CRA: Does Anybody Really Want To Know?
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26 months into the mortgage meltdown, we still lack basic data about the borrowers who failed to pay back their loans. Thanks to the efforts of Gale Cincotta, we have a huge amount of data in the Home Mortgage Disclosure Act database on the ethnicity of who gets mortgages, but no system for tracking who pays them back.

From the testimony of Edward Pinto, chief credit officer of Fannie Mae 1987-89, to the House Financial Services Committee on September 16, 2009:

While at Fannie, I had the pleasure to work extensively with the late Gale Cincotta. Some of you may be aware that Ms. Cincotta was the founder and head of National People’s Action (NPA) and is known as the ”Mother of the Community Reinvestment Act”. Ms. Cincotta had experienced first hand the lending debacles created by the misguided efforts of Washington bureaucrats. ...
Cincotta was Alinskyite activist in the Austin neighborhood of Chicago (the one that my wife's family was driven out of in 1970 by FHA lending). Cincotta's tragic tale was featured in Alyssa Katz's book Our Lot, which I reviewed for recently.

Cincotta found over the course of her long career in leftwing activism that it was a lot easier to pressure lenders to lend more than it was to get them to lend more responsibly. There is simply no conceptual vocabulary in contemporary America to discuss the idea that NAMs should be lent less money. As Wallace Shawn liked to say in The Princess Bride, "It's inconceivable." Moreover, nobody can get their cut out of a loan that isn't made.

I also need to tell you that I have spent the last 14 months searching for the facts on what caused the real estate bubble and subsequent mortgage and financial meltdown. I have reviewed over 40,000 pages of documents. The process relative to estimating CRA lending volumes and loan performance was particularly difficult and opaque.

I give you this background because if Gale were here today, she would tell you that the federal bureaucrats have done it again, but this time on a much more massive scale. Because of CRA and Fannie and Freddie’s (the GSEs”) affordable housing goals, ”American Nightmare of Foreclosure” has spread to virtually every congressional district of these United States.

Here are the facts that I believe Gale would want me to report to you:

” Understanding CRA lending performance is of vital importance because it is now clear that CRA-related single family mortgages totaled trillions of dollars over the period of 1993-2007; ” Over time CRA origination volume became a growing and ultimately significant portion of conventional conforming origination volume, growing from an estimated 7% of originations in 1993 to 19% in 2007; ” As H.R. 1479 points out, announced CRA commitment volume totaled over $6 trillion since CRA’s inception in 1977. Starting in 1992, volume exploded. Over the 17 year period 1992-2008, there were a total of $6 trillion in announced CRA commitments. This is an astounding 680 times the cumulative volume of $9 billion for such commitments over the entire first 15 years of CRA’s existence; ” Ninety-four percent of this $6 trillion in commitments were made by banks and thrifts that were or ended up being owned by just four banks: Wells Fargo, JP Morgan Chase, Citibank, and Bank of America;

Of course, analogous commitments were made by non-bank mortgage companies (such as Countrywide's $1 trillion pledge in January 2005) that had had been told by the Clinton Administration that if it didn't behave like it was under the CRA, it would be put under the CRA.
The questions you should be asking are:

Why don’t bankers know and disclose how their different products are performing?

Why is it that the Federal Reserve, the OCC, the OTS and other regulators appear to have no idea how CRA loans are actually performing over the last few years? Data from ten years ago cannot be the basis for making decisions on multi-trillion dollar programs.

Why is it that Comptroller Dugan just three weeks ago delivered remarks at the Interagency Community Affairs Conference where he asserted that CRA is not toxic lending, yet he failed to cite any broad-based quantitative evidence?

Why is it after requiring banks to demonstrate that they make extensive use of ”innovative and/or flexible lending practices” in order to receive a rating of outstanding, not one regulator had the common sense to track the performance of these admittedly innovative and flexible loans?

Platitudes are not sufficient. I have presented a prima facia case that CRA is toxic lending which leads to unsustainable loans which leads to an unacceptable level of foreclosures.

Gale Cincotta’s views on FHA 11 years ago are now equally applicable to CRA and AH lending:

”We have been fighting abuse, fraud, and neglect of the FHA program that has destroyed too many neighborhoods and too many families' dreams of homeownership for more than 25 years.”

Section D of H.R. 1479 calls upon the Federal Reserve to create a loan performance database.

I respectively submit that before you take any action on H.R. 1479, you demand that the appropriate regulators request detailed CRA performance data from Wells Fargo, JP Morgan Chase, Citibank, Bank of America, Fannie Mae and Freddie Mac. These six institutions should be able to provide performance information for an estimated 70% or more of outstanding CRA loans.

These programs have subprimed America.

The pain and hardship they have spawned is immeasurable. What is measurable is exactly how the trillions of dollars in past CRA and AH loans are performing.

Once you have that information, it is imperative that you learn from it so that you may implement Gale Cincotta’s vision whereby participants in the mortgage lending system have skin in the game. It was this lack of adequate equity and capital by borrowers, lenders, and investors that has put our entire economy at risk.

Only then will America get the sustainable affordable housing programs she deserves.

No, not that! Not what we deserve ... Please, give us something much better than we deserve.
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