Stan J Liebowitz
http://www.utdallas.edu/~liebowit/ professor of Economics in the Business School at the University of Texas at Dallas has addressed this topic.
http://www.nypost.com/seven/02052008/po ... htm?page=0 “The Real Scandal”
“...the mortgage crisis is that it is a direct result of an intentional loosening of underwriting standards - done in the name of ending discrimination, despite warnings that it could lead to wide-scale defaults. ... In the 1980s ... activists [claimed] ... that banks discriminated against minorities in mortgage lending. In 1989, sympathetic members of Congress got the Home Mortgage Disclosure Act amended to force banks to collect racial data on mortgage applicants; this allowed various studies to be ginned up that seemed to validate the original accusation. ... the Boston Fed [stated] "discrimination may be observed when a lender's underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants." ... Some of these "outdated" criteria included the size of the mortgage payment relative to income, credit history, savings history and income verification. Instead, the Boston Fed ruled that participation in a credit-counseling program should be taken as evidence of an applicant's ability to manage debt. ...”
An early paper of his on this topic is
http://www.utdallas.edu/~liebowit/mortg ... tgages.pdf “Mortgage Discrimination in Boston: Where's the Bias?”
His latest paper is downloadable at
http://papers.ssrn.com/sol3/papers.cfm? ... id=1211822 “Anatomy of a Train Wreck: Causes of the Mortgage Meltdown” “... Why did the mortgage market melt-down so badly? Why were there so many defaults when the economy was not particularly weak? Why were the securities based upon these mortgages not considered anywhere as risky as they actually turned out to be? It is the thesis of this paper that, in an attempt to increase homeownership, particularly by minorities and the less affluent, an attack on underwriting standards was undertaken by virtually every branch of the government since the early 1990s. The decline in mortgage underwriting standards was universally praised as an 'innovation' in mortgage lending by regulators, academic specialists, GSEs, and housing activists. This weakening of underwriting standards succeeded in increasing home ownership and also the price of housing, helping to lead to a housing price bubble. The bubble increased the number of housing speculators with estimates indicating that one quarter of all home sales were speculative sales prior to the bubble bursting. The recent rise in foreclosures is not related to the subprime/prime distinction since both markets had similar size increases in foreclosures that occurred at exactly the same time. Instead, the adjustable-rate/fixed-rate distinction is the key to understanding the rise in foreclosures. This is consistent with speculators turning and running when housing prices stopped rising. It is not consistent with the nasty-subprime-lender hypothesis currently considered to be the cause of the mortgage meltdown. ...”
The Boston Fed. Boston Fed - Equal Opportunity Lending manual can be found at
http://www.bos.frb.org/commdev/commaff/closingt.pdf Why did so many banks lend to so many with a real potential for default?
Laurence Auster’s article,
http://amnation.com/vfr/#008719 dramatically entitled “Racial socialism and the subprime mortgage crisis” links to an at least superficially informative article by Thomas DiLorenzo
http://www.lewrockwell.com/dilorenzo/dilorenzo125.html “The Government-Created Subprime Mortgage Meltdown”
Steve sailer has also addressed this
http://isteve.blogspot.com/2008/09/dive ... nking.html
