It failed the first time. It will fail this time as well. This is what caused the housing crisis in the first place: forcing banks to give loans to unqualified individuals…and sometimes these decisions were based on skin colorinstead of credit worthiness.
Racial Politics: With homeownership plunging among minorities, Democrats and community organizers are pushing banks to revert to the easy-credit requirements that got us into the crisis.
In the latest move, the NAACP announced Wednesday it was forming a partnership with Bank of America to “advance fair-lending practices” that will help provide credit to “disenfranchised communities that were ravaged by the economic crisis.”
Black unemployment is at Depression-era highs.
Among other things, BofA has agreed to monitor lending policies for their “racial impact” and allow borrowers “the option of selecting a loan that is appropriate for his circumstances.”
BofA, which just shelled out $8.5 billion to settle subprime claims, also pledged to “eliminate policies or practices that encourage biased and exploitive behaviors toward borrowers” and to “work with borrowers to prevent foreclosures.”
Sure, if FHA can do it, why can’t big banks? The Obama administration last week announced the agency will let delinquent mortgage-holders slide a full year on payments before starting foreclosure proceedings.
When will those of us who pay our mortgage on time receive special treatment?
The Justice Department, meanwhile, has been pressuring lenders to lower their credit standards in order to secure more mortgages for minorities.
This is the same shake-down Jimmy Carter’s Community Reinvestment Act (CRA) did. The results were banks were forced to make loans to unqualified applicants or face government fines and the housing crisis we currently face is at Depression-era levels.
As we reported last week, Attorney General Eric Holder has sued several banks based on groundless charges of discrimination. They’re now under court order to change their lending policies to qualify more credit-poor borrowers.
They’ve even been ordered to scrub clean the bad credit histories of minority borrowers who’ve defaulted on mortgages, thereby allowing them to requalify for loans.
When these politically mandated loans go into default, which they likely will, the housing market will take another blow. Home values will drop further still. And taxpayers will get struck with the tab when banks buckle from carrying even more bad debt.