The Minority Subprime Mortgage Disaster

The Minority Subprime Mortgage Disaster

Minority Subprime Disaster Costs US at Least $1.5 Trillion.

by James Buchanan

If you estimate an average loss in value of about $200,000 combined depreciation and damage to each home that was in the minority subprime loan program and that about 7.5 million Blacks and Latinos got these loans with no down payments and failed to pay them off, the total lost to the banking industry would be $200k times 7.5 million or $1.5 trillion dollars.

One source confirms the magnitude of this loss noting that: “The IMF estimates that financial institutions around the globe will eventually have to write off $1.5 trillion of their holdings of subprime MBSs. About $750 billion in such losses had been recognized as of November 2008. These losses have wiped out much of the capital of the world banking system.”

Various leftists have attempted to blame banks or predatory lenders for the subprime disaster. The truth is that minorities and liberal policies forced on the banks by federal courts caused this disaster. While it’s true that many banks offered one or two percent “teaser rates” for the first year of the mortgage, that doesn’t give the minorities an excuse. Just how unintelligent are people who don’t understand that the teaser interest rate is going to climb rapidly after the first year?

Most of the people who took these minority subprime loans were NOT serious first time home buyers, but were in fact doing real estate speculation, hoping to sell their house for a $50k to $100k profit after living in it for a year. Unfortunately for them (and for us) the housing bubble burst, millions of Blacks and Latinos (predictably) walked away from their financially underwater homes, and stuck the banks with the full financial loss since the liberals insanely waved the requirement for minorities to put down payments on their homes.

Very few articles in the mainstream media have discussed the role of minorities in the subprime disaster. A New York Post article reports that “a ‘landmark’ 1992 study from the Boston Fed concluded that mortgage-lending discrimination was systemic. That study was tremendously flawed – a colleague and I later showed that the data it had used contained thousands of egregious typos, such as loans with negative interest rates. Our study found no evidence of discrimination. Yet the political agenda triumphed – with the president of the Boston Fed saying no new studies were needed, and the US comptroller of the currency seconding the motion. No sooner had the ink dried on its discrimination study than the Boston Fed, clearly speaking for the entire Fed, produced a manual for mortgage lenders stating that: ‘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. Sound crazy? You bet… On the Web, you can still find CRA loans available via ACORN with ’100 percent financing . . . no credit scores . . . undocumented income . . . even if you don’t report it on your tax returns.’ ”

So a fabricated “study” by the Boston Fed claimed that minorities were being discriminated against for home loans. In reality, Blacks and Latinos were failing to qualify for home loans because their average income is lower, their average credit history is worse and their ability to make a down payment is worse than the average for White people. Unfortunately, liberals entrenched in powerful positions in our government and court system chose to ignore all the evidence that ordinary Blacks and Latinos have certain inherent, persistent flaws that make them bad candidates for home loans.

Not only did the Feds demand that more loans be made to minorities, they insisted that traditional criteria like proof of employment and the ability to make a down payment should not be used to disqualify loan applicants. Lending to unqualified minorities was the first big reason for the subprime crisis. Eliminating down payments was the second big reason. The down payment is critically necessary in the mortgage industry. By forcing people to make a 20 percent down payment, the chances of the borrower “walking away” from a home loan (if the housing prices start to drop or the monthly payments increase) are greatly reduced.

The bottom line is that Third World people are financially bad for the US. Huge amounts of money are squandered on them to supply them with Section 8 apartments to live in, food stamps, welfare and now they will receive “Obamacare” and this additional tax burden will be dumped primarily on the shoulders of White taxpayers. Most of the good-paying jobs, that Blacks and Latinos get, are stolen from better qualified Whites thanks to Affirmative Action. The vast majority of Blacks and Latinos are poor and impose a gigantic tax burden on the rest of us. The state of California is rapidly plunging toward bankruptcy thanks to its non-White majority. Too many needy Third World poor and too few productive White taxpayers.

Perhaps, the most incredible thing about the Minority Subprime Mortgage Crisis is that most people did not know it was building up. It basically came out of nowhere with a price tag of 1.5 trillion dollars and it has greatly accelerated the financial collapse of California and the United States.

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