Attack on Community Reinvestment Latest Battle in Republicans War on the Poor

Little Rock   A headline in the Wall Street Journal marked another salvo in the vicious war that the Republicans and the Trump administration has launched on low-and-moderate income and minority families across the country. This time it was not transferring tax subsidies to the rich or attempting to eviscerate their healthcare and kill them. This time they are trying to force them to be permanent renters or homeless in order to transfer more benefits back to banks by trying to further gut the Community Reinvestment Act of 1977.

CRA, as it is known, coupled with HMDA, the Home Mortgage Disclosure Act, has been the key tool for forty years in forcing banks to lend to lower income and minority neighborhoods. CRA was critical in ending the governmental sanctioning and encouragement of housing discrimination called redlining, which created zones where banks would not issue mortgages. And, it was – and is potentially about to be – even worse. For those with long memories part of the proof that drove CRA was the statistical evidence that there was a lending and deposit deficit and transfer between lower income communities and higher income ones. Excess money from banking customers’ deposits from low income communities enabled loans vastly in excess of deposits in higher income communities in the same urban area that financed sprawl and suburban development and created blight and abandonment in urban, lower income and minority communities. This was not just discrimination, but devastation triggered by banking disinvestment.

The Treasury Department and the Office of the Comptroller are preparing today to announce proposals to lighten the load on banks. Remember these are the same banks that created the credit deserts before CRA in 1977 and have now intensified desertification in these communities in the wake of their ineptness and reckless speculation that triggered the Great Recession in 2007. If there was any sense of irony in political philosophy and policy, this would be the case study, as Treasury now attempts to “reward” banks for not lending in lower income areas over the last decade, by making it easier for them to, yes, you got it, NOT lend in lower income areas.

They are masking this outright robbing from the poor and racism by hiding under the banner of there being burdensome regulations on the banks that cost “billions” in their words. Billions in banking is the equivalent of their bar bill for the trillions that they collectively handle, hoard, and sometimes lend. If any one needed more regulations, rather than less, it’s banks!

The details are still emerging but the headlines are another battle cry in the ongoing war on the poor.

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Please enjoy tUnE-yArDs’ Heart Attack.

Thanks to KABF.

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Private Equity Sabotaging Working Communities

lone-star-foreclosures

the map is a few years old

Madison   Auction off tens of thousands of homes during the housing crisis to private equity companies without rules or wherefores other than to offload the problems, despite knowing that private equity operations only care about their bottom line, what could go wrong? Not surprisingly, it turns out, just about everything, and nowhere is this truer than when the private equity bunch is led by Lone Star and the robber baron of our time, John Grayken, the American-born pirate who renounced his citizenship in order to pay less taxes, and now pretends to live in Ireland.

The New York Times is finally taking a look at the disaster that has followed the government’s policy of cut-and-run on the housing crisis and found the biggest culprits were Lone Star and its servicer, Caliber, Nationstar, also with Texas roots, and of course Blackstone, which has come out of this bottom feeding crisis as the largest private landlord in the country. Private equity firms are money machines and make it clear that if they make more money foreclosing, they won’t hesitate. Most hardly participated in the HAMP, housing modification program, to try to allow families to keep their homes, and because the government turned the whole modification process over to banks and financiers, there was no requirement that they do so.

Neither of course was there any obligation under the Community Reinvestment Act to benefit lower income, racially diverse communities and not discriminate in lending. As the Times reports:

But much of this investment has not benefited poor neighborhoods. Banks are expected, under the Community Reinvestment Act, to help meet the credit needs of low-income neighborhoods in areas they serve. Private equity has no such obligation. The idea is that banks should follow an implicit social contract: In return for government loans and other support, they are expected to serve a community’s needs. Private equity, which unlike the banks does not borrow money from the government, is answerable to its investors. Those investors include some of the nation’s largest pension plans, whose members — teachers and police officers among them — may support improvements to such lower-income areas.

And, that’s putting it mildly.

Private equity makes no bones about any of this either.

 

Lone Star explains to investors one way it profits from delinquent loans. Lone Star’s mortgage subsidiary will lower a borrower’s monthly payment if “the net present value of a modification is greater than the net present value of a foreclosure, loan sale or short sale.” Translation: If foreclosing on a homeowner is the most profitable option, Lone Star is likely to foreclose.

Not surprisingly, the new bosses for the housing market are much like the old bosses, except worse. Paperwork is misplaced or disappears. Homeowners can’t get responses or assistance. Modifications come too late to prevent foreclosures, and the beat goes on.

Pretty simply when you turn over the chicken house to the fox, you don’t just have a problem, you have no chickens, and in this case all of us, especially in low-and-moderate income communities are the chickens, clucking all the way to the slaughter.

Think I’m exaggerating? Here’s a perfect example from the Times on the vicious circle of predatory exploitation that Nationstar is able to practice directly and through its subsidiaries:

The whirl of transactions illustrates how Nationstar can control nearly every stage of the mortgage process, posing potential conflicts of interest as it earns fees along the way. Nationstar collects bills and, when people don’t pay, can foreclose on homes. Nationstar earns fees auctioning those homes through Homesearch. Ads on Homesearch, which is now known online as Xome.com, direct bidders to Greenlight. Nationstar can then collect on the new mortgage, bringing the process full circle.

As banks have pulled out of housing and private equity has swooped in, low and moderate communities are also being starved of needed investment, which also feeds into yet another cycle or deteriorating conditions for our communities. What’s the government doing about all of this? Not much. There’s talk of some new regulations by HUD, but who knows at this point, that may be too little and it’s definitely too late. Some Congressmen are moaning about their folks and foreclosures, but most of this is wishing-and-a-hoping. Looks like we’re headed for the wall again, unless there’s big change in the relationships between Washington and Wall Street, and that’s not looking so good this minute either.

Source: The New York Times

Source: The New York Times

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