Phi Beta Cons

The Right take on higher education.

Re: Homeownership Gap


Might as well throw my print-edition piece on the Community Reinvestment Act into the mix.

It would take some serious econometric work to prove exactly how much “housing affirmative action” played into the crisis. My assessment was something like “significant, but not the primary cause”:

It would be unfair to blame CRA entirely, though. A recent American Prospect article presents two important statistics: CRA-evaluated institutions issued only about half of sub-prime loans, and independent mortgage companies (which are non-CRA) made risky loans at more than twice the rate of CRA banks and thrifts. As the Prospect sees it, lenders issued sub-prime mortgages simply because such loans were expected to be profitable. Indeed, pre-crash, for Countrywide, the profit-to-loan ratio was higher on sub-prime than on prime loans. BankLinks noted that 95 percent of Bear Stearns’s buyers were not banks but “insurance companies, investment funds, etc., which invest based on their portfolio needs.” …

The Left didn’t cause the housing crisis. But in trying to help the poor and close racial gaps, it worked to push mortgaging in the direction of easier credit. In the end, this often hurt the intended beneficiaries.


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