Here We Go Again

Recall the role that subprime mortgages played in the Great Financial Crisis of 2008? As the housing bubble burst, borrowers with subprime mortgages began to default. These mortgages were the underpinings of securities instruments, which quickly became worthless, leading to devaluation of those securities and subsequent chaos in financial markets. (For a truly inspired explanation see the slideshow at the end of this post.)

Well, it seems that the obama administration is incapable of learning from the past.

Talk about not learning from past mistakes: A government department is again intimidating banks into lending to minority borrowers at below-market rates, all in the name of combating "discrimination." Welcome to the next housing mess.

Obama's Justice Department has argued that bankers who don’t make as many loans to blacks as whites are guilty of racial discrimination even if they harbor no discriminatory intent, and make lending decisions based on neutral lending criteria such as credit scores

Using the threat of legal action, Assistant Attorney General for Civil Rights Thomas Perez has extorted settlements from banks “setting aside prime-rate mortgages for low-income blacks and Hispanics with blemished credit,” treating welfare “as valid income in mortgage applications” and providing “favorable interest rates and down-payment assistance for minority borrowers with weak credit.”

Eric Holder and his in-search-of-victims-where-none-exist minions aren't the only ones who have no concept of how the real world works. (From Peter)

California could ban lender-initiated home foreclosures, under a proposed amendment to the state’s constitution that would make home ownership a fundamental right.

The Foreclosure Modification Act, a proposed citizen’s initiative, would ban mortgagees from foreclosing on owner-occupied dwellings in the Golden State. It would further require banks and other lenders to help mortgage borrowers struggling amid financial hardship or illness.

Additionally, lenders would be required to reduce loan principal amounts to reflect a drop in local property values of at least 10 percent. Payments would be adjusted without a new credit review, the proposal states.

Quoting Peter:

Have the moonbats behind this monstrosity ever thought about a few basic facts?

1. If a lender knows he won't be allowed to foreclose on a defaulting customer, what incentive does he have to make the loan in the first place?
2. If a lender must reduce the principal amount of the loan, even though he's already paid out that amount to purchase the property, he's basically guaranteed a loss on the transaction - so why would he undertake the transaction at all?
3. If it becomes a constitutional right to 'purchase and own a home', this necessarily implies that failure to grant the necessary loan to buy a home is discriminating against an individual's fundamental rights - which means that normal loan criteria such as credit history, income, ability to pay it off, etc. are all to be trumped by the applicant's 'rights'. What lender with any sanity will continue to offer home loans in such a state?

Answers:

1. None
2. He wouldn't
3. None

Maybe after obama gets tossed out on his ass next year he'll move to California. He'll fit right in...

Financial Crisis Explained (Language). Simple but to the point!

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