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Sunday, January 10, 2010

For your tool-chest: blaming the mortgage loan crisis on the undeserving poor is ridiculous

The mortgage loan crisis was caused by giving out mortgages to all those poor people – the Community Reinvestment Act (CRA) – who didn't deserve it, right? After all, even the radical left wing newspaper The New Ylork Times gave a platform to such an argument not long after Federal Reserve Governor Randall Kroszner destroyed it.

Let's give a probably-undeserved benefit of the doubt that this right-wing truism is not laced with a heavy dose of racism. Even with that concession, it is a total crock. Via an excellent website on economic policy matters, The Economics of Contempt, here are the facts Kroszner put forth that NYT's op-ed contributor did not bother to dig out.

“Only 6 percent of all the higher-priced loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas. ... This result undermines the assertion by critics of the potential for a substantial role for the CRA in the subprime crisis.”

“. . . . loans originated under the NWA program [a portfolio of CRA-covered loans] had a lower delinquency rate than subprime loans.

". . . . the loans in the NWA affordable lending portfolio had a lower rate of foreclosure than prime loans.”

“[F]oreclosure filings have increased at a faster pace in middle- or higher-income areas than in lower-income areas that are the focus of the CRA.”

Hmm, only 6% of higher-cost loans, lower delinquency rate than sub-prime loans, lower foreclosure rate than prime loans, fewer foreclosures than in middle income or higher income areas. Yes, it's simply false. Be ready to tick those facts off when one of your gullible acquaintances mouths this absurd Republican talking-point.


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