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"Risky lending" isn't giving a decent interest rate to a person whose income qualifies him for a loan, but has a FICO score of 600. "Risky Lending" is offering an adjustable rate loan with a teaser entry rate when the lender knows the applicant won't be able to afford it when the rate adjusts....they didn't care, they were selling the loan within weeks anyways. "Risky Lending" is making loans to anyone who can fog a mirror...which is what Countrywide admits to doing. And nowhere in any law does it mandate banks to do any of that. It only mandated that banks could not "redline". The rest was the work of the banks themselves.but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.
KCFlyer said:
What part of the community reinvestment act mandated that banks make loans to people wtih no jobs, or that banks fudge the income of applicants? What part of the community reinvestment act forced banks to offer adjustable rate loans with teaser rates? What part of the community reinvestment act mandated that banks bundle this crap up and sell it as investment grade? And last but not least....why did so many who got a loan under JIMMY CARTER wait 27 year before letting it fall into foreclosure? Indeed, the key line in the article that you seem to overlook is this one:
"Risky lending" isn't giving a decent interest rate to a person whose income qualifies him for a loan, but has a FICO score of 600. "Risky Lending" is offering an adjustable rate loan with a teaser entry rate when the lender knows the applicant won't be able to afford it when the rate adjusts....they didn't care, they were selling the loan within weeks anyways. "Risky Lending" is making loans to anyone who can fog a mirror...which is what Countrywide admits to doing. And nowhere in any law does it mandate banks to do any of that. It only mandated that banks could not "redline". The rest was the work of the banks themselves.
As originally enacted in 1977, the CRA vaguely mandated regulators to consider whether an insured bank was serving the needs of the “whole” community. For 16 years, the act was invoked rather infrequently, but 1993 marked a decisive turn in its enforcement. What changed? Substantial media and political attention was showered upon a 1992 Boston Federal Reserve Bank study of discrimination in home mortgage lending. This study concluded that, while there was no overt discrimination in banks’ allocation of mortgage funds, loan officers gave whites preferential treatment. The methodology of the study has since been questioned, but at the time it was highly influential with regulators and members of the incoming Clinton administration; in 1993, bank regulators initiated a major effort to reform the CRA regulations.
http://spectator.org/articles/42211/true-origins-financial-crisis