Evidence Against Interest: The Minority Role in the Housing Bubble

Steve Sailer, VDARE, September 30, 2014

The Urban Institute has a new report out to promote HUD Secretary Julian Castro’s speech calling for debasing home mortgage credit standards. But its snazzy data tools just make it easier to see what a huge role Hispanics–especially Castro’s mentor, Clinton HUD Secretary and then Countrywide Financial director Henry Cisneros–played in the Housing Bubble and Bust.

Here’s one of those new-fangled dot maps showing 2003 mortgages in the three southwestern Sand States of California, Nevada, and Arizona. Along with Florida, they constituted the great majority of the run-up in home values in 2004-2006 and the great majority of the losses in 2008 (i.e., the home value losses largely came before the Great Recession and played a major role in setting it off).

Here’s what mortgages given out in prosperous 2003 looked like by race, with whites represented by blue dots, Hispanics red, blacks yellow, and Asians gray:

1

And here’s what mortgages given out in metastasized 2006 look like by race:

2

Here is another graph from the Urban Institute showing how inflated lending to Hispanics and blacks was in 2005 versus the more prudent recent year of 2012:

3

During the years when Bush was promoting the Ownership Society and the White House Conference on Increasing Minority Homeownership, Hispanics were the marginal buyers, the major new source of demand that helped send home prices skyrocketing. Unfortunately, they also turned out to be marginal debtors who defaulted in huge numbers when it turned out that turning a neighborhood Hispanic didn’t raise property values.

I realize I’ve been banging on about this since 2007, but how many people of power and influence actually have a clear picture of what happened in their heads?

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  • “Promoting the Ownership Society”

    Which had been peddled for a long time by Jack Kemp.

    • propagandaoftruth

      Sounds like that close cousin of libtardism…

      Libtardtarianism.

      • shawnmer

        Kemp was certainly not a libertarian. He was essentially a liberal who happened to believe in supply side economics.

        Now supply side, low tax economics is generally effective in goosing economic growth. But Kemp bought into some of its more overstated claims that it could endlessly INCREASE tax revenue with this growth “feedback” effect. It is true that tax rates can reach levels that raise no additional revenue because they’re too stifling of economic activity, and that lowering them can actually bring in higher revenue. (The Laffer curve) But this works in the higher ranges, as when pre-Reagan tax rates were at 70%. You eventually reach a point where continuing to lower the rate also lowers revenue, and govt spending must be cut too.

        Kemp continued to push for continuously lower rates under the misguided idea that this would give him more revenue to spend on govt programs for blacks!

        • propagandaoftruth

          Um, actually, I have no problem with smart supply side economics. The economy is supply AND demand, as I’d tirelessly point out to fellow libtards back in the day…

          I guess there were always ideological cracks for me.

          But perhaps I’m thinking differently – I kind of see smart supply side economics as inherently…libertarianesque at the least in grand philosophical terms.

          I’ve often advocated a complete restructuring of our corporate tax code to, in no particular order…

          1. Remove burdensome obstacles to competition with foreign entities

          2. discourage harmful monopolies/oligopolies

          3. encourage socially responsible corporate practice (solid highest to lowest paid recompense ratio, any number of libtard demands made optional to corporations for consideration of a tax break)

          4. Redistribute wealth in as least an obnoxious way as possible (people need money to purchase, not to mention secure themselves by acquisition of property, insurance) while encouraging real investment.

          I think an efficient and efficiently adaptable corporate tax scheme could please enough of many disparate ideological and social groups to ensure security and prosperity.

          If implemented by a merit based civil service. Oops.

          So, am I still a commie or an economic Bismarckian? I’m not a libertarian, am I?

          • Lionel Hutz

            Yeah, common sense stuff. Today’s “right” is absolutely insane when it comes to the free market.

            The fact that half the country, and even most poor whites vote for republicans shows just how much the dems are despised.

          • SFLBIB

            The ink won’t be dry on that bill before lobbyists will start to turn it back to the status quo ante.

        • Bunky

          The effective tax rates from 1979 to 2010 (last year data)
          actually went down. The highest years effective tax rates were, surprise, carter and clinton at around 22%.
          W’s and Ohno’s (since ohno kept w’s tax rates) are down to 19-20%.
          As you say revenue went down for a period of time after tax decreases. However, one could only hope the feds would decrease spending.
          At no time did fedzilla actually spend LESS.
          Always more, more, and then some more.
          Fedzilla just borrows/prints it, so future taxpayers are serfs to their “largesse”.

    • redfeathers

      How I despised that man!

      • Don’t think he actually died. No, his political spirit has been reincarnated in Paul Ryan and Rand Paul. And once they leave the scene, along will come a new crop of four letter first name and four letter last name panderers.

  • AmericanCitizen

    Who here is really surprised that something that worked fine for decades was modified for the minority and then everything goes in the toilet. Is there anything that whites created in America that isn’t going to be ruined by the new breed of “poor with attitude and political clout”?

    • Except “it,” which “worked fine for decades,” had actual lending standards. And as we all know, a hard standard has a disparate impact on blacks and Hispanics.

      • AmericanCitizen

        Liberals only use skin color as the standard. Non-christian religions also are favored. Basically anything non-white non-christian is better than the people whose forefathers built this country into what the liberal and the minority can despoil today.

  • Mack0

    I suggest everyone read this article by Mr. Sailer. It is jam packed full of very interesting and useful information. Read the article more than once. I suggest everyone read all of Mr. Sailers articles. I usually start my morning with Sailer and a cup of coffee.

  • Easyrhino

    Jeez, you don’t need complex financial algorithms to figure this out.

    The US fed-gov mandated that standards to acquire loans be lowered to benefit chiefly minorities (but many speculators too) and when it was time for those over-extended to pay up they couldn’t.

    More reason to keep the US fed-gov along with the Fed-Reserve from manipulating free markets.

    • connorhus

      You are spot on Easyrhino except you forgot to mention that the community re-investment crap was heavily backed and lobbied for/supported by the Feminist for their own selfish reasons as well. Feminism has always used the minorities as their allies.

    • baldridge999

      All any white person really needs to understand is this system wants to blend white people out of existence through mass non-white immigration and forced integration. Since they’re targeting white people, such actions constitute genocide.

      How’s it feel to know the government our white ancestors created now has decided the descendants of those founding people must be eradicated? I can’t think of a more sick thing for a government to want to do. Even the most corrupt and rotten governments of the past, while they did many other destructive things, never went down that road.

  • Adolf Verloc

    A number of commenters have pointed out that if creditworthy blacks and Hispanics were denied loans unfairly, others of their ethnicity would have suffered less in the housing crash. The reverse was true.

    And let’s remember that while the Federal government bears much of the responsibility for promoting bad lending practices, the major banks were eager participants. Inventions such as securitization of mortgages and portfolio insurance enabled the banks to convince greedy investors (and themselves, happily) that garbage was gold.

    • connorhus

      The banks were forced to lend. They really had no choice and if they tried to establish any rules for worthiness they were going to be sued. So they did they only thing they could do, they bundled them and sold them off as fast as possible. Banks are evil, I am not defending them but in the case of the housing fiasco they had no options but to cave in to the government and pass on the loans as quickly as possible.

      • jabberwock

        That sounds like the Limbaugh version of the housing bubble that I’ve
        heard Rush relate. Too bad it has little relation to actual events.

        The
        majority of subprime lending was done by non-bank lenders that were
        free to lend as they pleased. Mortgages were bundled and sold off
        because that was an extremely profitable line of business, as were
        derivatives based on bundled mortgages. Bundling mortgages for sale long
        predates the housing bubble and has nothing to do with government
        regulation. It has everything to do with making money.

        Banks weren’t ‘forced to lend’. Even if we assume that they were they
        weren’t required to lend on housing. The CRA is about the location of
        their lending not the type of loans. And banks were not the primary
        writers of mortgages anyway.

        • connorhus

          If you had a clue on how the system worked you would know most of those banks simply fronted the money and then scrambled to find a third party backer. The banks that were being strong armed rarely keep any of their own home loans but shuffle em on. If Ol’ Rush was saying the same thing then he is spot on.

          “Banks weren’t forced to lend” Ahh excuse me there is video evidence of it and plenty of Femocrats spouting the same in the legislation they passed.

          • jabberwock

            Thanks for the explanation connor. It reveals tha you know next to nothing about the mortgage market and how it works. But then I could tell that from your first post.

    • shawnmer

      Oh, they have a handy reply for that. That subprime mortgages with unaffordable interest rates were made “disproportionately” to blacks. “Disproportionate” defined by the identically dubious method they used in studies to assert lending “discrimination” 20 years ago, namely by looking at assets and income only and disregarding applicant credit histories!

      A lovely Catch 22 they have for us. Don’t make the loan, we’re “racist.” Make the loan and a previously sound system falls apart, we’re still “racist. “

  • dd121

    Prepare for round two.

    • Ethan Allen

      Yes. Also, the arm-twisting that the government did to mortgage lenders in the early 2000s, they are now doing to automotive lenders. Yes, you too Mr. Minority, can buy this BRAND NEW Cadillac Excuhlate with NO MONEY DOWN and payments of only 25 percent of your takehome pay for ONLY 84 months!!

  • After working in a majority Mexican environment for decades, I am witness to their financial carelessness and lack of planning ability.

    I’m glad they’re dubbed “dreamers” because that’s about all they’re able to do, dream about more and more material wealth, which they focus on intensely. They love shiny things they cannot afford and so debt is a way of life for them. As is being short on cash for the week leading up to payday.

    They also are avid players of the Texas lottery. Concepts like the national debt are totally meaningless to them, as is the general principle of fiscal responsibility. It all bodes ill for future America as whites will be expected to bail them out of their troubles again and again in the future.

    • They also are avid players of the Texas lottery

      Lotteries, of course, are a tax on people who cannot or will not understand probability and statistics. So it’s no surprise to me Hispanics love playing to lotto. The whole irony is that in many states, lotto helps fund education, but if that education included a mandatory prob/stat class before graduating from high school, nobody would want to play the lottery.

      • shawnmer

        Retired talk radio host Neal Boortz once called the lottery a “tax on the stupid.” He was a hard core libertarian who opposed govt programs of almost any sort, but supported lotteries as one of the few ways of extracting back money given to the freeloaders.

        • dd121

          I always viewed it as a way to get poor people to pay their fair share of the taxes.

  • A Freespeechzone

    When you don’t adequately manage risk when lending money; failure is what you get….

    Moreover, to lend mortgages to those, regardless of race, etc. who truly don’t have the credit or means to repay it, only guarantees failure and is the most disingenuous result of all…

    They would have been much better off to have educated people on how to save and actually buy a home that they could afford…..

    Forcing ‘equality’ NEVER results in positive results.

  • John Smith

    We better face reality. Whites simply cannot win at this.

    (I am admittedly guilty of often oversimplifying and painting with a broad brush in my posts here.) Hypothetical of how the race hustlers operate –

    eg 96% of white are approved for loans. 88% of blacks are approved.

    (shrieking commences) “Oh my God, the black rejection rate is THREE TIMES the white rate.” (never mind that among the 88% of blacks approved, they still have a LARGER default rate) Whitey is demonized for “restrictive” practices.

    So banks lower even further the requirements for blacks and the default rate STILL INCREASES. Now whitey is accused of “predatory” practices.

    It’s as if banks want to engage in “racism” against the small % of rejections – instead of just making more money. (All the banks want to do is make more money. Defaults are bad for business.)

    Unless masses of blacks (and non-whites) are just given a f****** house…w/o having to make payments, this WILL NEVER, NEVER END.

    It’s that simple.

    • I wasn’t pre-approved for my first home loan, so I lowered my sights and got my second choice. I’m glad now, because the neighborhood has mature trees that provide plenty of shade, while 18 years later the other complex still has runty little stick trees.

    • superlloyd

      The only way to solve this would be to get rid of the absurd cultural marxist doctrine of disparate impact that is slowly but surely killing American civilisation. If loan approval were purely colour blind and solely based on credit history, fairness could be restored and could be shown to be non racist.

      Granted, blacks would be judged on their merits and not on the colour of the skin which is what King asked for, and the economy would be in a much better position. However, the rational solution or even plain, common sense doesn’t work in these times, unfortunately.

  • TruthBeTold

    I realize I’ve been banging on about this since 2007, but how many
    people of power and influence actually have a clear picture of what
    happened in their heads?

    Most people actively work to deny minority lending had anything to do with the meltdown.

    • connorhus

      The largest growth for home loans in race and gender were White Single Women. It was interesting that the growth in this group began after the community re-investment regulations allowed child support to be counted as income for securing loans. As is typical like with Affirmative Action the White Feminist add the minorities into the mix but the early real beneficiaries are the White single women. Then it becomes time for their allies to get their share and things go from bad to worse.

  • John Smith

    Anyone with a brain and halfway informed knew that lending money to those without an ability to repay because of govt. mandates to do so was the primary cause. After the fact, lenders should’ve “known better,” but their asses would’ve been in a sling had they not done so.

  • Low interest rates played a supporting role: The lower the interest rates, holding the monthly payment the same, the higher the loan principle that payment can support.

    But it was not the straw that stirred the drink.

  • Strider73

    Now you know why I have always called this ongoing economic downturn the “Diversity Depression.”

  • connorhus

    No argument from me on those groups helping it along at all. They did. But groups like NOW and LWV is what gave them the clout and numbers to do it. Actually the Feminist wanted it more made sure those minority groups were around to stir up trouble. The agenda back then was clearly listed on the NOW web site as a goal.

  • connorhus

    Also. Of course the Femocrats pushed for it. They been touting the “War on Women” Scenario since the 60’s.

  • Born_In_The_Pineywoods

    I have been in the real estate industry to see this. I work with foreclosures. When we have a foreclosed home with colored former owners, it is obvious due to the level of filth and total disregard for repairs and maintenance over an extended period of time.

    With mexicans, you have some of that, and add in unpermitted and sloppily built work (like framing out the deck to make it an enclosed room for more wetbacks.) With both groups, you also find walls painted in garish (and sometimes day-glo!) colors painted in many of them.

    Neither group seem to understand that owning a home requires more work to protect the investment than they were used to while than living in the projects or under a bridge or below the Rio Grande, or wherever they came from. So, when they finally quit paying, and we go in there, the properties are in terrible condition.

    And yes, when I go to talk to them about moving out, they have not made any plans to move, and seem shocked at the whole turn of events. They do not seem to understand that eviction is a natural consequence of not paying their mortgage. And they typically have nice vehicles. We just did one with 3 adult residents from Sierra Leone, with 3 fancy cars, one with rims, and nobody could figure out how to pay the mortgage, which was only on about a $120K house.

    Homeownership does NOT work with the lazy, stupid, and criminal. It does NOT magically make them into good citizens or something like that. If you could see the pictures and smell the smells, it would sadden and disgust you.

    So – There was a GOOD REASON behind redlining. And credit scores, while not perfect, are a pretty good measure of your ability and desire to pay your bills. They are no more racist than the rest of life is.

  • jabberwock

    “while the Bush administration tried to stop this sub prime nightmare multiple times.”

    I suggest you look up Bush’s speech on the “American Dream Downpayment Initiative” and see how you can explain that away. Bush was an ardent supporter of subprime loans to minorities. He never attempted to reign in subprime lending. That’s simply false.