Who's to blame for the housing crisis? Some conservative Republicans say it was minorities and the poor -- and the liberal government programs that encouraged them to become homeowners.
Among them are members of the U.S. Commission on Civil Rights, a federal agency that was stocked with Republicans during the Bush administration.
The storied eight-member commission, now dominated by four Republicans and two so-called "independents," recently issued a report on housing that the two Democrats found so tendentious that they filed tough dissents.
One might expect a civil rights investigation into housing to focus on the pervasive allegations of predatory lending, the intentional steering of creditworthy minority homebuyers into subprime mortgages, and the lackluster enforcement of fair lending laws.
But instead, the Republican commissioners explicitly sought to investigate whether "federal efforts to increase homeownership among minority and low-income individuals may have unintentionally weakened underwriting standards and lending policies."
For the first time since 2006, a commission report failed to issue any findings or recommendations. Commissioners bickered in the report's appendices, trading barbs over lax research methods and mismanagement, with Democrats pointing to the Republicans' alleged desire to disregard apparent discrimination in lending and focus rather on proving long-held beliefs that federal policies led to the housing crisis.
"There are many causes of this report's shortcomings," wrote Democrats Michael Yaki and Arlan Melendez. "Elsewhere, we have noted the erosion of management and research standards for the agency's reports and this one is no exception... From its inception this report was saddled with a distracting directive from Commissioners to consider a misguided policy question--whether the Community Reinvestment Act (CRA) and other federal policies meant to aid minority homeownership contributed to the recent financial crisis and/or harmed minority homeownership....The present report has failed to meet the high standards for research that were once the hallmark of the Commission."
Republicans shot back, writing that "several of their criticisms--as well as the general tenor of their statement--are off base."
With respect to allegations of steering, the right-leaning commissioners wrote that "It's an even greater leap to assume racially-motivated steering is a problem," pointing to the theory that "in many areas, minority borrowers are more likely to contact loan officers of the same race or ethnicity as themselves."
"...The bigger problem is that there is no logical or other reason to suspect discrimination at play in the pre-application process, especially when there is little or no evidence of discrimination in the rest of the loan process," wrote three Republicans and a self-identified Independent (who works at the Heritage Foundation, a right-leaning think tank). "... It makes no sense to think that race or ethnicity is a factor."
Baltimore is suing Wells Fargo for doing exactly that. The NAACP also is suing a multitude of banks for pushing subprime loans on black borrowers.
The right-leaning commissioners also wrote that federal policies "contributed to the weakening of lending standards and thereby contributed to the mortgage crisis. This theory is worth exploring, and our report does so."
To back up their theory, the commissioners wrote the following:
"Perhaps the most striking example of the conjunction between the [Community Reinvestment Act] and aggressive lending practices was the case of Washington Mutual (WaMu). On December 21, 2001, WaMu announced approval from the Office of Thrift Supervision for its merger with Dime Bancorp. In order to receive approval, WaMu made an unprecedented, $375 billion commitment to lend to low- and moderate-income borrowers. In late September 2008, the FDIC seized WaMu and sold its assets to JP Morgan Chase for $1.9 billion, despite WaMu purportedly having assets of $307 billion. This was the largest bank failure in American history."
The commissioners fail to mention that San Diego is suing WaMu for engaging in "unlawful, unfair or fraudulent predatory lending practices."
They also point to guidelines from a 1993 Boston Federal Reserve report on fair lending, which advised lenders to consider the reasons behind a borrower's lack of credit history or problems in their credit reports when reviewing loan applications. The commissioners wrote:
"Although these recommendations were only 'guidelines,' the publication ominously highlights the liability for lenders who fail to comply with federal housing laws. The message from the guidelines is clear: financial institutions must weaken their lending standards or they may face significant legal and financial exposure."
Here's what the Boston Fed report actually said:
"Even the most determined lending institution will have difficulty cultivating business from minority customers if its underwriting standards contain arbitrary or unreasonable measures of creditworthiness. Consistency in evaluating loan applications is also critical to ensuring
fair treatment... Since many mortgage applicants who are approved do not meet every underwriting guideline, lending policies should have mechanisms that define and monitor the use of compensating factors to ensure that they are applied consistently, without regard to race or ethnicity...If an institution permits flexibility in applying underwriting standards, it must do so consistently."
The commission's report was approved by a 4-0 Republican-led vote, with the other four commissioners abstaining. The appendix includes two separate statements by commissioners and three rebuttals to those two statements.
Read the report HERE: