Sheila Bair: Stop Blaming the Community Reinvestment Act

MY OINION OF MS.BAIRS IDEAS ABOUT HOME PFREVENTION OF HOME FORCLOSURES MAKE MORE SENSE THAN EVER CONSIDERING ALL THE MISDIRECTED BILLIONS BEGED FROM THE CONGRESS AND NOWLATER PLANS

TO "PLAY" WITH A PARTIAL OWNERSHIP OF BANKS I.E. CITYBANK. tHE SHOULD HAVE BEEN MADE TREASURY SECRETARY AND WE WOULD BE PM A LESS MUDDLED PATH!

JOAN HEALY R.N. of CA 7:40PM February 28, 2009

Shiela Bair seems to a mostly lone voice trying to help troubled homeowners stay in their houses. I am one of those homeowners.

Something in the neighborhood of ONE TRILLION DOLLARS has been committed to the saving of an insurance company (AIG) that insures the packaged and repackaged loans. This insurance is to the benefit of large banks that fought to have what they would do in the financial world increased, and the regulations governing them decreased. The obvious reason is so they could make more money. Now we (taxpayers) are on the hook for bailing them out, not only through AIB, but TARP.

When the refailure numbers are sighted I think a few things need to be considered. One- some of the "modified loans" took the took the missed payments, penalties, etc and rolled them back into the loans without any substantial change in the terms. In other words, the monthly payments actually went UP. These "new" loans were destined to fail. I also think some of the modified loans were technically called in default when the homeowners were able to sell their houuse within 6 months, even though the loan was probably paid off.

But even with some modified loans defaulting, does that mean the idea is bad? Keeping houses out of the distressed market is good, in my opion. What good does it do to have many people lose the only wealth they have, and not even have a place to live? What good does it do to have additional empty houses for sale?

Not all troubled loans are underwater. Not all troubled loans are from people borrowing 100%, or more, of the value of the house at the time of the loan. My loan to value (LTV) was about 70% in Sept., 07. Today my house has probably lost about 12 to 15% in value from that time. But there are no buyers at any price just now. The real problem for me is work has dried up. Yes, I took a loan that had payments that stressed my budget, and the worst has happened--loss of work. So which is a better thing: lose my house and my remaining equity and have one more foreclosure in the area, or use some Federal Tax money (of which I did contribute some, you know) to modify my loan into something I can afford while work is reduced. By the way, I do not take unemployment benefits.

Last thing, if folks are willing to stay in houses that are underwater (owe more than the current value) and make payments on a modified loan, while the economy improves and the value of the house slowly regains lost value, how is that a bad thing?

Go Sheila Bair

Les Schaub of CO 7:14PM December 18, 2008

They just fade away. Or rather, they just sink into the collective unconscious of ditoheads everywhere. Limbaugh and Hannity don't mention the CRA by name anymore, they don’t have to. Their brain dead minions have already been programmed. Financial crisis = irresponsible blacks.

You got ta love that GOP magic.

justanotherdave of PA 3:19PM December 17, 2008

Ashley, I guess you have a need to keep the right wing blinders on because this article clearly shows that CRA activity was only even possible – meaning a CRA lending entity - in 1/4 of the problem loans. Do you suppose that every one of those loans was a sub-prime one?

The author of the article that you site has also written this in the Rupert Murdock owned, right wing leaning, NY Post (dated Feb 5th, 2008):

"..At the crisis' core are loans that were made with virtually nonexistent underwriting standards - no verification of income or assets; little consideration of the applicant's ability to make payments; no down payment.

Most people instinctively understand that such loans are likely to be unsound"....snip

Mr. Stan Liebowitz hardly seems like a neutral party regarding this issue.

Try this: http://tinyurl.com/3sjcfj

Robert Gordon

..But CRA has always had critics, and they now suggest that the law went too far in encouraging banks to lend in struggling communities. Rhetoric aside, the argument turns on a simple question: In the current mortgage meltdown, did lenders approve bad loans to comply with CRA, or to make money?

The evidence strongly suggests the latter. First, consider timing. CRA was enacted in 1977. The sub-prime lending at the heart of the current crisis exploded a full quarter century later. In the mid-1990s, new CRA regulations and a wave of mergers led to a flurry of CRA activity, but, as noted by the New America Foundation's Ellen Seidman (and by Harvard's Joint Center), that activity "largely came to an end by 2001." In late 2004, the Bush administration announced plans to sharply weaken CRA regulations, pulling small and mid-sized banks out from under the law's toughest standards. Yet sub-prime lending continued, and even intensified -- at the very time when activity under CRA had slowed and the law had weakened.

Second, it is hard to blame CRA for the mortgage meltdown when CRA doesn't even apply to most of the loans that are behind it. As the University of Michigan's Michael Barr points out, half of sub-prime loans came from those mortgage companies beyond the reach of CRA. A further 25 to 30 percent came from bank subsidiaries and affiliates, which come under CRA to varying degrees but not as fully as banks themselves. (With affiliates, banks can choose whether to count the loans.) Perhaps one in four sub-prime loans were made by the institutions fully governed by CRA.

Most important, the lenders subject to CRA have engaged in less, not more, of the most dangerous lending. Janet Yellen, president of the San Francisco Federal Reserve, offers the killer statistic: Independent mortgage companies, which are not covered by CRA, made high-priced loans at more than twice the rate of the banks and thrifts.

ShorelineCT of CT 2:25PM December 17, 2008