The central thread in the Housing Bubble / Bust

S Sailer: "The central thread in the Housing Bubble / Bust was excessive deregulation in the name of increasing minority lending. But, there are simply no interest groups in America who want to hear that. Sure, trillions evaporated and trillions may evaporate again, but I guess that's a small price to pay for keeping the embarrassing truth covered up."

http://www.vdare.com/posts/i-am-shocked-shocked-to-learn-that-countrywide-financials-loan-practices-were-lax

I Am Shocked, SHOCKED To Learn That Countrywide Financial's Loan Practices Were Lax

By Steve Sailer

Created 10/24/12

Here's the top story in the Washington Post right now:

US suit cites ‘brazen’ mortgage fraud at Countrywide, even after Bank of America purchase [1]
By Associated Press, Updated: Wednesday, October 24, 2:15 PM
NEW YORK — The latest federal lawsuit over alleged mortgage fraud paints an unflattering picture of a doomed lender: Executives at Countrywide Financial urged workers to churn out loans, accepted fudged applications and tried to hide ballooning defaults.
The suit, filed Wednesday by the top federal prosecutor in Manhattan, also underscored how Bank of America’s purchase of Countrywide in July 2008, just before the financial crisis, backfired severely.
The prosecutor, Preet Bharara, said he was seeking more than $1 billion, but the suit could ultimately recover much more in damages.
“This lawsuit should send another clear message that reckless lending practices will not be tolerated,” Bharara said in a statement. He described Countrywide’s practices as “spectacularly brazen in scope.”
He also charged that Bank of America has resisted buying back soured mortgages from Fannie Mae and Freddie Mac, which bought loans from Countrywide.

A relevant fact that has disappeared down the memory hole is that during the Housing Bubble, Angelo Mozilo, CEO of Countrywide, kept boasting that Countrywide was going hog wild in the name of increasing minority homeownership. For example, here's a press release from January 2005. (I suspect that this immediately followed a meeting between Mozilo and Daniel Mudd, head of Fannie Mae, in which Fannie agreed to buy more mortgages from Countrywide).

Countrywide sets $1 trillion goal for real estate loan program [2]
Funding aims to help minority, low-income borrowers [2]
BY INMAN NEWS, FRIDAY, JANUARY 14, 2005.
Countrywide Home Loans today announced an expansion of its We House America initiative to fund $1 trillion in home loans to minorities and lower-income borrowers and communities through 2010.
"The $1 Trillion We House America Challenge, expanded from $600 billion announced in 2003, embodies Countrywide's long-standing commitment to lead the mortgage industry in closing the home-ownership gap for minority and lower-income families and communities," said Angelo Mozilo, Countrywide Financial Corp. chairman and CEO, who announced the initiative at the International Builders' Show in Orlando.
"For several years now, Countrywide has been a leading lender to minorities and lower-income households," Mozilo said. "I am proud of our lending record and pleased to announce the expansion of our lending commitment to $1 trillion." The We House America program has already placed 2.4 million families into homes, Mozilo said that number should nearly triple by 2010.
The company will continue to develop innovative programs emphasizing non-traditional lending criteria, according to the announcement, such as calling for improved underwriting systems that eliminate the over-reliance on traditional credit scores that can mask a borrower's true credit-worthiness.
Countrywide last year launched Optimum Loan, a program that addresses obstacles for hard-to-qualify borrowers, such as allowing for non-occupant co-borrowers, other secondary income, and pooled funds for down payments. ...
"To ensure that this objective is achieved, we intend to expand upon our existing partnerships with specific community groups," Mozilo said.
Henry Cisneros, a Countrywide director and a former secretary of Housing and Urban Development, said, "This company is leading the industry in closing the homeownership gap through ambitious lending commitments, innovative programs, and a strong corporate culture that constantly looks for ways to improve."
Countrywide formalized its commitment to affordable lending more than a decade ago by launching We House America, an initiative to provide increased homeownership opportunities for all Americans. The previous commitment covered the years of 2001-10 and has provided $341 billion of home loans as of Dec. 31, 2004. The company is now extending the goal to $1 trillion by 2010.

And back in February 2003, Mozilo had given a well-publicized Harvard address [3] pledging $600 billion (with a B) in minority and low income mortgages in support of President Bush's October 15, 2002 call for closing the racial gap in homeownership by freeing up lenders from discriminatory regulations like insisting upon down payments.
And Mozillo had been demanding deregulation in the name of minorities from nine years before that, when Cisneros and the Clinton Administration threatened Countrywide with having the Community Reinvestment Act, with all its paperwork, extended to non-bank mortgage lenders like Countrywide if they don't start lending more to minorities:

Eased guidelines seen as key to boost in minority lending [4]

AUTHOR(S) Prakash, Snigdha
PUB. DATE October 1994
SOURCE American Banker; 10/13/1994, Vol. 159 Issue 198, p20 ...
ABSTRACT Presents the guidelines outlines by Angelo Mozilo, chairman of Countrywide Funding Corp. regarding loans awarded to minority borrowers. Recommendation for the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corp.to loosen underwriting guidelines; Presentation of the guidelines during a speech delivered to the Mortgage Bankers Association.

The central thread in the Housing Bubble / Bust was excessive deregulation in the name of increasing minority lending.
But, there are simply no interest groups in America who want to hear that. Everybody wants to promote their ideologically congenial fragment of the full story.
Sure, trillions evaporated and trillions may evaporate again in the future because nobody wants to learn this lesson of history, but I guess that's a small price to pay for keeping the embarrassing truth covered up.

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Source URL: http://www.vdare.com/posts/i-am-shocked-shocked-to-learn-that-countrywide-financials-loan-practices-were-lax

Links:
[1] http://www.washingtonpost.com/business/us-sues-bank-of-america-for-1b-for-mortgage-fraud-suit-concerns-countrywide-loans/2012/10/24/6273f68a-1df7-11e2-8817-41b9a7aaabc7_story.html
[2] http://www.inman.com/news/2005/01/5/countrywide-sets-1-trillion-goal-real-estate-loan-program
[3] http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/m03-1_mozilo.pdf
[4] http://connection.ebscohost.com/c/articles/9411031116/eased-guidelines-seen-as-key-boost-minority-lending