[P2P-F] Fwd: “ghetto loans” - Pushed Minorities Into Subprime Mortgage Loans when many qualified for Prime Loans

[Michel Bauwens]

---------- Forwarded message ----------
From: Dante-Gabryell Monson <dante.monson at gmail.com>
Date: Fri, Dec 2, 2011 at 9:48 AM
Subject: “ghetto loans” - Pushed Minorities Into Subprime Mortgage Loans
when many qualified for Prime Loans
To: econowmix at googlegroups.com



http://thinkprogress.org/economy/2011/12/01/379332/former-banker-subprime-pushed/
Former
Chase Banker Admits His Bank Pushed Minorities Into Subprime Mortgage
Loans<http://thinkprogress.org/economy/2011/12/01/379332/former-banker-subprime-pushed/>

By Pat Garofalo <http://thinkprogress.org/author/pat-g/> on Dec 1, 2011 at
9:20 am

One of the most pernicious practices in which the nation’ biggest banks
engaged during the lead up to the financial crisis was pushing minority
borrowers into subprime loans, even when many of them qualified for prime
loans. Wells Fargo had perhaps the most horrifying practices in this
department, calling the subprime loans that they pushed in poor, black
neighborhoods “ghetto
loans<http://thinkprogress.org/economy/2009/06/08/172810/wells-fargo-subprime-bank/>
.”

This rampant predatory lending helped inflate the housing bubble; a Center
for American Progress investigation actually found huge racial
disparities<http://thinkprogress.org/economy/2009/09/15/172933/racial-disparities-tarp-banks/>
in
lending at the big banks that wound up getting bailed out, with minority
borrowers far more
likely<http://www.americanprogress.org/issues/2009/09/pdf/tarp_report.pdf>
to
receive high-priced loans.

One former banker for Chase — James Theckston — told the New York Times’
Nick Kristof that not only did his bank push minority borrowers into
higher-priced loans, but senior executives then tried to cover up the
racial disparity<http://www.nytimes.com/2011/12/01/opinion/kristof-a-banker-speaks-with-regret.html?_r=1>
in
their banks’ lending:

 One memory particularly troubles Theckston. He says that some account
executives earned a commission seven times higher from subprime loans,
rather than prime mortgages. So they looked for less savvy borrowers —
those with less education, without previous mortgage experience, or without
fluent English — and nudged them toward subprime loans.

*These less savvy borrowers were disproportionately blacks and Latinos, he
said, and they ended up paying a higher rate so that they were more likely
to lose their homes. Senior executives seemed aware of this racial
mismatch, he recalled, and frantically tried to cover it up.*

“The bigwigs of the corporations knew
this<http://www.nytimes.com/2011/12/01/opinion/kristof-a-banker-speaks-with-regret.html?_r=1>,
but they figured we’re going to make billions out of it, so who cares? The
government is going to bail us out. And the problem loans will be out of
here, maybe even overseas,” Theckston explained.

In 2006, Chase made high-price loans to 16.4 percent of white borrowers,
while nearly half of black
borrowers<http://www.americanprogress.org/issues/2009/09/pdf/tarp_report.pdf>
and
more than one-third of Hispanic borrowers received high-price loans. These
disparities help explain why, according to a new report from the Center on
Responsible Lending, Latinos and blacks are twice as
likely<http://thinkprogress.org/economy/2011/11/18/372517/latinos-african-americans-housing-crisis/>
to
have been impacted by the housing crisis as whites. In fact, “approximately
one quarter<http://thinkprogress.org/economy/2011/11/18/372517/latinos-african-americans-housing-crisis/>
of
all Latino and African-American borrowers have lost their home to
foreclosure or are seriously delinquent, compared to just under 12 percent
for white borrowers.”



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