Bank of America CEO Brian Moynihan advocates for a new program to offer zero down payment mortgages in black and Hispanic neighborhoods. There is no need to worry about a resurgence of the 2008 financial crisis, he said. This was caused by monetary easing and lax insurance underwriting.
“This gives a down payment to buy a home in a majority-minority neighborhood, regardless of who the buyer is, as long as they meet the income requirements,” Moynihan said. told Fox News.
Criticism centers on the reverse racism the policy seems to foster. However, that is not the most worrying thing for those who are concerned about minority aspirations and the improvement of their communities.
Moynihan’s defense is a red flag in itself. Good locality and wealth valuations depend on strict underwriting standards and are threatened by easy credit. The daunting task of putting together a down payment does not apply to the Bank of America program.
But saving for a down payment is a virtue, not a hindrance. Every neighborhood is a benevolent conspiracy in which we rely on our neighbors to maintain our homes, watch over our children, and take an interest in civic life.
Getting a mortgage too easily risks giving credit to people who don’t have the means to fix or repaint that roof or make the payments. An empty or dilapidated house next door threatens the value of those who work hard and play by the rules.
Concerns here should focus on what Bank of America’s policies are intended to help. Unfortunately, we’ve seen the Community Reinvestment Act before and this movie that puts pressure on banks to give credit to them based on zip code, not criteria. My colleague Edward Pinto, former chief economist at Fannie Mae, I got itof 2008, “The financial crisis had a single major cause: the accumulation of unprecedented numbers of weak mortgages in the U.S. financial system.”
That crisis and the resulting widespread mortgage foreclosures disproportionately affected blacks, leaving 240,000 black homeowners homeless. The causes crucially included the federal government’s “Affordable Housing Goal” for low-income communities, which encourages lenders to extend loans to those who do not meet traditional standards.
The same pressures from Federal Reserve and Treasury regulators are creating skewed credit incentives. bank of america We are hiring.
Banks seeking regulatory approval for growth through mergers or acquisitions will be required to show a network of branches in certain zip codes and a record of providing commercial and mortgage loans to low-income and minority borrowers, the regulation said. We face challenges from authorities and advocacy groups.
Banks face five types of Community Reinvestment Act trials. As CEO, Moynihan is right to signal the bank’s intentions to target Black and Hispanic communities. That’s exactly what the regulator claims. They call it “meeting the credit needs of the community.”
But the focus of such easy credit, premised on factors other than loan repayment capacity, is on lending volume rather than the key metric that prudent banks have historically paid attention to.
The Community Reinvestment Act has never required loan performance reporting. In particular, it dates back to 1977 — long before banks could compete across state lines, long before Quicken Loans and other online lenders launched, banks faced regulatory pressure like However, it is available to creditworthy borrowers wherever they live. They know better than to offer down payment grants to unqualified borrowers.
For major banks, giving easy credit in minority areas is a virtue signal, in other words the cost of doing business.
The victims we should be concerned about are not the discredited white homebuyers, but the minority homeowners who are the enemies of improved neighborhoods where lax homeowner underwriting standards are stable.
Here’s what equitable housing really means. It’s a chance for households with the right means to get a mortgage. Denying credit based on race is wrong. Extending it based on it does not do the recipient any favors.
Howard Husock is a Senior Fellow at the American Enterprise Institute and author of The Poor Side of Town: And Why We Need It.