Edward Pinto has been very thoroughly discredited (see Barry Ritholtz's Big Picture for a variety of posts and links on the subject)... Moreover, his involvement in the FCIC investigation of the causes of the financial crisis is a breach of ethics. Finally, why would anyone believe that a former Fannie Chief Credit Officer and a guy who's been involved in housing finance throughout his career is in any way impartial? Wallison and Pinto are typical crisis denialists, who are out there to whitewash the banking industry and allow it to go back to business as usual. Blaming CRA is just an attempt at misdirection.
If they don't qualify under CRA then they can apply for a subprime loan that carries a higher rate which is what was a major cause of the Panic of '08. These nonCRA loans were what caused the CRA lending banks to collapse. CRA is subprime but not all subprime was CRA. This is what I think people are confusing.
Most subprime lenders weren't subject to federal lending law The criticisms of the reinvestment act don't make sense to Glenn Hayes. He runs Neighborhood Housing Services of Orange County, which works with banks to provide CRA loans to first-time homebuyers. In its 14-year history, the nonprofit has helped 1,200 families buy their first homes. Score so far: No foreclosures and a delinquency rate under 1 percent. ------- CRA did not cause the Panic of '08. Another read: Did the CRA cause the mortgage market meltdown?
About 1998. Remember in May 1997 the tax code was changed. Before that, you could only defer cap gains tax on the sale of principal residence. After that, you could make up to $250,000 single and $500,000 married tax free.
I don't know how to say this any different. If you do forensic accounting, of course you cannot find CRA's fingerprints on everything since the prime cause is far removed from final effect in the nonlinear process known as history. The important question to ask is what happened in 1994. Maxine Waters, the Clintons, and all the so called progressives were determined to push banks into lower lending standards. Once the lenders made up their minds under this pressure to start lending subprime, the bottle was uncorked and you didn't even need CRA anymore. Liberals were going to use CRA to bash lenders over their head but it turned out they didn't need to. All that followed is a result of the original catalyst, and the lending markets being what they are, tried to find a way to make money off the shitty loans they were pushed into in 1994. The plot clearly shows that 1994 was a special year in all this, and now we know what happened in 1994.
Right, fuel for the fire, and so the house flipping began. Enhanced because you could buy with little down which in turn was because lenders were pressured by liberals.
Clinton threatened to extend CRA if banks didn't fall in line, it was a club used to bash banks into subprime. I don't care about your anecdote, it proves nothing. Later the markets discovered securitization as a response to subprime, and viola, bubbble+meltdown.
-George Will (July 2011) But I only want to quote Clinton, and once again point out the housing ownership bubble that started in 1994. Liberalism is far more effective than war at trashing ones economy.