Do We Have A Case

New Orleans     Rick Smith, heading our St. Petersburg research team, forwarded me a piece this morning done by Katrina Vanden Heuvel of the Nation based on a conversation she was having with Jesse Jackson who was calling from New Delhi. Most of it was old hat, but pulling the threads together it made a good point: Does the subprime crisis represent a gap in civil rights enforcement or in law?

In talking to Katrina, Jackson used the term “steering” when referring to the way that African-American and Latino borrowers were routed to subprime products, even when they qualified for prime loans and regular mortgages. Steering, as he knew, is a term of art and in the context of residential activity best describes the old blockbusting practice of flipping entire neighborhoods in the 50’s, 60’s, and 70’s as part of the redlining phenomenon that the Community Reinvestment Act was supposed to stop when passed in the mid-70’s.

Katrina pointes out:

“In 2005 and 2006, over 50% of all loans made to African-Americans, and over 40% to Latinos, were subprime — compared to only 19% to white borrowers. Martin Gruenberg, vice chairman of the Federal Deposit Insurance Corporation (FDIC), said…in January, ‘Only one-sixth of this differential could be accounted for by the ability of the borrower.’ Analysis of the Home Mortgage Disclosure Act (HMDA) data shows that African-Americans and Latinos in New York City, Boston, Washington, Philadelphia and other cities were two to three times more likely to have subprime, high-cost loans than white borrowers with similar incomes and loan amounts.”

She also pointed out how little enforcement has been done in the last 8 years. Essentially none!

…Congressman Al Green of Texas asked how many cases had been prosecuted by the Justice Department in the last five years, no one knew the answer. A call to the Justice Department brought this e-mail response, "The Department has used its authority to enforce the Fair Housing Act and the Equal Credit Opportunity Act to bring cases against lenders that targeted certain protected classes of borrowers with predatory or abusive loans: United States v. Delta Funding (2000); United States v. Long Beach Mortgage (1996); Hargraves v. Capital City Mortgage Corp. (2000).

Seems little question that with this much smoke, there’s a blazing fire not far away. We need to get some trucks and hoses on this part of the problem and make sure that the companies and hustlers burning up our neighborhoods end up paying for the damage.

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