11/07/2007
"End of the Housing Bubble: Minorities Hurt Most" reports The New York Times for the umpteenth time:
What’s Behind the Race Gap?
Last year, blacks were 2.3 times more likely, and Hispanics twice as likely, to get high-cost loans as whites after adjusting for loan amounts and the income of the borrowers, according to an analysis of loans reported under the federal Home Mortgage Disclosure Act. (Asians are somewhat less likely than whites to take out high-cost loans.) Researchers and industry officials agree that there is probably no single explanation for the lending patterns, though the history of banks' avoiding minority neighborhoods, the practice known as "redlining," is a good place to start.
It’s the Original Sin Theory of Race: any time, any where blacks or Hispanics mess up, white people have to be the original cause. Obviously, income is hardly the only factor in creditworthiness: expenditures relative to income and other sources of wealth, such as inheritances, play a role. (It’s bizarre that we've become so brain dead from political correctness that nobody dares even point out that white people tend to have wealthier relatives than blacks and Latinos have.)
If you read between the lines of the article, however, you'll see that one cause of NAMs (Non-Asian Minorities) getting hit harder by ridiculous subprime mortgages was the government’s long war against redlining:
The biggest home lenders in minority neighborhoods are mortgage companies that provide only subprime loans, not full-service banks that do a range of lending.
It may be that these borrowers do not have access to traditional banks, because there are no branches near them. The Community Reinvestment Act, enacted 30 years ago, was intended to address redlining by forcing banks to make loans in lower-income areas. But the law’s provisions do not apply to banks in neighborhoods where they have no branches.
"You could go into a middle-class area in Queens County that is white and there will be lots of banks on the shopping street," said Alfred A. DelliBovi, president of the Federal Home Loan Bank of New York and a deputy secretary of the Department of Housing and Urban Development in the first Bush administration. "If you go to an area that is equal income and that is black, you won’t see many."
Banks typically locate branches where they believe they will get the most deposits. A lower savings rate and a distrust of banks stemming from a legacy of redlining may help explain why there are fewer branches in minority neighborhoods, Mr. DelliBovi said.
Huh?
Let’s put it in plain English: a big reason that legitimate banks stay away from NAM neighborhoods is because if they operate in NAM neighborhoods but don’t hand out loans to NAMs at the same rate they provide loans to WaAs (Whites and Asians), the government will sue them for racial discrimination. So, they just stay far away, leaving NAM neighborhoods to high pressure boiler room operations.
Finally, toward the end of the article, the reporters toss in an undigested quote that hints at the real story, but still ignores the government’s role:
"If we turn the clock back 30 years ago, we had redlining," said Nicholas Retsinas, director of the Joint Center for Housing Studies at Harvard University. "In the last few years, we have had the opposite — an overextension of credit by lenders and an overextension by borrowers."
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