Some years back, it was common to hear accusations that it was too hard for low-income Americans to get loans to buy houses. There were even accusations by civil rights groups that home loans were regularly being denied based on race.
Over time, lending standards got looser. Down payments often were not required. People with poor credit got “subprime” loans at adjustable rates.
Under pressure from the federal government, government-sponsored Fannie Mae and Freddie Mac bought up massive numbers of risky home loans from the banks that had originally lent the money.
Soon, however, adjustable-rate mortgages started “adjusting” upward, putting the monthly payments out of reach for many people. As a result, over the past few years there have been record numbers of home foreclosures, leaving the foreclosed buyers in worse condition than if they had never been given a loan they couldn’t afford in the first place. The housing collapse was one of the major causes of the recession and of our current high unemployment, which rose in May to 9.1 percent.
But once all the foreclosures started hitting, some of the same groups that had accused lenders of denying loans to the poor began accusing lenders of giving too many loans to people with weak credit. They said borrowers had been tricked into taking loans with unfavorable terms.
Whether those claims are right or wrong, you might think this whole painful experience would have convinced everyone that making too-large home loans to people with risky credit histories is a bad idea.
But some groups are now pushing for even more shaky lending.
“... [A]s banking regulators are rewriting the rules for the mortgage market, unusual alliances have sprung up in opposition to tighter lending standards,” The New York Times reported. “Advocacy groups like the NAACP and the National Council of La Raza, a Latino civil rights organization, on the one hand, and the American Bankers Association on the other, are joining together to fight rules they say could make home loans less affordable for minority and working-class Americans.”
If Congress decides to overhaul Fannie Mae and Freddie Mac, “the same groups could voice similar concerns over anything that restricts the availability of credit for first-time home buyers,” the newspaper added.
We’ve seen millions of Americans lose their homes because they got mortgages they couldn’t afford, yet now there is talk of handing out new irresponsible loans!
Apparently our nation has not yet learned its lesson.