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Originally Posted by mary
The Community Reinvestment Act, passed in 1977, requires banks to lend in the low-income neighborhoods where they take deposits. Just the idea that a lending crisis created from 2004 to 2007 was caused by a 1977 law is silly. But it’s even more ridiculous when you consider that most subprime loans were made by firms that aren’t subject to the CRA. University of Michigan law professor Michael Barr testified back in February before the House Committee on Financial Services that 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations. As former Fed Governor Ned Gramlich said in an August, 2007, speech shortly before he passed away: “In the subprime market where we badly need supervision, a majority of loans are made with very little supervision. It is like a city with a murder law, but no cops on the beat.”
http://www.businessweek.com/investin...ity_reinv.html |
That's one thing that kills me. Mortgage brokers are the biggest reason for the subprime thing. Those guys are crooks. No-doc/low-doc/stated income loans were common options when I was mortgage shopping. They all offered some variation. And the underwriters for their companies aren't going to care when they KNOW the GSE's are just going to turn around and buy these whether they're strong, documented credits or not. That whole industry needs oversight.