rec.crafts.metalworking - 26 new messages in 2 topics - digest
rec.crafts.metalworking
http://groups.google.com/group/rec.crafts.metalworking?hl=en
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Today's topics:
* The rich pay less taxes - 25 messages, 1 author
http://groups.google.com/group/rec.crafts.metalworking/t/24b6cdc2cfb01942?hl=en
* English wheel, and other metalworking questions - 1 messages, 1 author
http://groups.google.com/group/rec.crafts.metalworking/t/21791cc0fef8a197?hl=en
==============================================================================
TOPIC: The rich pay less taxes
http://groups.google.com/group/rec.crafts.metalworking/t/24b6cdc2cfb01942?hl=en
==============================================================================
== 1 of 25 ==
Date: Mon, Jan 6 2014 9:54 am
From: prime cut
On 1/6/2014 8:59 AM, jim wrote:
> And yet you can't seem to identify what
http://reason.com/blog/2012/12/21/study-says-community-reinvestment-act-in
Study Says Community Reinvestment Act Induced Banks To Take Bad Risks
J.D. Tuccille|Dec. 21, 2012 6:37 pm
'twas Wall Street greed what done it, some folks say, when it comes to
explaining the spectacular housing meltdown of recent years, which had
its roots in a great many astonishingly risky loans. Other folks suggest
that the federal government just may have played something of a role in
inducing, even strong-arming, banks to take risks they otherwise would
have avoided. Specifically, the Community Reinvestment Act and related
policy pressures are pointed to as culprits, part of a government effort
to extend home-ownership in lower-income neighborhoods. Now comes a new
study from the National Bureau of Economic Research that says, quite
bluntly. that the CRA played a major role.
In the academic world, mealy-mouthed delivery of even powerful
conclusions is the norm, so it's refreshing to see authors Sumit
Agarwal, Efraim Benmelech, Nittai Bergman, Amit Seru answer the title's
question, "Did the Community Reinvestment Act (CRA) Lead to Risky
Lending?," with the clear, "Yes, it did. ... We find that adherence to
the act led to riskier lending by banks." The full abstract reads:
Yes, it did. We use exogenous variation in banks� incentives to conform
to the standards of the Community Reinvestment Act (CRA) around
regulatory exam dates to trace out the effect of the CRA on lending
activity. Our empirical strategy compares lending behavior of banks
undergoing CRA exams within a given census tract in a given month to the
behavior of banks operating in the same census tract-month that do not
face these exams. We find that adherence to the act led to riskier
lending by banks: in the six quarters surrounding the CRA exams lending
is elevated on average by about 5 percent every quarter and loans in
these quarters default by about 15 percent more often. These patterns
are accentuated in CRA-eligible census tracts and are concentrated among
large banks. The effects are strongest during the time period when the
market for private securitization was booming.
Investors Business Daily does a very nice job of summarizing the nature
of the pressure brought on lenders (that's IBD's most excellent graphic,
above):
"We want your CRA loans because they help us meet our housing goals,"
Fannie Vice Chair Jamie Gorelick beseeched lenders gathered at a banking
conference in 2000, just after HUD hiked the mortgage giant's affordable
housing quotas to 50% and pressed it to buy more CRA-eligible loans to
help meet those new targets. "We will buy them from your portfolios or
package them into securities."
She described "CRA-friendly products" as mortgages with less than "3%
down" and "flexible underwriting."
From 2001-2007, Fannie and Freddie bought roughly half of all CRA home
loans, most carrying subprime features.
Note that the authors of the study caution that their work here may
actually understate the impact of the CRA. How? Because the study
assumes that the major impact of CRA took place when banks were
undergoing examination regarding their compliance with CRA goals. If
banks found it difficult to shift gears in preparation for such exams,
they may have altered their overall behavior to satisfy politicians and
regulators. Or, as the authors put it in their conclusion, "If
adjustment costs in lending behavior are large and banks can�t easily
tilt their loan portfolio toward greater CRA compliance, the full impact
of the CRA is potentially much greater than that estimated by the change
in lending behavior around CRA exams."
The housing meltdown and the Great Recession. Something else for which
you can thank the feds.
== 2 of 25 ==
Date: Mon, Jan 6 2014 9:54 am
From: prime cut
On 1/6/2014 8:55 AM, jim wrote:
> Copying and pasting a 20 page document
http://reason.com/blog/2012/12/21/study-says-community-reinvestment-act-in
Study Says Community Reinvestment Act Induced Banks To Take Bad Risks
J.D. Tuccille|Dec. 21, 2012 6:37 pm
'twas Wall Street greed what done it, some folks say, when it comes to
explaining the spectacular housing meltdown of recent years, which had
its roots in a great many astonishingly risky loans. Other folks suggest
that the federal government just may have played something of a role in
inducing, even strong-arming, banks to take risks they otherwise would
have avoided. Specifically, the Community Reinvestment Act and related
policy pressures are pointed to as culprits, part of a government effort
to extend home-ownership in lower-income neighborhoods. Now comes a new
study from the National Bureau of Economic Research that says, quite
bluntly. that the CRA played a major role.
In the academic world, mealy-mouthed delivery of even powerful
conclusions is the norm, so it's refreshing to see authors Sumit
Agarwal, Efraim Benmelech, Nittai Bergman, Amit Seru answer the title's
question, "Did the Community Reinvestment Act (CRA) Lead to Risky
Lending?," with the clear, "Yes, it did. ... We find that adherence to
the act led to riskier lending by banks." The full abstract reads:
Yes, it did. We use exogenous variation in banks� incentives to conform
to the standards of the Community Reinvestment Act (CRA) around
regulatory exam dates to trace out the effect of the CRA on lending
activity. Our empirical strategy compares lending behavior of banks
undergoing CRA exams within a given census tract in a given month to the
behavior of banks operating in the same census tract-month that do not
face these exams. We find that adherence to the act led to riskier
lending by banks: in the six quarters surrounding the CRA exams lending
is elevated on average by about 5 percent every quarter and loans in
these quarters default by about 15 percent more often. These patterns
are accentuated in CRA-eligible census tracts and are concentrated among
large banks. The effects are strongest during the time period when the
market for private securitization was booming.
Investors Business Daily does a very nice job of summarizing the nature
of the pressure brought on lenders (that's IBD's most excellent graphic,
above):
"We want your CRA loans because they help us meet our housing goals,"
Fannie Vice Chair Jamie Gorelick beseeched lenders gathered at a banking
conference in 2000, just after HUD hiked the mortgage giant's affordable
housing quotas to 50% and pressed it to buy more CRA-eligible loans to
help meet those new targets. "We will buy them from your portfolios or
package them into securities."
She described "CRA-friendly products" as mortgages with less than "3%
down" and "flexible underwriting."
From 2001-2007, Fannie and Freddie bought roughly half of all CRA home
loans, most carrying subprime features.
Note that the authors of the study caution that their work here may
actually understate the impact of the CRA. How? Because the study
assumes that the major impact of CRA took place when banks were
undergoing examination regarding their compliance with CRA goals. If
banks found it difficult to shift gears in preparation for such exams,
they may have altered their overall behavior to satisfy politicians and
regulators. Or, as the authors put it in their conclusion, "If
adjustment costs in lending behavior are large and banks can�t easily
tilt their loan portfolio toward greater CRA compliance, the full impact
of the CRA is potentially much greater than that estimated by the change
in lending behavior around CRA exams."
The housing meltdown and the Great Recession. Something else for which
you can thank the feds.
== 3 of 25 ==
Date: Mon, Jan 6 2014 9:54 am
From: prime cut
On 1/6/2014 8:54 AM, jim wrote:
> The 20 page document doesn't say anything
http://reason.com/blog/2012/12/21/study-says-community-reinvestment-act-in
Study Says Community Reinvestment Act Induced Banks To Take Bad Risks
J.D. Tuccille|Dec. 21, 2012 6:37 pm
'twas Wall Street greed what done it, some folks say, when it comes to
explaining the spectacular housing meltdown of recent years, which had
its roots in a great many astonishingly risky loans. Other folks suggest
that the federal government just may have played something of a role in
inducing, even strong-arming, banks to take risks they otherwise would
have avoided. Specifically, the Community Reinvestment Act and related
policy pressures are pointed to as culprits, part of a government effort
to extend home-ownership in lower-income neighborhoods. Now comes a new
study from the National Bureau of Economic Research that says, quite
bluntly. that the CRA played a major role.
In the academic world, mealy-mouthed delivery of even powerful
conclusions is the norm, so it's refreshing to see authors Sumit
Agarwal, Efraim Benmelech, Nittai Bergman, Amit Seru answer the title's
question, "Did the Community Reinvestment Act (CRA) Lead to Risky
Lending?," with the clear, "Yes, it did. ... We find that adherence to
the act led to riskier lending by banks." The full abstract reads:
Yes, it did. We use exogenous variation in banks� incentives to conform
to the standards of the Community Reinvestment Act (CRA) around
regulatory exam dates to trace out the effect of the CRA on lending
activity. Our empirical strategy compares lending behavior of banks
undergoing CRA exams within a given census tract in a given month to the
behavior of banks operating in the same census tract-month that do not
face these exams. We find that adherence to the act led to riskier
lending by banks: in the six quarters surrounding the CRA exams lending
is elevated on average by about 5 percent every quarter and loans in
these quarters default by about 15 percent more often. These patterns
are accentuated in CRA-eligible census tracts and are concentrated among
large banks. The effects are strongest during the time period when the
market for private securitization was booming.
Investors Business Daily does a very nice job of summarizing the nature
of the pressure brought on lenders (that's IBD's most excellent graphic,
above):
"We want your CRA loans because they help us meet our housing goals,"
Fannie Vice Chair Jamie Gorelick beseeched lenders gathered at a banking
conference in 2000, just after HUD hiked the mortgage giant's affordable
housing quotas to 50% and pressed it to buy more CRA-eligible loans to
help meet those new targets. "We will buy them from your portfolios or
package them into securities."
She described "CRA-friendly products" as mortgages with less than "3%
down" and "flexible underwriting."
From 2001-2007, Fannie and Freddie bought roughly half of all CRA home
loans, most carrying subprime features.
Note that the authors of the study caution that their work here may
actually understate the impact of the CRA. How? Because the study
assumes that the major impact of CRA took place when banks were
undergoing examination regarding their compliance with CRA goals. If
banks found it difficult to shift gears in preparation for such exams,
they may have altered their overall behavior to satisfy politicians and
regulators. Or, as the authors put it in their conclusion, "If
adjustment costs in lending behavior are large and banks can�t easily
tilt their loan portfolio toward greater CRA compliance, the full impact
of the CRA is potentially much greater than that estimated by the change
in lending behavior around CRA exams."
The housing meltdown and the Great Recession. Something else for which
you can thank the feds.
== 4 of 25 ==
Date: Mon, Jan 6 2014 9:54 am
From: prime cut
On 1/6/2014 8:52 AM, jim wrote:
> Countrywide made tons of bad loans for one reason -
http://reason.com/blog/2012/12/21/study-says-community-reinvestment-act-in
Study Says Community Reinvestment Act Induced Banks To Take Bad Risks
J.D. Tuccille|Dec. 21, 2012 6:37 pm
'twas Wall Street greed what done it, some folks say, when it comes to
explaining the spectacular housing meltdown of recent years, which had
its roots in a great many astonishingly risky loans. Other folks suggest
that the federal government just may have played something of a role in
inducing, even strong-arming, banks to take risks they otherwise would
have avoided. Specifically, the Community Reinvestment Act and related
policy pressures are pointed to as culprits, part of a government effort
to extend home-ownership in lower-income neighborhoods. Now comes a new
study from the National Bureau of Economic Research that says, quite
bluntly. that the CRA played a major role.
In the academic world, mealy-mouthed delivery of even powerful
conclusions is the norm, so it's refreshing to see authors Sumit
Agarwal, Efraim Benmelech, Nittai Bergman, Amit Seru answer the title's
question, "Did the Community Reinvestment Act (CRA) Lead to Risky
Lending?," with the clear, "Yes, it did. ... We find that adherence to
the act led to riskier lending by banks." The full abstract reads:
Yes, it did. We use exogenous variation in banks� incentives to conform
to the standards of the Community Reinvestment Act (CRA) around
regulatory exam dates to trace out the effect of the CRA on lending
activity. Our empirical strategy compares lending behavior of banks
undergoing CRA exams within a given census tract in a given month to the
behavior of banks operating in the same census tract-month that do not
face these exams. We find that adherence to the act led to riskier
lending by banks: in the six quarters surrounding the CRA exams lending
is elevated on average by about 5 percent every quarter and loans in
these quarters default by about 15 percent more often. These patterns
are accentuated in CRA-eligible census tracts and are concentrated among
large banks. The effects are strongest during the time period when the
market for private securitization was booming.
Investors Business Daily does a very nice job of summarizing the nature
of the pressure brought on lenders (that's IBD's most excellent graphic,
above):
"We want your CRA loans because they help us meet our housing goals,"
Fannie Vice Chair Jamie Gorelick beseeched lenders gathered at a banking
conference in 2000, just after HUD hiked the mortgage giant's affordable
housing quotas to 50% and pressed it to buy more CRA-eligible loans to
help meet those new targets. "We will buy them from your portfolios or
package them into securities."
She described "CRA-friendly products" as mortgages with less than "3%
down" and "flexible underwriting."
From 2001-2007, Fannie and Freddie bought roughly half of all CRA home
loans, most carrying subprime features.
Note that the authors of the study caution that their work here may
actually understate the impact of the CRA. How? Because the study
assumes that the major impact of CRA took place when banks were
undergoing examination regarding their compliance with CRA goals. If
banks found it difficult to shift gears in preparation for such exams,
they may have altered their overall behavior to satisfy politicians and
regulators. Or, as the authors put it in their conclusion, "If
adjustment costs in lending behavior are large and banks can�t easily
tilt their loan portfolio toward greater CRA compliance, the full impact
of the CRA is potentially much greater than that estimated by the change
in lending behavior around CRA exams."
The housing meltdown and the Great Recession. Something else for which
you can thank the feds.
== 5 of 25 ==
Date: Mon, Jan 6 2014 9:55 am
From: prime cut
On 1/6/2014 8:48 AM, jim wrote:
> Here are some stories based on facts:
http://reason.com/blog/2012/12/21/study-says-community-reinvestment-act-in
Study Says Community Reinvestment Act Induced Banks To Take Bad Risks
J.D. Tuccille|Dec. 21, 2012 6:37 pm
'twas Wall Street greed what done it, some folks say, when it comes to
explaining the spectacular housing meltdown of recent years, which had
its roots in a great many astonishingly risky loans. Other folks suggest
that the federal government just may have played something of a role in
inducing, even strong-arming, banks to take risks they otherwise would
have avoided. Specifically, the Community Reinvestment Act and related
policy pressures are pointed to as culprits, part of a government effort
to extend home-ownership in lower-income neighborhoods. Now comes a new
study from the National Bureau of Economic Research that says, quite
bluntly. that the CRA played a major role.
In the academic world, mealy-mouthed delivery of even powerful
conclusions is the norm, so it's refreshing to see authors Sumit
Agarwal, Efraim Benmelech, Nittai Bergman, Amit Seru answer the title's
question, "Did the Community Reinvestment Act (CRA) Lead to Risky
Lending?," with the clear, "Yes, it did. ... We find that adherence to
the act led to riskier lending by banks." The full abstract reads:
Yes, it did. We use exogenous variation in banks� incentives to conform
to the standards of the Community Reinvestment Act (CRA) around
regulatory exam dates to trace out the effect of the CRA on lending
activity. Our empirical strategy compares lending behavior of banks
undergoing CRA exams within a given census tract in a given month to the
behavior of banks operating in the same census tract-month that do not
face these exams. We find that adherence to the act led to riskier
lending by banks: in the six quarters surrounding the CRA exams lending
is elevated on average by about 5 percent every quarter and loans in
these quarters default by about 15 percent more often. These patterns
are accentuated in CRA-eligible census tracts and are concentrated among
large banks. The effects are strongest during the time period when the
market for private securitization was booming.
Investors Business Daily does a very nice job of summarizing the nature
of the pressure brought on lenders (that's IBD's most excellent graphic,
above):
"We want your CRA loans because they help us meet our housing goals,"
Fannie Vice Chair Jamie Gorelick beseeched lenders gathered at a banking
conference in 2000, just after HUD hiked the mortgage giant's affordable
housing quotas to 50% and pressed it to buy more CRA-eligible loans to
help meet those new targets. "We will buy them from your portfolios or
package them into securities."
She described "CRA-friendly products" as mortgages with less than "3%
down" and "flexible underwriting."
From 2001-2007, Fannie and Freddie bought roughly half of all CRA home
loans, most carrying subprime features.
Note that the authors of the study caution that their work here may
actually understate the impact of the CRA. How? Because the study
assumes that the major impact of CRA took place when banks were
undergoing examination regarding their compliance with CRA goals. If
banks found it difficult to shift gears in preparation for such exams,
they may have altered their overall behavior to satisfy politicians and
regulators. Or, as the authors put it in their conclusion, "If
adjustment costs in lending behavior are large and banks can�t easily
tilt their loan portfolio toward greater CRA compliance, the full impact
of the CRA is potentially much greater than that estimated by the change
in lending behavior around CRA exams."
The housing meltdown and the Great Recession. Something else for which
you can thank the feds.
== 6 of 25 ==
Date: Mon, Jan 6 2014 9:55 am
From: prime cut
On 1/6/2014 8:42 AM, jim wrote:
> You posted 20 pages that say nothing
http://reason.com/blog/2012/12/21/study-says-community-reinvestment-act-in
Study Says Community Reinvestment Act Induced Banks To Take Bad Risks
J.D. Tuccille|Dec. 21, 2012 6:37 pm
'twas Wall Street greed what done it, some folks say, when it comes to
explaining the spectacular housing meltdown of recent years, which had
its roots in a great many astonishingly risky loans. Other folks suggest
that the federal government just may have played something of a role in
inducing, even strong-arming, banks to take risks they otherwise would
have avoided. Specifically, the Community Reinvestment Act and related
policy pressures are pointed to as culprits, part of a government effort
to extend home-ownership in lower-income neighborhoods. Now comes a new
study from the National Bureau of Economic Research that says, quite
bluntly. that the CRA played a major role.
In the academic world, mealy-mouthed delivery of even powerful
conclusions is the norm, so it's refreshing to see authors Sumit
Agarwal, Efraim Benmelech, Nittai Bergman, Amit Seru answer the title's
question, "Did the Community Reinvestment Act (CRA) Lead to Risky
Lending?," with the clear, "Yes, it did. ... We find that adherence to
the act led to riskier lending by banks." The full abstract reads:
Yes, it did. We use exogenous variation in banks� incentives to conform
to the standards of the Community Reinvestment Act (CRA) around
regulatory exam dates to trace out the effect of the CRA on lending
activity. Our empirical strategy compares lending behavior of banks
undergoing CRA exams within a given census tract in a given month to the
behavior of banks operating in the same census tract-month that do not
face these exams. We find that adherence to the act led to riskier
lending by banks: in the six quarters surrounding the CRA exams lending
is elevated on average by about 5 percent every quarter and loans in
these quarters default by about 15 percent more often. These patterns
are accentuated in CRA-eligible census tracts and are concentrated among
large banks. The effects are strongest during the time period when the
market for private securitization was booming.
Investors Business Daily does a very nice job of summarizing the nature
of the pressure brought on lenders (that's IBD's most excellent graphic,
above):
"We want your CRA loans because they help us meet our housing goals,"
Fannie Vice Chair Jamie Gorelick beseeched lenders gathered at a banking
conference in 2000, just after HUD hiked the mortgage giant's affordable
housing quotas to 50% and pressed it to buy more CRA-eligible loans to
help meet those new targets. "We will buy them from your portfolios or
package them into securities."
She described "CRA-friendly products" as mortgages with less than "3%
down" and "flexible underwriting."
From 2001-2007, Fannie and Freddie bought roughly half of all CRA home
loans, most carrying subprime features.
Note that the authors of the study caution that their work here may
actually understate the impact of the CRA. How? Because the study
assumes that the major impact of CRA took place when banks were
undergoing examination regarding their compliance with CRA goals. If
banks found it difficult to shift gears in preparation for such exams,
they may have altered their overall behavior to satisfy politicians and
regulators. Or, as the authors put it in their conclusion, "If
adjustment costs in lending behavior are large and banks can�t easily
tilt their loan portfolio toward greater CRA compliance, the full impact
of the CRA is potentially much greater than that estimated by the change
in lending behavior around CRA exams."
The housing meltdown and the Great Recession. Something else for which
you can thank the feds.
== 7 of 25 ==
Date: Mon, Jan 6 2014 9:55 am
From: prime cut
On 1/6/2014 8:31 AM, jim wrote:
> You just made up another story.
>
> Where is the evidence that banks were extorted to
> make bad loans?
http://reason.com/blog/2012/12/21/study-says-community-reinvestment-act-in
Study Says Community Reinvestment Act Induced Banks To Take Bad Risks
J.D. Tuccille|Dec. 21, 2012 6:37 pm
'twas Wall Street greed what done it, some folks say, when it comes to
explaining the spectacular housing meltdown of recent years, which had
its roots in a great many astonishingly risky loans. Other folks suggest
that the federal government just may have played something of a role in
inducing, even strong-arming, banks to take risks they otherwise would
have avoided. Specifically, the Community Reinvestment Act and related
policy pressures are pointed to as culprits, part of a government effort
to extend home-ownership in lower-income neighborhoods. Now comes a new
study from the National Bureau of Economic Research that says, quite
bluntly. that the CRA played a major role.
In the academic world, mealy-mouthed delivery of even powerful
conclusions is the norm, so it's refreshing to see authors Sumit
Agarwal, Efraim Benmelech, Nittai Bergman, Amit Seru answer the title's
question, "Did the Community Reinvestment Act (CRA) Lead to Risky
Lending?," with the clear, "Yes, it did. ... We find that adherence to
the act led to riskier lending by banks." The full abstract reads:
Yes, it did. We use exogenous variation in banks� incentives to conform
to the standards of the Community Reinvestment Act (CRA) around
regulatory exam dates to trace out the effect of the CRA on lending
activity. Our empirical strategy compares lending behavior of banks
undergoing CRA exams within a given census tract in a given month to the
behavior of banks operating in the same census tract-month that do not
face these exams. We find that adherence to the act led to riskier
lending by banks: in the six quarters surrounding the CRA exams lending
is elevated on average by about 5 percent every quarter and loans in
these quarters default by about 15 percent more often. These patterns
are accentuated in CRA-eligible census tracts and are concentrated among
large banks. The effects are strongest during the time period when the
market for private securitization was booming.
Investors Business Daily does a very nice job of summarizing the nature
of the pressure brought on lenders (that's IBD's most excellent graphic,
above):
"We want your CRA loans because they help us meet our housing goals,"
Fannie Vice Chair Jamie Gorelick beseeched lenders gathered at a banking
conference in 2000, just after HUD hiked the mortgage giant's affordable
housing quotas to 50% and pressed it to buy more CRA-eligible loans to
help meet those new targets. "We will buy them from your portfolios or
package them into securities."
She described "CRA-friendly products" as mortgages with less than "3%
down" and "flexible underwriting."
From 2001-2007, Fannie and Freddie bought roughly half of all CRA home
loans, most carrying subprime features.
Note that the authors of the study caution that their work here may
actually understate the impact of the CRA. How? Because the study
assumes that the major impact of CRA took place when banks were
undergoing examination regarding their compliance with CRA goals. If
banks found it difficult to shift gears in preparation for such exams,
they may have altered their overall behavior to satisfy politicians and
regulators. Or, as the authors put it in their conclusion, "If
adjustment costs in lending behavior are large and banks can�t easily
tilt their loan portfolio toward greater CRA compliance, the full impact
of the CRA is potentially much greater than that estimated by the change
in lending behavior around CRA exams."
The housing meltdown and the Great Recession. Something else for which
you can thank the feds.
== 8 of 25 ==
Date: Mon, Jan 6 2014 9:55 am
From: prime cut
On 1/6/2014 7:07 AM, jim wrote:
> No it isn't. That is just another story you just made up.
http://reason.com/blog/2012/12/21/study-says-community-reinvestment-act-in
Study Says Community Reinvestment Act Induced Banks To Take Bad Risks
J.D. Tuccille|Dec. 21, 2012 6:37 pm
'twas Wall Street greed what done it, some folks say, when it comes to
explaining the spectacular housing meltdown of recent years, which had
its roots in a great many astonishingly risky loans. Other folks suggest
that the federal government just may have played something of a role in
inducing, even strong-arming, banks to take risks they otherwise would
have avoided. Specifically, the Community Reinvestment Act and related
policy pressures are pointed to as culprits, part of a government effort
to extend home-ownership in lower-income neighborhoods. Now comes a new
study from the National Bureau of Economic Research that says, quite
bluntly. that the CRA played a major role.
In the academic world, mealy-mouthed delivery of even powerful
conclusions is the norm, so it's refreshing to see authors Sumit
Agarwal, Efraim Benmelech, Nittai Bergman, Amit Seru answer the title's
question, "Did the Community Reinvestment Act (CRA) Lead to Risky
Lending?," with the clear, "Yes, it did. ... We find that adherence to
the act led to riskier lending by banks." The full abstract reads:
Yes, it did. We use exogenous variation in banks� incentives to conform
to the standards of the Community Reinvestment Act (CRA) around
regulatory exam dates to trace out the effect of the CRA on lending
activity. Our empirical strategy compares lending behavior of banks
undergoing CRA exams within a given census tract in a given month to the
behavior of banks operating in the same census tract-month that do not
face these exams. We find that adherence to the act led to riskier
lending by banks: in the six quarters surrounding the CRA exams lending
is elevated on average by about 5 percent every quarter and loans in
these quarters default by about 15 percent more often. These patterns
are accentuated in CRA-eligible census tracts and are concentrated among
large banks. The effects are strongest during the time period when the
market for private securitization was booming.
Investors Business Daily does a very nice job of summarizing the nature
of the pressure brought on lenders (that's IBD's most excellent graphic,
above):
"We want your CRA loans because they help us meet our housing goals,"
Fannie Vice Chair Jamie Gorelick beseeched lenders gathered at a banking
conference in 2000, just after HUD hiked the mortgage giant's affordable
housing quotas to 50% and pressed it to buy more CRA-eligible loans to
help meet those new targets. "We will buy them from your portfolios or
package them into securities."
She described "CRA-friendly products" as mortgages with less than "3%
down" and "flexible underwriting."
From 2001-2007, Fannie and Freddie bought roughly half of all CRA home
loans, most carrying subprime features.
Note that the authors of the study caution that their work here may
actually understate the impact of the CRA. How? Because the study
assumes that the major impact of CRA took place when banks were
undergoing examination regarding their compliance with CRA goals. If
banks found it difficult to shift gears in preparation for such exams,
they may have altered their overall behavior to satisfy politicians and
regulators. Or, as the authors put it in their conclusion, "If
adjustment costs in lending behavior are large and banks can�t easily
tilt their loan portfolio toward greater CRA compliance, the full impact
of the CRA is potentially much greater than that estimated by the change
in lending behavior around CRA exams."
The housing meltdown and the Great Recession. Something else for which
you can thank the feds.
== 9 of 25 ==
Date: Mon, Jan 6 2014 9:56 am
From: prime cut
On 1/6/2014 5:54 AM, jim wrote:
> You have come up with nothing factual. All you have is stories.
>
> ---
http://reason.com/blog/2012/12/21/study-says-community-reinvestment-act-in
Study Says Community Reinvestment Act Induced Banks To Take Bad Risks
J.D. Tuccille|Dec. 21, 2012 6:37 pm
'twas Wall Street greed what done it, some folks say, when it comes to
explaining the spectacular housing meltdown of recent years, which had
its roots in a great many astonishingly risky loans. Other folks suggest
that the federal government just may have played something of a role in
inducing, even strong-arming, banks to take risks they otherwise would
have avoided. Specifically, the Community Reinvestment Act and related
policy pressures are pointed to as culprits, part of a government effort
to extend home-ownership in lower-income neighborhoods. Now comes a new
study from the National Bureau of Economic Research that says, quite
bluntly. that the CRA played a major role.
In the academic world, mealy-mouthed delivery of even powerful
conclusions is the norm, so it's refreshing to see authors Sumit
Agarwal, Efraim Benmelech, Nittai Bergman, Amit Seru answer the title's
question, "Did the Community Reinvestment Act (CRA) Lead to Risky
Lending?," with the clear, "Yes, it did. ... We find that adherence to
the act led to riskier lending by banks." The full abstract reads:
Yes, it did. We use exogenous variation in banks� incentives to conform
to the standards of the Community Reinvestment Act (CRA) around
regulatory exam dates to trace out the effect of the CRA on lending
activity. Our empirical strategy compares lending behavior of banks
undergoing CRA exams within a given census tract in a given month to the
behavior of banks operating in the same census tract-month that do not
face these exams. We find that adherence to the act led to riskier
lending by banks: in the six quarters surrounding the CRA exams lending
is elevated on average by about 5 percent every quarter and loans in
these quarters default by about 15 percent more often. These patterns
are accentuated in CRA-eligible census tracts and are concentrated among
large banks. The effects are strongest during the time period when the
market for private securitization was booming.
Investors Business Daily does a very nice job of summarizing the nature
of the pressure brought on lenders (that's IBD's most excellent graphic,
above):
"We want your CRA loans because they help us meet our housing goals,"
Fannie Vice Chair Jamie Gorelick beseeched lenders gathered at a banking
conference in 2000, just after HUD hiked the mortgage giant's affordable
housing quotas to 50% and pressed it to buy more CRA-eligible loans to
help meet those new targets. "We will buy them from your portfolios or
package them into securities."
She described "CRA-friendly products" as mortgages with less than "3%
down" and "flexible underwriting."
From 2001-2007, Fannie and Freddie bought roughly half of all CRA home
loans, most carrying subprime features.
Note that the authors of the study caution that their work here may
actually understate the impact of the CRA. How? Because the study
assumes that the major impact of CRA took place when banks were
undergoing examination regarding their compliance with CRA goals. If
banks found it difficult to shift gears in preparation for such exams,
they may have altered their overall behavior to satisfy politicians and
regulators. Or, as the authors put it in their conclusion, "If
adjustment costs in lending behavior are large and banks can�t easily
tilt their loan portfolio toward greater CRA compliance, the full impact
of the CRA is potentially much greater than that estimated by the change
in lending behavior around CRA exams."
The housing meltdown and the Great Recession. Something else for which
you can thank the feds.
== 10 of 25 ==
Date: Mon, Jan 6 2014 9:55 am
From: prime cut
On 1/6/2014 6:51 AM, jim wrote:
> Ha ha ha That is just anothedr story.
http://reason.com/blog/2012/12/21/study-says-community-reinvestment-act-in
Study Says Community Reinvestment Act Induced Banks To Take Bad Risks
J.D. Tuccille|Dec. 21, 2012 6:37 pm
'twas Wall Street greed what done it, some folks say, when it comes to
explaining the spectacular housing meltdown of recent years, which had
its roots in a great many astonishingly risky loans. Other folks suggest
that the federal government just may have played something of a role in
inducing, even strong-arming, banks to take risks they otherwise would
have avoided. Specifically, the Community Reinvestment Act and related
policy pressures are pointed to as culprits, part of a government effort
to extend home-ownership in lower-income neighborhoods. Now comes a new
study from the National Bureau of Economic Research that says, quite
bluntly. that the CRA played a major role.
In the academic world, mealy-mouthed delivery of even powerful
conclusions is the norm, so it's refreshing to see authors Sumit
Agarwal, Efraim Benmelech, Nittai Bergman, Amit Seru answer the title's
question, "Did the Community Reinvestment Act (CRA) Lead to Risky
Lending?," with the clear, "Yes, it did. ... We find that adherence to
the act led to riskier lending by banks." The full abstract reads:
Yes, it did. We use exogenous variation in banks� incentives to conform
to the standards of the Community Reinvestment Act (CRA) around
regulatory exam dates to trace out the effect of the CRA on lending
activity. Our empirical strategy compares lending behavior of banks
undergoing CRA exams within a given census tract in a given month to the
behavior of banks operating in the same census tract-month that do not
face these exams. We find that adherence to the act led to riskier
lending by banks: in the six quarters surrounding the CRA exams lending
is elevated on average by about 5 percent every quarter and loans in
these quarters default by about 15 percent more often. These patterns
are accentuated in CRA-eligible census tracts and are concentrated among
large banks. The effects are strongest during the time period when the
market for private securitization was booming.
Investors Business Daily does a very nice job of summarizing the nature
of the pressure brought on lenders (that's IBD's most excellent graphic,
above):
"We want your CRA loans because they help us meet our housing goals,"
Fannie Vice Chair Jamie Gorelick beseeched lenders gathered at a banking
conference in 2000, just after HUD hiked the mortgage giant's affordable
housing quotas to 50% and pressed it to buy more CRA-eligible loans to
help meet those new targets. "We will buy them from your portfolios or
package them into securities."
She described "CRA-friendly products" as mortgages with less than "3%
down" and "flexible underwriting."
From 2001-2007, Fannie and Freddie bought roughly half of all CRA home
loans, most carrying subprime features.
Note that the authors of the study caution that their work here may
actually understate the impact of the CRA. How? Because the study
assumes that the major impact of CRA took place when banks were
undergoing examination regarding their compliance with CRA goals. If
banks found it difficult to shift gears in preparation for such exams,
they may have altered their overall behavior to satisfy politicians and
regulators. Or, as the authors put it in their conclusion, "If
adjustment costs in lending behavior are large and banks can�t easily
tilt their loan portfolio toward greater CRA compliance, the full impact
of the CRA is potentially much greater than that estimated by the change
in lending behavior around CRA exams."
The housing meltdown and the Great Recession. Something else for which
you can thank the feds.
== 11 of 25 ==
Date: Mon, Jan 6 2014 9:56 am
From: prime cut
On 1/6/2014 5:52 AM, jim wrote:
> One reason these loans were so lucrative
http://reason.com/blog/2012/12/21/study-says-community-reinvestment-act-in
Study Says Community Reinvestment Act Induced Banks To Take Bad Risks
J.D. Tuccille|Dec. 21, 2012 6:37 pm
'twas Wall Street greed what done it, some folks say, when it comes to
explaining the spectacular housing meltdown of recent years, which had
its roots in a great many astonishingly risky loans. Other folks suggest
that the federal government just may have played something of a role in
inducing, even strong-arming, banks to take risks they otherwise would
have avoided. Specifically, the Community Reinvestment Act and related
policy pressures are pointed to as culprits, part of a government effort
to extend home-ownership in lower-income neighborhoods. Now comes a new
study from the National Bureau of Economic Research that says, quite
bluntly. that the CRA played a major role.
In the academic world, mealy-mouthed delivery of even powerful
conclusions is the norm, so it's refreshing to see authors Sumit
Agarwal, Efraim Benmelech, Nittai Bergman, Amit Seru answer the title's
question, "Did the Community Reinvestment Act (CRA) Lead to Risky
Lending?," with the clear, "Yes, it did. ... We find that adherence to
the act led to riskier lending by banks." The full abstract reads:
Yes, it did. We use exogenous variation in banks� incentives to conform
to the standards of the Community Reinvestment Act (CRA) around
regulatory exam dates to trace out the effect of the CRA on lending
activity. Our empirical strategy compares lending behavior of banks
undergoing CRA exams within a given census tract in a given month to the
behavior of banks operating in the same census tract-month that do not
face these exams. We find that adherence to the act led to riskier
lending by banks: in the six quarters surrounding the CRA exams lending
is elevated on average by about 5 percent every quarter and loans in
these quarters default by about 15 percent more often. These patterns
are accentuated in CRA-eligible census tracts and are concentrated among
large banks. The effects are strongest during the time period when the
market for private securitization was booming.
Investors Business Daily does a very nice job of summarizing the nature
of the pressure brought on lenders (that's IBD's most excellent graphic,
above):
"We want your CRA loans because they help us meet our housing goals,"
Fannie Vice Chair Jamie Gorelick beseeched lenders gathered at a banking
conference in 2000, just after HUD hiked the mortgage giant's affordable
housing quotas to 50% and pressed it to buy more CRA-eligible loans to
help meet those new targets. "We will buy them from your portfolios or
package them into securities."
She described "CRA-friendly products" as mortgages with less than "3%
down" and "flexible underwriting."
From 2001-2007, Fannie and Freddie bought roughly half of all CRA home
loans, most carrying subprime features.
Note that the authors of the study caution that their work here may
actually understate the impact of the CRA. How? Because the study
assumes that the major impact of CRA took place when banks were
undergoing examination regarding their compliance with CRA goals. If
banks found it difficult to shift gears in preparation for such exams,
they may have altered their overall behavior to satisfy politicians and
regulators. Or, as the authors put it in their conclusion, "If
adjustment costs in lending behavior are large and banks can�t easily
tilt their loan portfolio toward greater CRA compliance, the full impact
of the CRA is potentially much greater than that estimated by the change
in lending behavior around CRA exams."
The housing meltdown and the Great Recession. Something else for which
you can thank the feds.
== 12 of 25 ==
Date: Mon, Jan 6 2014 9:57 am
From: prime cut
On 1/6/2014 5:52 AM, jim wrote:
> One reason these loans were so lucrative for Countrywide is that
http://www.businessinsider.com/three-ways-the-cra-pushed-countrywide-to-lower-lending-standards-2009-6
When we discuss the role of the Community Reinvestment Act and other
fair lending rules in contributing to lax lending standards, people bent
on exonerating the CRA often point out that many of the questionable
loans were made by non-depository mortgage companies not covered by the
CRA.
Barry Ritholtz has been a prominent critic of the theory that the CRA
has some culpability for lax lending. He has pointed out that 50% of
subprime loans were made by mortgage service companies not subject
comprehensive federal supervision. �How was this caused by either CRA or
GSEs?� Barry asked.
As much as I respect Barry�s formidable analytical powers, I�m afraid
he�s taken too narrow of the view of the matter. His question is far
easier to answer than he suspects. Regulations often touch those who are
not directly regulated. Indeed, the regulation of one group in a
marketplace will almost always wind up affecting other groups.
More concretely, there are three very specific ways in which the CRA
nudged Countrywide and other mortgage companies to adopt lax lending
standards.
1. The Creation Of Artificial Demand For Low-Income Mortgages. Banks
that were regulated by the CRA often found it difficult to meet their
obligations under the CRA directly. Long standing lending practices by
local loan officers were a big problem. But as banks expanded their
deposit bases and other businesses, they often found that they were at
risk of regulators discovering they had fallen behind in making CRA loans.
One way of addressing this problem was buying the loans in the secondary
market. Mortgage companies like Countrywide began to serve this entirely
artificial demand for CRA loans. Countrywide marketed its loans directly
to banks as a way for them to meet CRA obligations. "The result of these
efforts is an enormous pipeline of mortgages to low- and moderate-income
buyers. With this pipeline, Countrywide Securities Corporation (CSC) can
potentially help you meet your Community Reinvestment Act (CRA) goals by
offering both whole loan and mortgage-backed securities that are
eligible for CRA credit,� a Countrywide advertisement on its website read.
2. The Threat Of Regulation Is Often As Good As Regulation. It is
highly misleading to claim that just because mortgage companies were not
technically under the CRA that they were not required by regulators to
meet similar tests. In fact, regulators threatened that if the mortgage
companies didn�t step up to the plate by relaxing lending standards they
would be brought under the CRA umbrella and required to do so.
Here�s how City Journal explains the dynamic:
To meet their goals, the two mortgage giants enlisted large
lenders�including nonbanks, which weren�t covered by the CRA�into the
effort. Freddie Mac began an �alternative qualifying� program with the
Sears Mortgage Corporation that let a borrower qualify for a loan with a
monthly payment as high as 50 percent of his income, at a time when most
private mortgage companies wouldn�t exceed 33 percent. The program also
allowed borrowers with bad credit to get mortgages if they took
credit-counseling classes administered by Acorn and other nonprofits.
Subsequent research would show that such classes have little impact on
default rates.
Pressuring nonbank lenders to make more loans to poor minorities didn�t
stop with Sears. If it didn�t happen, Clinton officials warned, they�d
seek to extend CRA regulations to all mortgage makers. In Congress,
Representative Maxine Waters called financial firms not covered by the
CRA �among the most egregious redliners.� To rebuff the criticism, the
Mortgage Bankers Association (MBA) shocked the financial world by
signing a 1994 agreement with the Department of Housing and Urban
Development (HUD), pledging to increase lending to minorities and join
in new efforts to rewrite lending standards. The first MBA member to
sign up: Countrywide Financial, the mortgage firm that would be at the
core of the subprime meltdown.
3. The CRA Distorted the Mortgage Market. With banks offering
mortgages with high loan to value, delayed payment schedules and other
enticing features, the mortgage companies would have quickly found
themselves unable to compete if they didn�t offer similar loans. The
requirement to offer risky loans from banks created a situation where
other lenders found they had to offer similar products if they wanted to
expand their business.
Of course, Angelo Mozillo didn't need very much prompting on this score.
He believed exactly what the CRA regulators believed: that these lax
lending practices were the wave of the future, democratizing the glories
of home ownership.
== 13 of 25 ==
Date: Mon, Jan 6 2014 9:57 am
From: prime cut
On 1/6/2014 5:54 AM, jim wrote:
> You have come up with nothing factual. All you have is stories.
http://www.businessinsider.com/three-ways-the-cra-pushed-countrywide-to-lower-lending-standards-2009-6
When we discuss the role of the Community Reinvestment Act and other
fair lending rules in contributing to lax lending standards, people bent
on exonerating the CRA often point out that many of the questionable
loans were made by non-depository mortgage companies not covered by the
CRA.
Barry Ritholtz has been a prominent critic of the theory that the CRA
has some culpability for lax lending. He has pointed out that 50% of
subprime loans were made by mortgage service companies not subject
comprehensive federal supervision. �How was this caused by either CRA or
GSEs?� Barry asked.
As much as I respect Barry�s formidable analytical powers, I�m afraid
he�s taken too narrow of the view of the matter. His question is far
easier to answer than he suspects. Regulations often touch those who are
not directly regulated. Indeed, the regulation of one group in a
marketplace will almost always wind up affecting other groups.
More concretely, there are three very specific ways in which the CRA
nudged Countrywide and other mortgage companies to adopt lax lending
standards.
1. The Creation Of Artificial Demand For Low-Income Mortgages. Banks
that were regulated by the CRA often found it difficult to meet their
obligations under the CRA directly. Long standing lending practices by
local loan officers were a big problem. But as banks expanded their
deposit bases and other businesses, they often found that they were at
risk of regulators discovering they had fallen behind in making CRA loans.
One way of addressing this problem was buying the loans in the secondary
market. Mortgage companies like Countrywide began to serve this entirely
artificial demand for CRA loans. Countrywide marketed its loans directly
to banks as a way for them to meet CRA obligations. "The result of these
efforts is an enormous pipeline of mortgages to low- and moderate-income
buyers. With this pipeline, Countrywide Securities Corporation (CSC) can
potentially help you meet your Community Reinvestment Act (CRA) goals by
offering both whole loan and mortgage-backed securities that are
eligible for CRA credit,� a Countrywide advertisement on its website read.
2. The Threat Of Regulation Is Often As Good As Regulation. It is
highly misleading to claim that just because mortgage companies were not
technically under the CRA that they were not required by regulators to
meet similar tests. In fact, regulators threatened that if the mortgage
companies didn�t step up to the plate by relaxing lending standards they
would be brought under the CRA umbrella and required to do so.
Here�s how City Journal explains the dynamic:
To meet their goals, the two mortgage giants enlisted large
lenders�including nonbanks, which weren�t covered by the CRA�into the
effort. Freddie Mac began an �alternative qualifying� program with the
Sears Mortgage Corporation that let a borrower qualify for a loan with a
monthly payment as high as 50 percent of his income, at a time when most
private mortgage companies wouldn�t exceed 33 percent. The program also
allowed borrowers with bad credit to get mortgages if they took
credit-counseling classes administered by Acorn and other nonprofits.
Subsequent research would show that such classes have little impact on
default rates.
Pressuring nonbank lenders to make more loans to poor minorities didn�t
stop with Sears. If it didn�t happen, Clinton officials warned, they�d
seek to extend CRA regulations to all mortgage makers. In Congress,
Representative Maxine Waters called financial firms not covered by the
CRA �among the most egregious redliners.� To rebuff the criticism, the
Mortgage Bankers Association (MBA) shocked the financial world by
signing a 1994 agreement with the Department of Housing and Urban
Development (HUD), pledging to increase lending to minorities and join
in new efforts to rewrite lending standards. The first MBA member to
sign up: Countrywide Financial, the mortgage firm that would be at the
core of the subprime meltdown.
3. The CRA Distorted the Mortgage Market. With banks offering
mortgages with high loan to value, delayed payment schedules and other
enticing features, the mortgage companies would have quickly found
themselves unable to compete if they didn�t offer similar loans. The
requirement to offer risky loans from banks created a situation where
other lenders found they had to offer similar products if they wanted to
expand their business.
Of course, Angelo Mozillo didn't need very much prompting on this score.
He believed exactly what the CRA regulators believed: that these lax
lending practices were the wave of the future, democratizing the glories
of home ownership.
== 14 of 25 ==
Date: Mon, Jan 6 2014 9:57 am
From: prime cut
On 1/6/2014 6:51 AM, jim wrote:
> Ha ha ha That is just anothedr story.
http://www.businessinsider.com/three-ways-the-cra-pushed-countrywide-to-lower-lending-standards-2009-6
When we discuss the role of the Community Reinvestment Act and other
fair lending rules in contributing to lax lending standards, people bent
on exonerating the CRA often point out that many of the questionable
loans were made by non-depository mortgage companies not covered by the
CRA.
Barry Ritholtz has been a prominent critic of the theory that the CRA
has some culpability for lax lending. He has pointed out that 50% of
subprime loans were made by mortgage service companies not subject
comprehensive federal supervision. �How was this caused by either CRA or
GSEs?� Barry asked.
As much as I respect Barry�s formidable analytical powers, I�m afraid
he�s taken too narrow of the view of the matter. His question is far
easier to answer than he suspects. Regulations often touch those who are
not directly regulated. Indeed, the regulation of one group in a
marketplace will almost always wind up affecting other groups.
More concretely, there are three very specific ways in which the CRA
nudged Countrywide and other mortgage companies to adopt lax lending
standards.
1. The Creation Of Artificial Demand For Low-Income Mortgages. Banks
that were regulated by the CRA often found it difficult to meet their
obligations under the CRA directly. Long standing lending practices by
local loan officers were a big problem. But as banks expanded their
deposit bases and other businesses, they often found that they were at
risk of regulators discovering they had fallen behind in making CRA loans.
One way of addressing this problem was buying the loans in the secondary
market. Mortgage companies like Countrywide began to serve this entirely
artificial demand for CRA loans. Countrywide marketed its loans directly
to banks as a way for them to meet CRA obligations. "The result of these
efforts is an enormous pipeline of mortgages to low- and moderate-income
buyers. With this pipeline, Countrywide Securities Corporation (CSC) can
potentially help you meet your Community Reinvestment Act (CRA) goals by
offering both whole loan and mortgage-backed securities that are
eligible for CRA credit,� a Countrywide advertisement on its website read.
2. The Threat Of Regulation Is Often As Good As Regulation. It is
highly misleading to claim that just because mortgage companies were not
technically under the CRA that they were not required by regulators to
meet similar tests. In fact, regulators threatened that if the mortgage
companies didn�t step up to the plate by relaxing lending standards they
would be brought under the CRA umbrella and required to do so.
Here�s how City Journal explains the dynamic:
To meet their goals, the two mortgage giants enlisted large
lenders�including nonbanks, which weren�t covered by the CRA�into the
effort. Freddie Mac began an �alternative qualifying� program with the
Sears Mortgage Corporation that let a borrower qualify for a loan with a
monthly payment as high as 50 percent of his income, at a time when most
private mortgage companies wouldn�t exceed 33 percent. The program also
allowed borrowers with bad credit to get mortgages if they took
credit-counseling classes administered by Acorn and other nonprofits.
Subsequent research would show that such classes have little impact on
default rates.
Pressuring nonbank lenders to make more loans to poor minorities didn�t
stop with Sears. If it didn�t happen, Clinton officials warned, they�d
seek to extend CRA regulations to all mortgage makers. In Congress,
Representative Maxine Waters called financial firms not covered by the
CRA �among the most egregious redliners.� To rebuff the criticism, the
Mortgage Bankers Association (MBA) shocked the financial world by
signing a 1994 agreement with the Department of Housing and Urban
Development (HUD), pledging to increase lending to minorities and join
in new efforts to rewrite lending standards. The first MBA member to
sign up: Countrywide Financial, the mortgage firm that would be at the
core of the subprime meltdown.
3. The CRA Distorted the Mortgage Market. With banks offering
mortgages with high loan to value, delayed payment schedules and other
enticing features, the mortgage companies would have quickly found
themselves unable to compete if they didn�t offer similar loans. The
requirement to offer risky loans from banks created a situation where
other lenders found they had to offer similar products if they wanted to
expand their business.
Of course, Angelo Mozillo didn't need very much prompting on this score.
He believed exactly what the CRA regulators believed: that these lax
lending practices were the wave of the future, democratizing the glories
of home ownership.
== 15 of 25 ==
Date: Mon, Jan 6 2014 9:58 am
From: prime cut
On 1/6/2014 7:07 AM, jim wrote:
> Countrywide loans have nothing to do with
http://www.businessinsider.com/three-ways-the-cra-pushed-countrywide-to-lower-lending-standards-2009-6
When we discuss the role of the Community Reinvestment Act and other
fair lending rules in contributing to lax lending standards, people bent
on exonerating the CRA often point out that many of the questionable
loans were made by non-depository mortgage companies not covered by the
CRA.
Barry Ritholtz has been a prominent critic of the theory that the CRA
has some culpability for lax lending. He has pointed out that 50% of
subprime loans were made by mortgage service companies not subject
comprehensive federal supervision. �How was this caused by either CRA or
GSEs?� Barry asked.
As much as I respect Barry�s formidable analytical powers, I�m afraid
he�s taken too narrow of the view of the matter. His question is far
easier to answer than he suspects. Regulations often touch those who are
not directly regulated. Indeed, the regulation of one group in a
marketplace will almost always wind up affecting other groups.
More concretely, there are three very specific ways in which the CRA
nudged Countrywide and other mortgage companies to adopt lax lending
standards.
1. The Creation Of Artificial Demand For Low-Income Mortgages. Banks
that were regulated by the CRA often found it difficult to meet their
obligations under the CRA directly. Long standing lending practices by
local loan officers were a big problem. But as banks expanded their
deposit bases and other businesses, they often found that they were at
risk of regulators discovering they had fallen behind in making CRA loans.
One way of addressing this problem was buying the loans in the secondary
market. Mortgage companies like Countrywide began to serve this entirely
artificial demand for CRA loans. Countrywide marketed its loans directly
to banks as a way for them to meet CRA obligations. "The result of these
efforts is an enormous pipeline of mortgages to low- and moderate-income
buyers. With this pipeline, Countrywide Securities Corporation (CSC) can
potentially help you meet your Community Reinvestment Act (CRA) goals by
offering both whole loan and mortgage-backed securities that are
eligible for CRA credit,� a Countrywide advertisement on its website read.
2. The Threat Of Regulation Is Often As Good As Regulation. It is
highly misleading to claim that just because mortgage companies were not
technically under the CRA that they were not required by regulators to
meet similar tests. In fact, regulators threatened that if the mortgage
companies didn�t step up to the plate by relaxing lending standards they
would be brought under the CRA umbrella and required to do so.
Here�s how City Journal explains the dynamic:
To meet their goals, the two mortgage giants enlisted large
lenders�including nonbanks, which weren�t covered by the CRA�into the
effort. Freddie Mac began an �alternative qualifying� program with the
Sears Mortgage Corporation that let a borrower qualify for a loan with a
monthly payment as high as 50 percent of his income, at a time when most
private mortgage companies wouldn�t exceed 33 percent. The program also
allowed borrowers with bad credit to get mortgages if they took
credit-counseling classes administered by Acorn and other nonprofits.
Subsequent research would show that such classes have little impact on
default rates.
Pressuring nonbank lenders to make more loans to poor minorities didn�t
stop with Sears. If it didn�t happen, Clinton officials warned, they�d
seek to extend CRA regulations to all mortgage makers. In Congress,
Representative Maxine Waters called financial firms not covered by the
CRA �among the most egregious redliners.� To rebuff the criticism, the
Mortgage Bankers Association (MBA) shocked the financial world by
signing a 1994 agreement with the Department of Housing and Urban
Development (HUD), pledging to increase lending to minorities and join
in new efforts to rewrite lending standards. The first MBA member to
sign up: Countrywide Financial, the mortgage firm that would be at the
core of the subprime meltdown.
3. The CRA Distorted the Mortgage Market. With banks offering
mortgages with high loan to value, delayed payment schedules and other
enticing features, the mortgage companies would have quickly found
themselves unable to compete if they didn�t offer similar loans. The
requirement to offer risky loans from banks created a situation where
other lenders found they had to offer similar products if they wanted to
expand their business.
Of course, Angelo Mozillo didn't need very much prompting on this score.
He believed exactly what the CRA regulators believed: that these lax
lending practices were the wave of the future, democratizing the glories
of home ownership.
== 16 of 25 ==
Date: Mon, Jan 6 2014 9:58 am
From: prime cut
On 1/6/2014 8:31 AM, jim wrote:
> Where is the evidence that banks were extorted to
> make bad loans?
http://www.businessinsider.com/three-ways-the-cra-pushed-countrywide-to-lower-lending-standards-2009-6
When we discuss the role of the Community Reinvestment Act and other
fair lending rules in contributing to lax lending standards, people bent
on exonerating the CRA often point out that many of the questionable
loans were made by non-depository mortgage companies not covered by the
CRA.
Barry Ritholtz has been a prominent critic of the theory that the CRA
has some culpability for lax lending. He has pointed out that 50% of
subprime loans were made by mortgage service companies not subject
comprehensive federal supervision. �How was this caused by either CRA or
GSEs?� Barry asked.
As much as I respect Barry�s formidable analytical powers, I�m afraid
he�s taken too narrow of the view of the matter. His question is far
easier to answer than he suspects. Regulations often touch those who are
not directly regulated. Indeed, the regulation of one group in a
marketplace will almost always wind up affecting other groups.
More concretely, there are three very specific ways in which the CRA
nudged Countrywide and other mortgage companies to adopt lax lending
standards.
1. The Creation Of Artificial Demand For Low-Income Mortgages. Banks
that were regulated by the CRA often found it difficult to meet their
obligations under the CRA directly. Long standing lending practices by
local loan officers were a big problem. But as banks expanded their
deposit bases and other businesses, they often found that they were at
risk of regulators discovering they had fallen behind in making CRA loans.
One way of addressing this problem was buying the loans in the secondary
market. Mortgage companies like Countrywide began to serve this entirely
artificial demand for CRA loans. Countrywide marketed its loans directly
to banks as a way for them to meet CRA obligations. "The result of these
efforts is an enormous pipeline of mortgages to low- and moderate-income
buyers. With this pipeline, Countrywide Securities Corporation (CSC) can
potentially help you meet your Community Reinvestment Act (CRA) goals by
offering both whole loan and mortgage-backed securities that are
eligible for CRA credit,� a Countrywide advertisement on its website read.
2. The Threat Of Regulation Is Often As Good As Regulation. It is
highly misleading to claim that just because mortgage companies were not
technically under the CRA that they were not required by regulators to
meet similar tests. In fact, regulators threatened that if the mortgage
companies didn�t step up to the plate by relaxing lending standards they
would be brought under the CRA umbrella and required to do so.
Here�s how City Journal explains the dynamic:
To meet their goals, the two mortgage giants enlisted large
lenders�including nonbanks, which weren�t covered by the CRA�into the
effort. Freddie Mac began an �alternative qualifying� program with the
Sears Mortgage Corporation that let a borrower qualify for a loan with a
monthly payment as high as 50 percent of his income, at a time when most
private mortgage companies wouldn�t exceed 33 percent. The program also
allowed borrowers with bad credit to get mortgages if they took
credit-counseling classes administered by Acorn and other nonprofits.
Subsequent research would show that such classes have little impact on
default rates.
Pressuring nonbank lenders to make more loans to poor minorities didn�t
stop with Sears. If it didn�t happen, Clinton officials warned, they�d
seek to extend CRA regulations to all mortgage makers. In Congress,
Representative Maxine Waters called financial firms not covered by the
CRA �among the most egregious redliners.� To rebuff the criticism, the
Mortgage Bankers Association (MBA) shocked the financial world by
signing a 1994 agreement with the Department of Housing and Urban
Development (HUD), pledging to increase lending to minorities and join
in new efforts to rewrite lending standards. The first MBA member to
sign up: Countrywide Financial, the mortgage firm that would be at the
core of the subprime meltdown.
3. The CRA Distorted the Mortgage Market. With banks offering
mortgages with high loan to value, delayed payment schedules and other
enticing features, the mortgage companies would have quickly found
themselves unable to compete if they didn�t offer similar loans. The
requirement to offer risky loans from banks created a situation where
other lenders found they had to offer similar products if they wanted to
expand their business.
Of course, Angelo Mozillo didn't need very much prompting on this score.
He believed exactly what the CRA regulators believed: that these lax
lending practices were the wave of the future, democratizing the glories
of home ownership.
== 17 of 25 ==
Date: Mon, Jan 6 2014 9:58 am
From: prime cut
On 1/6/2014 8:48 AM, jim wrote:
> That is your made up story.
>
> Here are some stories based on facts:
http://www.businessinsider.com/three-ways-the-cra-pushed-countrywide-to-lower-lending-standards-2009-6
When we discuss the role of the Community Reinvestment Act and other
fair lending rules in contributing to lax lending standards, people bent
on exonerating the CRA often point out that many of the questionable
loans were made by non-depository mortgage companies not covered by the
CRA.
Barry Ritholtz has been a prominent critic of the theory that the CRA
has some culpability for lax lending. He has pointed out that 50% of
subprime loans were made by mortgage service companies not subject
comprehensive federal supervision. �How was this caused by either CRA or
GSEs?� Barry asked.
As much as I respect Barry�s formidable analytical powers, I�m afraid
he�s taken too narrow of the view of the matter. His question is far
easier to answer than he suspects. Regulations often touch those who are
not directly regulated. Indeed, the regulation of one group in a
marketplace will almost always wind up affecting other groups.
More concretely, there are three very specific ways in which the CRA
nudged Countrywide and other mortgage companies to adopt lax lending
standards.
1. The Creation Of Artificial Demand For Low-Income Mortgages. Banks
that were regulated by the CRA often found it difficult to meet their
obligations under the CRA directly. Long standing lending practices by
local loan officers were a big problem. But as banks expanded their
deposit bases and other businesses, they often found that they were at
risk of regulators discovering they had fallen behind in making CRA loans.
One way of addressing this problem was buying the loans in the secondary
market. Mortgage companies like Countrywide began to serve this entirely
artificial demand for CRA loans. Countrywide marketed its loans directly
to banks as a way for them to meet CRA obligations. "The result of these
efforts is an enormous pipeline of mortgages to low- and moderate-income
buyers. With this pipeline, Countrywide Securities Corporation (CSC) can
potentially help you meet your Community Reinvestment Act (CRA) goals by
offering both whole loan and mortgage-backed securities that are
eligible for CRA credit,� a Countrywide advertisement on its website read.
2. The Threat Of Regulation Is Often As Good As Regulation. It is
highly misleading to claim that just because mortgage companies were not
technically under the CRA that they were not required by regulators to
meet similar tests. In fact, regulators threatened that if the mortgage
companies didn�t step up to the plate by relaxing lending standards they
would be brought under the CRA umbrella and required to do so.
Here�s how City Journal explains the dynamic:
To meet their goals, the two mortgage giants enlisted large
lenders�including nonbanks, which weren�t covered by the CRA�into the
effort. Freddie Mac began an �alternative qualifying� program with the
Sears Mortgage Corporation that let a borrower qualify for a loan with a
monthly payment as high as 50 percent of his income, at a time when most
private mortgage companies wouldn�t exceed 33 percent. The program also
allowed borrowers with bad credit to get mortgages if they took
credit-counseling classes administered by Acorn and other nonprofits.
Subsequent research would show that such classes have little impact on
default rates.
Pressuring nonbank lenders to make more loans to poor minorities didn�t
stop with Sears. If it didn�t happen, Clinton officials warned, they�d
seek to extend CRA regulations to all mortgage makers. In Congress,
Representative Maxine Waters called financial firms not covered by the
CRA �among the most egregious redliners.� To rebuff the criticism, the
Mortgage Bankers Association (MBA) shocked the financial world by
signing a 1994 agreement with the Department of Housing and Urban
Development (HUD), pledging to increase lending to minorities and join
in new efforts to rewrite lending standards. The first MBA member to
sign up: Countrywide Financial, the mortgage firm that would be at the
core of the subprime meltdown.
3. The CRA Distorted the Mortgage Market. With banks offering
mortgages with high loan to value, delayed payment schedules and other
enticing features, the mortgage companies would have quickly found
themselves unable to compete if they didn�t offer similar loans. The
requirement to offer risky loans from banks created a situation where
other lenders found they had to offer similar products if they wanted to
expand their business.
Of course, Angelo Mozillo didn't need very much prompting on this score.
He believed exactly what the CRA regulators believed: that these lax
lending practices were the wave of the future, democratizing the glories
of home ownership.
== 18 of 25 ==
Date: Mon, Jan 6 2014 9:58 am
From: prime cut
On 1/6/2014 8:52 AM, jim wrote:
> Countrywide made tons of bad loans for one reason - they were
> profitable.
http://www.businessinsider.com/three-ways-the-cra-pushed-countrywide-to-lower-lending-standards-2009-6
When we discuss the role of the Community Reinvestment Act and other
fair lending rules in contributing to lax lending standards, people bent
on exonerating the CRA often point out that many of the questionable
loans were made by non-depository mortgage companies not covered by the
CRA.
Barry Ritholtz has been a prominent critic of the theory that the CRA
has some culpability for lax lending. He has pointed out that 50% of
subprime loans were made by mortgage service companies not subject
comprehensive federal supervision. �How was this caused by either CRA or
GSEs?� Barry asked.
As much as I respect Barry�s formidable analytical powers, I�m afraid
he�s taken too narrow of the view of the matter. His question is far
easier to answer than he suspects. Regulations often touch those who are
not directly regulated. Indeed, the regulation of one group in a
marketplace will almost always wind up affecting other groups.
More concretely, there are three very specific ways in which the CRA
nudged Countrywide and other mortgage companies to adopt lax lending
standards.
1. The Creation Of Artificial Demand For Low-Income Mortgages. Banks
that were regulated by the CRA often found it difficult to meet their
obligations under the CRA directly. Long standing lending practices by
local loan officers were a big problem. But as banks expanded their
deposit bases and other businesses, they often found that they were at
risk of regulators discovering they had fallen behind in making CRA loans.
One way of addressing this problem was buying the loans in the secondary
market. Mortgage companies like Countrywide began to serve this entirely
artificial demand for CRA loans. Countrywide marketed its loans directly
to banks as a way for them to meet CRA obligations. "The result of these
efforts is an enormous pipeline of mortgages to low- and moderate-income
buyers. With this pipeline, Countrywide Securities Corporation (CSC) can
potentially help you meet your Community Reinvestment Act (CRA) goals by
offering both whole loan and mortgage-backed securities that are
eligible for CRA credit,� a Countrywide advertisement on its website read.
2. The Threat Of Regulation Is Often As Good As Regulation. It is
highly misleading to claim that just because mortgage companies were not
technically under the CRA that they were not required by regulators to
meet similar tests. In fact, regulators threatened that if the mortgage
companies didn�t step up to the plate by relaxing lending standards they
would be brought under the CRA umbrella and required to do so.
Here�s how City Journal explains the dynamic:
To meet their goals, the two mortgage giants enlisted large
lenders�including nonbanks, which weren�t covered by the CRA�into the
effort. Freddie Mac began an �alternative qualifying� program with the
Sears Mortgage Corporation that let a borrower qualify for a loan with a
monthly payment as high as 50 percent of his income, at a time when most
private mortgage companies wouldn�t exceed 33 percent. The program also
allowed borrowers with bad credit to get mortgages if they took
credit-counseling classes administered by Acorn and other nonprofits.
Subsequent research would show that such classes have little impact on
default rates.
Pressuring nonbank lenders to make more loans to poor minorities didn�t
stop with Sears. If it didn�t happen, Clinton officials warned, they�d
seek to extend CRA regulations to all mortgage makers. In Congress,
Representative Maxine Waters called financial firms not covered by the
CRA �among the most egregious redliners.� To rebuff the criticism, the
Mortgage Bankers Association (MBA) shocked the financial world by
signing a 1994 agreement with the Department of Housing and Urban
Development (HUD), pledging to increase lending to minorities and join
in new efforts to rewrite lending standards. The first MBA member to
sign up: Countrywide Financial, the mortgage firm that would be at the
core of the subprime meltdown.
3. The CRA Distorted the Mortgage Market. With banks offering
mortgages with high loan to value, delayed payment schedules and other
enticing features, the mortgage companies would have quickly found
themselves unable to compete if they didn�t offer similar loans. The
requirement to offer risky loans from banks created a situation where
other lenders found they had to offer similar products if they wanted to
expand their business.
Of course, Angelo Mozillo didn't need very much prompting on this score.
He believed exactly what the CRA regulators believed: that these lax
lending practices were the wave of the future, democratizing the glories
of home ownership.
== 19 of 25 ==
Date: Mon, Jan 6 2014 9:58 am
From: prime cut
On 1/6/2014 8:54 AM, jim wrote:
> The 20 page document doesn't say anything that
> would support the story that banks were forced
http://www.businessinsider.com/three-ways-the-cra-pushed-countrywide-to-lower-lending-standards-2009-6
When we discuss the role of the Community Reinvestment Act and other
fair lending rules in contributing to lax lending standards, people bent
on exonerating the CRA often point out that many of the questionable
loans were made by non-depository mortgage companies not covered by the
CRA.
Barry Ritholtz has been a prominent critic of the theory that the CRA
has some culpability for lax lending. He has pointed out that 50% of
subprime loans were made by mortgage service companies not subject
comprehensive federal supervision. �How was this caused by either CRA or
GSEs?� Barry asked.
As much as I respect Barry�s formidable analytical powers, I�m afraid
he�s taken too narrow of the view of the matter. His question is far
easier to answer than he suspects. Regulations often touch those who are
not directly regulated. Indeed, the regulation of one group in a
marketplace will almost always wind up affecting other groups.
More concretely, there are three very specific ways in which the CRA
nudged Countrywide and other mortgage companies to adopt lax lending
standards.
1. The Creation Of Artificial Demand For Low-Income Mortgages. Banks
that were regulated by the CRA often found it difficult to meet their
obligations under the CRA directly. Long standing lending practices by
local loan officers were a big problem. But as banks expanded their
deposit bases and other businesses, they often found that they were at
risk of regulators discovering they had fallen behind in making CRA loans.
One way of addressing this problem was buying the loans in the secondary
market. Mortgage companies like Countrywide began to serve this entirely
artificial demand for CRA loans. Countrywide marketed its loans directly
to banks as a way for them to meet CRA obligations. "The result of these
efforts is an enormous pipeline of mortgages to low- and moderate-income
buyers. With this pipeline, Countrywide Securities Corporation (CSC) can
potentially help you meet your Community Reinvestment Act (CRA) goals by
offering both whole loan and mortgage-backed securities that are
eligible for CRA credit,� a Countrywide advertisement on its website read.
2. The Threat Of Regulation Is Often As Good As Regulation. It is
highly misleading to claim that just because mortgage companies were not
technically under the CRA that they were not required by regulators to
meet similar tests. In fact, regulators threatened that if the mortgage
companies didn�t step up to the plate by relaxing lending standards they
would be brought under the CRA umbrella and required to do so.
Here�s how City Journal explains the dynamic:
To meet their goals, the two mortgage giants enlisted large
lenders�including nonbanks, which weren�t covered by the CRA�into the
effort. Freddie Mac began an �alternative qualifying� program with the
Sears Mortgage Corporation that let a borrower qualify for a loan with a
monthly payment as high as 50 percent of his income, at a time when most
private mortgage companies wouldn�t exceed 33 percent. The program also
allowed borrowers with bad credit to get mortgages if they took
credit-counseling classes administered by Acorn and other nonprofits.
Subsequent research would show that such classes have little impact on
default rates.
Pressuring nonbank lenders to make more loans to poor minorities didn�t
stop with Sears. If it didn�t happen, Clinton officials warned, they�d
seek to extend CRA regulations to all mortgage makers. In Congress,
Representative Maxine Waters called financial firms not covered by the
CRA �among the most egregious redliners.� To rebuff the criticism, the
Mortgage Bankers Association (MBA) shocked the financial world by
signing a 1994 agreement with the Department of Housing and Urban
Development (HUD), pledging to increase lending to minorities and join
in new efforts to rewrite lending standards. The first MBA member to
sign up: Countrywide Financial, the mortgage firm that would be at the
core of the subprime meltdown.
3. The CRA Distorted the Mortgage Market. With banks offering
mortgages with high loan to value, delayed payment schedules and other
enticing features, the mortgage companies would have quickly found
themselves unable to compete if they didn�t offer similar loans. The
requirement to offer risky loans from banks created a situation where
other lenders found they had to offer similar products if they wanted to
expand their business.
Of course, Angelo Mozillo didn't need very much prompting on this score.
He believed exactly what the CRA regulators believed: that these lax
lending practices were the wave of the future, democratizing the glories
of home ownership.
== 20 of 25 ==
Date: Mon, Jan 6 2014 9:59 am
From: prime cut
On 1/6/2014 8:55 AM, jim wrote:
> Copying and pasting a 20 page document
http://www.businessinsider.com/three-ways-the-cra-pushed-countrywide-to-lower-lending-standards-2009-6
When we discuss the role of the Community Reinvestment Act and other
fair lending rules in contributing to lax lending standards, people bent
on exonerating the CRA often point out that many of the questionable
loans were made by non-depository mortgage companies not covered by the
CRA.
Barry Ritholtz has been a prominent critic of the theory that the CRA
has some culpability for lax lending. He has pointed out that 50% of
subprime loans were made by mortgage service companies not subject
comprehensive federal supervision. �How was this caused by either CRA or
GSEs?� Barry asked.
As much as I respect Barry�s formidable analytical powers, I�m afraid
he�s taken too narrow of the view of the matter. His question is far
easier to answer than he suspects. Regulations often touch those who are
not directly regulated. Indeed, the regulation of one group in a
marketplace will almost always wind up affecting other groups.
More concretely, there are three very specific ways in which the CRA
nudged Countrywide and other mortgage companies to adopt lax lending
standards.
1. The Creation Of Artificial Demand For Low-Income Mortgages. Banks
that were regulated by the CRA often found it difficult to meet their
obligations under the CRA directly. Long standing lending practices by
local loan officers were a big problem. But as banks expanded their
deposit bases and other businesses, they often found that they were at
risk of regulators discovering they had fallen behind in making CRA loans.
One way of addressing this problem was buying the loans in the secondary
market. Mortgage companies like Countrywide began to serve this entirely
artificial demand for CRA loans. Countrywide marketed its loans directly
to banks as a way for them to meet CRA obligations. "The result of these
efforts is an enormous pipeline of mortgages to low- and moderate-income
buyers. With this pipeline, Countrywide Securities Corporation (CSC) can
potentially help you meet your Community Reinvestment Act (CRA) goals by
offering both whole loan and mortgage-backed securities that are
eligible for CRA credit,� a Countrywide advertisement on its website read.
2. The Threat Of Regulation Is Often As Good As Regulation. It is
highly misleading to claim that just because mortgage companies were not
technically under the CRA that they were not required by regulators to
meet similar tests. In fact, regulators threatened that if the mortgage
companies didn�t step up to the plate by relaxing lending standards they
would be brought under the CRA umbrella and required to do so.
Here�s how City Journal explains the dynamic:
To meet their goals, the two mortgage giants enlisted large
lenders�including nonbanks, which weren�t covered by the CRA�into the
effort. Freddie Mac began an �alternative qualifying� program with the
Sears Mortgage Corporation that let a borrower qualify for a loan with a
monthly payment as high as 50 percent of his income, at a time when most
private mortgage companies wouldn�t exceed 33 percent. The program also
allowed borrowers with bad credit to get mortgages if they took
credit-counseling classes administered by Acorn and other nonprofits.
Subsequent research would show that such classes have little impact on
default rates.
Pressuring nonbank lenders to make more loans to poor minorities didn�t
stop with Sears. If it didn�t happen, Clinton officials warned, they�d
seek to extend CRA regulations to all mortgage makers. In Congress,
Representative Maxine Waters called financial firms not covered by the
CRA �among the most egregious redliners.� To rebuff the criticism, the
Mortgage Bankers Association (MBA) shocked the financial world by
signing a 1994 agreement with the Department of Housing and Urban
Development (HUD), pledging to increase lending to minorities and join
in new efforts to rewrite lending standards. The first MBA member to
sign up: Countrywide Financial, the mortgage firm that would be at the
core of the subprime meltdown.
3. The CRA Distorted the Mortgage Market. With banks offering
mortgages with high loan to value, delayed payment schedules and other
enticing features, the mortgage companies would have quickly found
themselves unable to compete if they didn�t offer similar loans. The
requirement to offer risky loans from banks created a situation where
other lenders found they had to offer similar products if they wanted to
expand their business.
Of course, Angelo Mozillo didn't need very much prompting on this score.
He believed exactly what the CRA regulators believed: that these lax
lending practices were the wave of the future, democratizing the glories
of home ownership.
== 21 of 25 ==
Date: Mon, Jan 6 2014 9:59 am
From: prime cut
On 1/6/2014 8:59 AM, jim wrote:
> And yet you can't seem to identify what
> in the document supports the story that banks were
> forced to make bad loans.
http://www.businessinsider.com/three-ways-the-cra-pushed-countrywide-to-lower-lending-standards-2009-6
When we discuss the role of the Community Reinvestment Act and other
fair lending rules in contributing to lax lending standards, people bent
on exonerating the CRA often point out that many of the questionable
loans were made by non-depository mortgage companies not covered by the
CRA.
Barry Ritholtz has been a prominent critic of the theory that the CRA
has some culpability for lax lending. He has pointed out that 50% of
subprime loans were made by mortgage service companies not subject
comprehensive federal supervision. �How was this caused by either CRA or
GSEs?� Barry asked.
As much as I respect Barry�s formidable analytical powers, I�m afraid
he�s taken too narrow of the view of the matter. His question is far
easier to answer than he suspects. Regulations often touch those who are
not directly regulated. Indeed, the regulation of one group in a
marketplace will almost always wind up affecting other groups.
More concretely, there are three very specific ways in which the CRA
nudged Countrywide and other mortgage companies to adopt lax lending
standards.
1. The Creation Of Artificial Demand For Low-Income Mortgages. Banks
that were regulated by the CRA often found it difficult to meet their
obligations under the CRA directly. Long standing lending practices by
local loan officers were a big problem. But as banks expanded their
deposit bases and other businesses, they often found that they were at
risk of regulators discovering they had fallen behind in making CRA loans.
One way of addressing this problem was buying the loans in the secondary
market. Mortgage companies like Countrywide began to serve this entirely
artificial demand for CRA loans. Countrywide marketed its loans directly
to banks as a way for them to meet CRA obligations. "The result of these
efforts is an enormous pipeline of mortgages to low- and moderate-income
buyers. With this pipeline, Countrywide Securities Corporation (CSC) can
potentially help you meet your Community Reinvestment Act (CRA) goals by
offering both whole loan and mortgage-backed securities that are
eligible for CRA credit,� a Countrywide advertisement on its website read.
2. The Threat Of Regulation Is Often As Good As Regulation. It is
highly misleading to claim that just because mortgage companies were not
technically under the CRA that they were not required by regulators to
meet similar tests. In fact, regulators threatened that if the mortgage
companies didn�t step up to the plate by relaxing lending standards they
would be brought under the CRA umbrella and required to do so.
Here�s how City Journal explains the dynamic:
To meet their goals, the two mortgage giants enlisted large
lenders�including nonbanks, which weren�t covered by the CRA�into the
effort. Freddie Mac began an �alternative qualifying� program with the
Sears Mortgage Corporation that let a borrower qualify for a loan with a
monthly payment as high as 50 percent of his income, at a time when most
private mortgage companies wouldn�t exceed 33 percent. The program also
allowed borrowers with bad credit to get mortgages if they took
credit-counseling classes administered by Acorn and other nonprofits.
Subsequent research would show that such classes have little impact on
default rates.
Pressuring nonbank lenders to make more loans to poor minorities didn�t
stop with Sears. If it didn�t happen, Clinton officials warned, they�d
seek to extend CRA regulations to all mortgage makers. In Congress,
Representative Maxine Waters called financial firms not covered by the
CRA �among the most egregious redliners.� To rebuff the criticism, the
Mortgage Bankers Association (MBA) shocked the financial world by
signing a 1994 agreement with the Department of Housing and Urban
Development (HUD), pledging to increase lending to minorities and join
in new efforts to rewrite lending standards. The first MBA member to
sign up: Countrywide Financial, the mortgage firm that would be at the
core of the subprime meltdown.
3. The CRA Distorted the Mortgage Market. With banks offering
mortgages with high loan to value, delayed payment schedules and other
enticing features, the mortgage companies would have quickly found
themselves unable to compete if they didn�t offer similar loans. The
requirement to offer risky loans from banks created a situation where
other lenders found they had to offer similar products if they wanted to
expand their business.
Of course, Angelo Mozillo didn't need very much prompting on this score.
He believed exactly what the CRA regulators believed: that these lax
lending practices were the wave of the future, democratizing the glories
of home ownership.
== 22 of 25 ==
Date: Mon, Jan 6 2014 9:59 am
From: prime cut
On 1/6/2014 9:07 AM, jim wrote:
> Fannie Mae bought a few. The bad loans were sold to
> the GSEs by fraud.
http://www.businessinsider.com/three-ways-the-cra-pushed-countrywide-to-lower-lending-standards-2009-6
When we discuss the role of the Community Reinvestment Act and other
fair lending rules in contributing to lax lending standards, people bent
on exonerating the CRA often point out that many of the questionable
loans were made by non-depository mortgage companies not covered by the
CRA.
Barry Ritholtz has been a prominent critic of the theory that the CRA
has some culpability for lax lending. He has pointed out that 50% of
subprime loans were made by mortgage service companies not subject
comprehensive federal supervision. �How was this caused by either CRA or
GSEs?� Barry asked.
As much as I respect Barry�s formidable analytical powers, I�m afraid
he�s taken too narrow of the view of the matter. His question is far
easier to answer than he suspects. Regulations often touch those who are
not directly regulated. Indeed, the regulation of one group in a
marketplace will almost always wind up affecting other groups.
More concretely, there are three very specific ways in which the CRA
nudged Countrywide and other mortgage companies to adopt lax lending
standards.
1. The Creation Of Artificial Demand For Low-Income Mortgages. Banks
that were regulated by the CRA often found it difficult to meet their
obligations under the CRA directly. Long standing lending practices by
local loan officers were a big problem. But as banks expanded their
deposit bases and other businesses, they often found that they were at
risk of regulators discovering they had fallen behind in making CRA loans.
One way of addressing this problem was buying the loans in the secondary
market. Mortgage companies like Countrywide began to serve this entirely
artificial demand for CRA loans. Countrywide marketed its loans directly
to banks as a way for them to meet CRA obligations. "The result of these
efforts is an enormous pipeline of mortgages to low- and moderate-income
buyers. With this pipeline, Countrywide Securities Corporation (CSC) can
potentially help you meet your Community Reinvestment Act (CRA) goals by
offering both whole loan and mortgage-backed securities that are
eligible for CRA credit,� a Countrywide advertisement on its website read.
2. The Threat Of Regulation Is Often As Good As Regulation. It is
highly misleading to claim that just because mortgage companies were not
technically under the CRA that they were not required by regulators to
meet similar tests. In fact, regulators threatened that if the mortgage
companies didn�t step up to the plate by relaxing lending standards they
would be brought under the CRA umbrella and required to do so.
Here�s how City Journal explains the dynamic:
To meet their goals, the two mortgage giants enlisted large
lenders�including nonbanks, which weren�t covered by the CRA�into the
effort. Freddie Mac began an �alternative qualifying� program with the
Sears Mortgage Corporation that let a borrower qualify for a loan with a
monthly payment as high as 50 percent of his income, at a time when most
private mortgage companies wouldn�t exceed 33 percent. The program also
allowed borrowers with bad credit to get mortgages if they took
credit-counseling classes administered by Acorn and other nonprofits.
Subsequent research would show that such classes have little impact on
default rates.
Pressuring nonbank lenders to make more loans to poor minorities didn�t
stop with Sears. If it didn�t happen, Clinton officials warned, they�d
seek to extend CRA regulations to all mortgage makers. In Congress,
Representative Maxine Waters called financial firms not covered by the
CRA �among the most egregious redliners.� To rebuff the criticism, the
Mortgage Bankers Association (MBA) shocked the financial world by
signing a 1994 agreement with the Department of Housing and Urban
Development (HUD), pledging to increase lending to minorities and join
in new efforts to rewrite lending standards. The first MBA member to
sign up: Countrywide Financial, the mortgage firm that would be at the
core of the subprime meltdown.
3. The CRA Distorted the Mortgage Market. With banks offering
mortgages with high loan to value, delayed payment schedules and other
enticing features, the mortgage companies would have quickly found
themselves unable to compete if they didn�t offer similar loans. The
requirement to offer risky loans from banks created a situation where
other lenders found they had to offer similar products if they wanted to
expand their business.
Of course, Angelo Mozillo didn't need very much prompting on this score.
He believed exactly what the CRA regulators believed: that these lax
lending practices were the wave of the future, democratizing the glories
of home ownership.
== 23 of 25 ==
Date: Mon, Jan 6 2014 9:59 am
From: prime cut
On 1/6/2014 9:16 AM, jim wrote:
> Nice story, but where are the facts?
http://www.businessinsider.com/three-ways-the-cra-pushed-countrywide-to-lower-lending-standards-2009-6
When we discuss the role of the Community Reinvestment Act and other
fair lending rules in contributing to lax lending standards, people bent
on exonerating the CRA often point out that many of the questionable
loans were made by non-depository mortgage companies not covered by the
CRA.
Barry Ritholtz has been a prominent critic of the theory that the CRA
has some culpability for lax lending. He has pointed out that 50% of
subprime loans were made by mortgage service companies not subject
comprehensive federal supervision. �How was this caused by either CRA or
GSEs?� Barry asked.
As much as I respect Barry�s formidable analytical powers, I�m afraid
he�s taken too narrow of the view of the matter. His question is far
easier to answer than he suspects. Regulations often touch those who are
not directly regulated. Indeed, the regulation of one group in a
marketplace will almost always wind up affecting other groups.
More concretely, there are three very specific ways in which the CRA
nudged Countrywide and other mortgage companies to adopt lax lending
standards.
1. The Creation Of Artificial Demand For Low-Income Mortgages. Banks
that were regulated by the CRA often found it difficult to meet their
obligations under the CRA directly. Long standing lending practices by
local loan officers were a big problem. But as banks expanded their
deposit bases and other businesses, they often found that they were at
risk of regulators discovering they had fallen behind in making CRA loans.
One way of addressing this problem was buying the loans in the secondary
market. Mortgage companies like Countrywide began to serve this entirely
artificial demand for CRA loans. Countrywide marketed its loans directly
to banks as a way for them to meet CRA obligations. "The result of these
efforts is an enormous pipeline of mortgages to low- and moderate-income
buyers. With this pipeline, Countrywide Securities Corporation (CSC) can
potentially help you meet your Community Reinvestment Act (CRA) goals by
offering both whole loan and mortgage-backed securities that are
eligible for CRA credit,� a Countrywide advertisement on its website read.
2. The Threat Of Regulation Is Often As Good As Regulation. It is
highly misleading to claim that just because mortgage companies were not
technically under the CRA that they were not required by regulators to
meet similar tests. In fact, regulators threatened that if the mortgage
companies didn�t step up to the plate by relaxing lending standards they
would be brought under the CRA umbrella and required to do so.
Here�s how City Journal explains the dynamic:
To meet their goals, the two mortgage giants enlisted large
lenders�including nonbanks, which weren�t covered by the CRA�into the
effort. Freddie Mac began an �alternative qualifying� program with the
Sears Mortgage Corporation that let a borrower qualify for a loan with a
monthly payment as high as 50 percent of his income, at a time when most
private mortgage companies wouldn�t exceed 33 percent. The program also
allowed borrowers with bad credit to get mortgages if they took
credit-counseling classes administered by Acorn and other nonprofits.
Subsequent research would show that such classes have little impact on
default rates.
Pressuring nonbank lenders to make more loans to poor minorities didn�t
stop with Sears. If it didn�t happen, Clinton officials warned, they�d
seek to extend CRA regulations to all mortgage makers. In Congress,
Representative Maxine Waters called financial firms not covered by the
CRA �among the most egregious redliners.� To rebuff the criticism, the
Mortgage Bankers Association (MBA) shocked the financial world by
signing a 1994 agreement with the Department of Housing and Urban
Development (HUD), pledging to increase lending to minorities and join
in new efforts to rewrite lending standards. The first MBA member to
sign up: Countrywide Financial, the mortgage firm that would be at the
core of the subprime meltdown.
3. The CRA Distorted the Mortgage Market. With banks offering
mortgages with high loan to value, delayed payment schedules and other
enticing features, the mortgage companies would have quickly found
themselves unable to compete if they didn�t offer similar loans. The
requirement to offer risky loans from banks created a situation where
other lenders found they had to offer similar products if they wanted to
expand their business.
Of course, Angelo Mozillo didn't need very much prompting on this score.
He believed exactly what the CRA regulators believed: that these lax
lending practices were the wave of the future, democratizing the glories
of home ownership.
== 24 of 25 ==
Date: Mon, Jan 6 2014 10:00 am
From: prime cut
On 1/6/2014 9:30 AM, jim wrote:
> "There is no data anywhere to cast doubt on the vastly
> superior loan performance of the GSEs.
http://www.businessinsider.com/three-ways-the-cra-pushed-countrywide-to-lower-lending-standards-2009-6
When we discuss the role of the Community Reinvestment Act and other
fair lending rules in contributing to lax lending standards, people bent
on exonerating the CRA often point out that many of the questionable
loans were made by non-depository mortgage companies not covered by the
CRA.
Barry Ritholtz has been a prominent critic of the theory that the CRA
has some culpability for lax lending. He has pointed out that 50% of
subprime loans were made by mortgage service companies not subject
comprehensive federal supervision. �How was this caused by either CRA or
GSEs?� Barry asked.
As much as I respect Barry�s formidable analytical powers, I�m afraid
he�s taken too narrow of the view of the matter. His question is far
easier to answer than he suspects. Regulations often touch those who are
not directly regulated. Indeed, the regulation of one group in a
marketplace will almost always wind up affecting other groups.
More concretely, there are three very specific ways in which the CRA
nudged Countrywide and other mortgage companies to adopt lax lending
standards.
1. The Creation Of Artificial Demand For Low-Income Mortgages. Banks
that were regulated by the CRA often found it difficult to meet their
obligations under the CRA directly. Long standing lending practices by
local loan officers were a big problem. But as banks expanded their
deposit bases and other businesses, they often found that they were at
risk of regulators discovering they had fallen behind in making CRA loans.
One way of addressing this problem was buying the loans in the secondary
market. Mortgage companies like Countrywide began to serve this entirely
artificial demand for CRA loans. Countrywide marketed its loans directly
to banks as a way for them to meet CRA obligations. "The result of these
efforts is an enormous pipeline of mortgages to low- and moderate-income
buyers. With this pipeline, Countrywide Securities Corporation (CSC) can
potentially help you meet your Community Reinvestment Act (CRA) goals by
offering both whole loan and mortgage-backed securities that are
eligible for CRA credit,� a Countrywide advertisement on its website read.
2. The Threat Of Regulation Is Often As Good As Regulation. It is
highly misleading to claim that just because mortgage companies were not
technically under the CRA that they were not required by regulators to
meet similar tests. In fact, regulators threatened that if the mortgage
companies didn�t step up to the plate by relaxing lending standards they
would be brought under the CRA umbrella and required to do so.
Here�s how City Journal explains the dynamic:
To meet their goals, the two mortgage giants enlisted large
lenders�including nonbanks, which weren�t covered by the CRA�into the
effort. Freddie Mac began an �alternative qualifying� program with the
Sears Mortgage Corporation that let a borrower qualify for a loan with a
monthly payment as high as 50 percent of his income, at a time when most
private mortgage companies wouldn�t exceed 33 percent. The program also
allowed borrowers with bad credit to get mortgages if they took
credit-counseling classes administered by Acorn and other nonprofits.
Subsequent research would show that such classes have little impact on
default rates.
Pressuring nonbank lenders to make more loans to poor minorities didn�t
stop with Sears. If it didn�t happen, Clinton officials warned, they�d
seek to extend CRA regulations to all mortgage makers. In Congress,
Representative Maxine Waters called financial firms not covered by the
CRA �among the most egregious redliners.� To rebuff the criticism, the
Mortgage Bankers Association (MBA) shocked the financial world by
signing a 1994 agreement with the Department of Housing and Urban
Development (HUD), pledging to increase lending to minorities and join
in new efforts to rewrite lending standards. The first MBA member to
sign up: Countrywide Financial, the mortgage firm that would be at the
core of the subprime meltdown.
3. The CRA Distorted the Mortgage Market. With banks offering
mortgages with high loan to value, delayed payment schedules and other
enticing features, the mortgage companies would have quickly found
themselves unable to compete if they didn�t offer similar loans. The
requirement to offer risky loans from banks created a situation where
other lenders found they had to offer similar products if they wanted to
expand their business.
Of course, Angelo Mozillo didn't need very much prompting on this score.
He believed exactly what the CRA regulators believed: that these lax
lending practices were the wave of the future, democratizing the glories
of home ownership.
== 25 of 25 ==
Date: Mon, Jan 6 2014 10:00 am
From: prime cut
On 1/6/2014 9:41 AM, jim wrote:
> The management of Countrywide knew they business model
> would not endure. Didn't matter.
http://www.businessinsider.com/three-ways-the-cra-pushed-countrywide-to-lower-lending-standards-2009-6
When we discuss the role of the Community Reinvestment Act and other
fair lending rules in contributing to lax lending standards, people bent
on exonerating the CRA often point out that many of the questionable
loans were made by non-depository mortgage companies not covered by the
CRA.
Barry Ritholtz has been a prominent critic of the theory that the CRA
has some culpability for lax lending. He has pointed out that 50% of
subprime loans were made by mortgage service companies not subject
comprehensive federal supervision. �How was this caused by either CRA or
GSEs?� Barry asked.
As much as I respect Barry�s formidable analytical powers, I�m afraid
he�s taken too narrow of the view of the matter. His question is far
easier to answer than he suspects. Regulations often touch those who are
not directly regulated. Indeed, the regulation of one group in a
marketplace will almost always wind up affecting other groups.
More concretely, there are three very specific ways in which the CRA
nudged Countrywide and other mortgage companies to adopt lax lending
standards.
1. The Creation Of Artificial Demand For Low-Income Mortgages. Banks
that were regulated by the CRA often found it difficult to meet their
obligations under the CRA directly. Long standing lending practices by
local loan officers were a big problem. But as banks expanded their
deposit bases and other businesses, they often found that they were at
risk of regulators discovering they had fallen behind in making CRA loans.
One way of addressing this problem was buying the loans in the secondary
market. Mortgage companies like Countrywide began to serve this entirely
artificial demand for CRA loans. Countrywide marketed its loans directly
to banks as a way for them to meet CRA obligations. "The result of these
efforts is an enormous pipeline of mortgages to low- and moderate-income
buyers. With this pipeline, Countrywide Securities Corporation (CSC) can
potentially help you meet your Community Reinvestment Act (CRA) goals by
offering both whole loan and mortgage-backed securities that are
eligible for CRA credit,� a Countrywide advertisement on its website read.
2. The Threat Of Regulation Is Often As Good As Regulation. It is
highly misleading to claim that just because mortgage companies were not
technically under the CRA that they were not required by regulators to
meet similar tests. In fact, regulators threatened that if the mortgage
companies didn�t step up to the plate by relaxing lending standards they
would be brought under the CRA umbrella and required to do so.
Here�s how City Journal explains the dynamic:
To meet their goals, the two mortgage giants enlisted large
lenders�including nonbanks, which weren�t covered by the CRA�into the
effort. Freddie Mac began an �alternative qualifying� program with the
Sears Mortgage Corporation that let a borrower qualify for a loan with a
monthly payment as high as 50 percent of his income, at a time when most
private mortgage companies wouldn�t exceed 33 percent. The program also
allowed borrowers with bad credit to get mortgages if they took
credit-counseling classes administered by Acorn and other nonprofits.
Subsequent research would show that such classes have little impact on
default rates.
Pressuring nonbank lenders to make more loans to poor minorities didn�t
stop with Sears. If it didn�t happen, Clinton officials warned, they�d
seek to extend CRA regulations to all mortgage makers. In Congress,
Representative Maxine Waters called financial firms not covered by the
CRA �among the most egregious redliners.� To rebuff the criticism, the
Mortgage Bankers Association (MBA) shocked the financial world by
signing a 1994 agreement with the Department of Housing and Urban
Development (HUD), pledging to increase lending to minorities and join
in new efforts to rewrite lending standards. The first MBA member to
sign up: Countrywide Financial, the mortgage firm that would be at the
core of the subprime meltdown.
3. The CRA Distorted the Mortgage Market. With banks offering
mortgages with high loan to value, delayed payment schedules and other
enticing features, the mortgage companies would have quickly found
themselves unable to compete if they didn�t offer similar loans. The
requirement to offer risky loans from banks created a situation where
other lenders found they had to offer similar products if they wanted to
expand their business.
Of course, Angelo Mozillo didn't need very much prompting on this score.
He believed exactly what the CRA regulators believed: that these lax
lending practices were the wave of the future, democratizing the glories
of home ownership.
==============================================================================
TOPIC: English wheel, and other metalworking questions
http://groups.google.com/group/rec.crafts.metalworking/t/21791cc0fef8a197?hl=en
==============================================================================
== 1 of 1 ==
Date: Mon, Jan 6 2014 10:01 am
From: "Jim Wilkins"
"stryped" <stryped1@yahoo.com> wrote in message
news:8306a5eb-d71e-4e7b-9b41-66a4ea3f8744@googlegroups.com...
> On Monday, January 6, 2014 8:27:13 AM UTC-6, Jim Wilkins wrote:
>> "stryped" <stryped1@yahoo.com> wrote in message
>>
>
> I guess I was meaning a more three dimensional shape. With the
> purpose of being able to tell the angle of curves and other features
> on a car.
>
> You may be able to do it mathematically. (Not my forte) I thought if
> you could somehow come up with a drawing it could be blown to the
> proper proportion and projected onto a wall indicating the
> appropriate size if that makes sense.
That is exactly what 'lofting' does. The Loft is the top floor of the
boat-building shed, where the workmen lay out full-sized patterns for
the frames of the ship on the floor.
http://www.leithshipyards.com/mould-loft/lofting.html
http://www.dockmuseum.org.uk/archive/details.asp?imageid=3173&title=Mould+Loft&subject=The+Shipyard&subtitle=
The process isn't obsolete; I've seen lofted plywood templates for
shaping the diving planes of a nuclear submarine.
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