It is now racist to use credit scores
Without the US government pushing subprime loans for home purchasing which by definition are a risky product, there could be no start to the subprime housing bubble which eventually burst. Countless government agencies have been involved in the mortgage business for decades such as Fannie Mae and Freddie Mac and laws such as the Community Reinvestment Act over time held banks accountable by forcing them to lower their lending standards so as not to charged with unfair lending practices.
In other words, if the government over decades and through both Republican and Democratic administrations did not get deeply involved with ensuring people with poor credit were getting loans, we would not have seen a sub-prime housing bubble or a bursting thereof.
This doesn't mean home prices wouldn't have corrected - we have seen many corrections over the years but this one would have been much milder if the government wasn't standing over the banks ready to call them racists and charging them with crimes for not lending to minorities who tend to have lower credit scores.
John Carney has an incredibly well-researched article on the topic and it should be read by anyone who does not want to see a repeat of the housing collapse.
Rather than looking at the real roots of the problem, the government has done an amazing job blaming Wall Street and just about anyone else they can find for the problem. Sure Wall Street played a role but the major distortion in the market came from the government and it amplified the pain of the crash because it amplified the rise in prices.
The facts are crucial to understand as the AP just reported that HUD is investigating mortgage lenders who require better credit scores than the government requires to get a mortgage. The issue they have is that minorities have lower credit scores and are subsequently not able to purchase as many homes.
There is no charge of discrimination based on race mind you but just on credit score.
The policies have "the effect of discriminating against African–Americans, Latinos, and residents of African–American and Latino neighborhoods across the nation," the National Community Reinvestment Coalition wrote in the complaints that it announced Wednesday.
So there you have it... It is now racist to use credit scores. Perhaps it always has been - but we are just now paying attention.
Perhaps the most important takeaway here is the lesson the government learned from the recent housing crisis was not that lending standards were too lax.
And as we continue teaching the lesson that that the people who make all the wrong decisions will be rewarded and those who play by the rules will be punished, we will see our society crumble as resentment grows.
So let me make a prediction here... This sort of reckless and unfounded claim of racism and bias used to coerce lenders to loan to consumers with insufficient credit scores will cause more problems with housing in the future. And when it does, the icing on this prediction cake is that someplace, somewhere, we will get to hear the collective and melodic voices of Reid, Obama and Pelosi explaining to us it was the predatory lenders and evil banks who got us into this mess.
It really is enough to make one want to pound their head against a wall.
-- Rich Tehrani
Without the US government pushing subprime loans for home purchasing which by definition are a risky product, there could be no start to the subprime housing bubble which eventually burst. Countless government agencies have been involved in the mortgage business for decades such as Fannie Mae and Freddie Mac and laws such as the Community Reinvestment Act over time held banks accountable by forcing them to lower their lending standards so as not to charged with unfair lending practices.
In other words, if the government over decades and through both Republican and Democratic administrations did not get deeply involved with ensuring people with poor credit were getting loans, we would not have seen a sub-prime housing bubble or a bursting thereof.
This doesn't mean home prices wouldn't have corrected - we have seen many corrections over the years but this one would have been much milder if the government wasn't standing over the banks ready to call them racists and charging them with crimes for not lending to minorities who tend to have lower credit scores.
John Carney has an incredibly well-researched article on the topic and it should be read by anyone who does not want to see a repeat of the housing collapse.
Rather than looking at the real roots of the problem, the government has done an amazing job blaming Wall Street and just about anyone else they can find for the problem. Sure Wall Street played a role but the major distortion in the market came from the government and it amplified the pain of the crash because it amplified the rise in prices.
The facts are crucial to understand as the AP just reported that HUD is investigating mortgage lenders who require better credit scores than the government requires to get a mortgage. The issue they have is that minorities have lower credit scores and are subsequently not able to purchase as many homes.
There is no charge of discrimination based on race mind you but just on credit score.
The policies have "the effect of discriminating against African–Americans, Latinos, and residents of African–American and Latino neighborhoods across the nation," the National Community Reinvestment Coalition wrote in the complaints that it announced Wednesday.
So there you have it... It is now racist to use credit scores. Perhaps it always has been - but we are just now paying attention.
Perhaps the most important takeaway here is the lesson the government learned from the recent housing crisis was not that lending standards were too lax.
And as we continue teaching the lesson that that the people who make all the wrong decisions will be rewarded and those who play by the rules will be punished, we will see our society crumble as resentment grows.
So let me make a prediction here... This sort of reckless and unfounded claim of racism and bias used to coerce lenders to loan to consumers with insufficient credit scores will cause more problems with housing in the future. And when it does, the icing on this prediction cake is that someplace, somewhere, we will get to hear the collective and melodic voices of Reid, Obama and Pelosi explaining to us it was the predatory lenders and evil banks who got us into this mess.
It really is enough to make one want to pound their head against a wall.
-- Rich Tehrani
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