Tuesday, September 30, 2008

Them Damn Minorities!

That's the new Conservative meme about the secret real reason for the financial markets crisis. Yup. It's the Community Reinvestment Act that caused it, forcing banks to lend to minorities:

Several conservatives in the media have recently blamed the Community Reinvestment Act for the current financial crisis -- when, in fact, the CRA does not apply to institutions making the vast majority of troubled loans underlying the crisis. It applies only to depository institutions, such as banks and savings and loan associations. Experts have estimated that 80 percent of high-priced subprime loans were offered by financial institutions that are not subject to the CRA.

Well, if it's not that particular act, it must be the minorities anyway. Except for this:

2008-ComplianceTech, a provider of technology and business intelligence for consumer lending institutions and government agencies, has released an industry report indicating that the majority of subprime-rate loans originated in 2006 were made to non-Hispanic Whites and upper-income borrowers (conventional, 1st lien, 1-to-4 family, owner-occupied, home purchase and refinance).The findings are contrary to the way subprime-rate lending has been portrayed. Frequent media portrayals and congressional dialogue refer to subprime-rate lending as a minority and low-income issue. Findings in the report are based on data submitted by lenders under the Home Mortgage Disclosure Act (HMDA) analyzed with the data-mining tool LendingPatterns(TM).

The report concluded that a disproportionate share of loans made to minorities and low-income borrowers were subprime-rate loans, but the majority of subprime-rate loans were made to non-Hispanic Whites and upper-income borrowers. Of the 1,917,809 subprime-rate loans originated in 2006, non-Hispanic Whites had 70.82 percent of the loans, and 56.23 percent of the subprime-rate loans. Upper-income borrowers had the highest share of the subprime-rate loans at 39.37 percent, followed by 27.55 percent for middle-income borrowers and 20.99 percent for moderate-income borrowers.

Contrary to popular belief, low-income borrowers had only 149,173, or 7.57 percent, of 2006 subprime-rate loans. The report also concluded that the majority of subprime-rate loans were originated in predominately-White geographic regions (areas representing census tracts less than 30 percent minority).