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sokinwet · 09-22-2008, 04:22 PM

"Would i be wrong in assuming this was meant for communities where people really couldn't afford a house and were really unable to pay back the principal?"
Yes, no lender has ever been required to make a loan to a borrower without the ability to pay, however it is against federal law to "redline" areas because of minority or lower income resident concentrations. CRA requirements are for regulated banks over a certain size regardless of the community.....Duxbury or Roxbury...makes no difference. I will add that the majority of "gov. sponsored" first time buyer programs allowing 5% d.pmt. also require 30 yr. fixed rate mortgages and every study I have seen shows the default rate of these loans is comparable to standard mortgage default rates.
Let me give an example of two CRA activities spanning 3 decades that I have been involved in. In 1982 we established a home repair program for owners under 80% of median income and signed a servicing agreement with a local lender. They got CRA credit for servicing our loans at no cost; they also got the deposit to establish the program. This month...a 60+ unit "age restricted/over 62 " affordable rental development receives favorable terms from a big lender who receives CRA credits. Believe me the proforma's have to show ability to pay the loan or the bank wouldn't be stepping up! Nothing is free or done at a loss!
I have been involved in a number of FTHB programs and have seen many cases where mortgage originators, who are paid on commission like a car saleman, have tried to pad borrower income to facilitate approval without borrower knowledge. Without exception, these originators have been dealing with private mortgage co's who have no CRA obligations. When XYZ mtg. co. makes this loan they turn it into immediate profit by selling on the secondary market where it is purchased by greedy investors who are able to purchase mortgage based securities because of deregulation and lack of proper oversight. It is an enormously complex issue that cannot be "blamed" on borrowers, Clinton, Bush, etc. I do believe it is a symptom of the greed that will occur when the government abdicates it's role to govern on our behalf.

09-22-2008, 04:22 PM	#59
sokinwet Registered User iTrader: (0) Join Date: Sep 2003 Location: Rockland, MA Posts: 651	"Would i be wrong in assuming this was meant for communities where people really couldn't afford a house and were really unable to pay back the principal?" Yes, no lender has ever been required to make a loan to a borrower without the ability to pay, however it is against federal law to "redline" areas because of minority or lower income resident concentrations. CRA requirements are for regulated banks over a certain size regardless of the community.....Duxbury or Roxbury...makes no difference. I will add that the majority of "gov. sponsored" first time buyer programs allowing 5% d.pmt. also require 30 yr. fixed rate mortgages and every study I have seen shows the default rate of these loans is comparable to standard mortgage default rates. Let me give an example of two CRA activities spanning 3 decades that I have been involved in. In 1982 we established a home repair program for owners under 80% of median income and signed a servicing agreement with a local lender. They got CRA credit for servicing our loans at no cost; they also got the deposit to establish the program. This month...a 60+ unit "age restricted/over 62 " affordable rental development receives favorable terms from a big lender who receives CRA credits. Believe me the proforma's have to show ability to pay the loan or the bank wouldn't be stepping up! Nothing is free or done at a loss! I have been involved in a number of FTHB programs and have seen many cases where mortgage originators, who are paid on commission like a car saleman, have tried to pad borrower income to facilitate approval without borrower knowledge. Without exception, these originators have been dealing with private mortgage co's who have no CRA obligations. When XYZ mtg. co. makes this loan they turn it into immediate profit by selling on the secondary market where it is purchased by greedy investors who are able to purchase mortgage based securities because of deregulation and lack of proper oversight. It is an enormously complex issue that cannot be "blamed" on borrowers, Clinton, Bush, etc. I do believe it is a symptom of the greed that will occur when the government abdicates it's role to govern on our behalf.