This entry is cross-posted on the DMI blog.
n yesterday"s New York Times, Howard Husock at the Manhattan Institute repeated the tired old argument that housing advocates and the Community Reinvestment Act caused the housing meltdown. It's one thing for the Times to offer a range of ideological views. It's another thing to give space to an argument that has as much credence as the existence of the Tooth Fairy.
Howard, this is personal. I'm one of the "housing advocates" of which you speak. Not only have I never "pushed lenders to make loans in low-income neighborhoods for reasons other than the only one that makes sense: likely repayment," but iI have yet to meet a housing advocate who urged banks to make bad loans. In fact, if you had been paying attention for the past ten years or so you would have noticed that much of the energy of housing and fair lending advocates has been focused on fighting abusive subprime lending practices. As early as the late nineties I was standing in a New York State Banking Department hearing room holding a shark and trying to get regulators to ban things like yield spread premiums, those lovely little broker kickbacks that helped drive up the price of loans. And who do you think led the charge against Delta Funding, a notorious predatory lender that became a poster child for unscrupulous lending practices in the nineties? Yep, housing advocates.
The truth is the housing and fair lending advocates I know care less about high mortgage lending volume than they do about the ability of an ordinary person to live affordably and safely with a roof over his or her head, whether it be in a rented apartment or a mortgaged home.
As for the CRA, once again Husock ignores the fact that more than three quarters of the subprime loans that are now driving the foreclosure crisis were made by non-depository institutions that are NOT subject to CRA. And while there might have been bank CRA officers carelessly using subprime loans to bolster their CRA performance ratings (I don't know why; Have you ever heard of a bank that has not received at least a Satisfactory or Outstanding CRA rating, much less was punished for a bad CRA record? Of course not, because it doesn't happen!) they certainly weren't pushed into it by the "advocates." And they were not acting in the spirit of fair lending that prompted the creation of the CRA in the first place.
The only sense that Husock makes is that we need to "fix the system of mortgage securitization" and that CRA "regulators should take loan performance, not just the number of loans made, into account." Howard, now you're talking like a housing advocate. A progressive one at that.