Did Greenspan Add to Subprime Woes? Former Chase Banker Admits His Bank Pushed Minorities Into Subprime Mortgage Loans. By Pat Garofalo on December 1, 2011 at 9:20 am "Former Chase Banker Admits His Bank Pushed Minorities Into Subprime Mortgage Loans" One of the most pernicious practices in which the nation’ biggest banks engaged during the lead up to the financial crisis was pushing minority borrowers into subprime loans, even when many of them qualified for prime loans.
Wells Fargo had perhaps the most horrifying practices in this department, calling the subprime loans that they pushed in poor, black neighborhoods “ghetto loans.” This rampant predatory lending helped inflate the housing bubble; a Center for American Progress investigation actually found huge racial disparities in lending at the big banks that wound up getting bailed out, with minority borrowers far more likely to receive high-priced loans. One memory particularly troubles Theckston. “The bigwigs of the corporations knew this, but they figured we’re going to make billions out of it, so who cares? Countrywide protected fraudsters by silencing whistleblowers, say former employees. ‘Fund the loans’ Countrywide had been slower than many other mortgage lenders to fully embrace making subprime loans to borrowers with modest incomes or weak credit.
By 2004, though, Countrywide had become a player in the market for subprime deals and many other nontraditional mortgages, including loans that didn’t require much documentation of borrowers’ income and assets. These loans were part of the plan for meeting its CEO’s audacious goal of growing his company from a giant to a colossus. Mozilo had vowed that his company would double its share of the home-loan market to 30 percent by 2008.
Some former Countrywide employees say the pressure to push through more and more loans encouraged an anything-goes attitude. In one example, Countrywide approved a loan for a borrower whose application listed him as a dairy foreman earning $126,000 a year, according to a legal claim later filed by Mortgage Guaranty Insurance Co., a mortgage insurer. Markopoulos couldn’t be reached for a response. Op-Ed Contributor - I Saw the Crisis Coming. Why Didn’t the Fed? Subprime Debacle 2.0. [ Enlarge Image ] By now, most agree that the real estate crisis that precipitated the credit crunch and current economic malaise resulted from two things: Improper lending standards and unrealistic expectations.
Sadly, in the midst of the worst economic downturn and, of course, just before an election year, it looks as if the government is going back to its old, and by now disproven, playbook: subprime lending. “The 1977 Community Reinvestment Act (CRA) requires banks to make loans in all the areas they serve, not just the wealthy ones... At the Justice Dept., a new 20-person unit dedicated to fair lending issues received a record number of discrimination referrals from regulators in 2010 and has dozens of open cases, according to a recent agency report. Potential penalties can reach into the millions of dollars. "We are using every tool in our arsenal to combat lending discrimination," Thomas E. Subprime lending and the unfortunate consequences are not relegated to real estate. Crise de la dette privée (subprimes 2008)