my name is Peter.
Generally I’m a venturesome analyst. recently I take a great interest in online-casino and poker.
Not long time ago I started my own blog, where I describe my virtual adventures.
Probably, it will be interesting for you to find out my particular opinion on famous gambling projects.
Please visit my blog. http://allbestcasino.com I’ll be interested on your opinion..

 

Post a Comment

Subscribe to Post Comments [Atom]

<< Home