Why CRA Loans Weren't Toxic Subprime Loans

Mike at Rortybomb wades into the CRA debate with a very good point: toxic subprime loans bear almost no relation to CRA loans.

80% of the subprime mortgages expired in 30 months; they perpetually had to be refinanced. 75%+ of subprime mortages had a prepayment penalty. This is not at all what CRA loans looked like. CRA rooted for solid, longer-term mortgages.

I do hope the formal debate between John Carney and Barry Ritholtz happens; I’ve already lined up John Gapper and Mike Mandel as judges (they say they have no opinion on the matter), and I’m pretty sure I can host it in a Reuters TV studio. Come on, Barry, you know you want to!

Comments

[Wisdom vs. Information]

Giving wealth to the non-creditworthy by forcing companies to buy subprime mortgages from banks is like trying to help a crackhead by giving him cocaine, or helping an overweight diabetic by giving him an organic muffin. The CRA's intentions are irrelevant, and their methods are stupid. Euro-apologists keep trotting out one CRA apologia after another and prove nothing except that they have bad memory. Subprime accelerated when Congress put down the thumbscrews, everything else that happened was an effect. All Ritholz did was try to change the subject, why waste time with a debate?

2009 Jun 30 05:26 PM

[THofler]

Yee Gods! Time for y'all to grow up and move on.

2009 Jun 30 11:04 PM

[John Preston]

Actually, Subprime was the effect....an unintended consequence of a string of events......Fannie & Freddie were the prime instigators...and that leads to CRA..., and Congress ... Agencies...Departments... Street and Corporate Amercia..... this problem started at the top...with a bad mission plan and flawed and misguided oversight.....




On Jun 30 05:26 PM Wisdom vs. Information wrote:

> Giving wealth to the non-creditworthy by forcing companies to buy
> subprime mortgages from banks is like trying to help a crackhead
> by giving him cocaine, or helping an overweight diabetic by giving
> him an organic muffin. The CRA's intentions are irrelevant, and their
> methods are stupid. Euro-apologists keep trotting out one CRA apologia
> after another and prove nothing except that they have bad memory.
> Subprime accelerated when Congress put down the thumbscrews, everything
> else that happened was an effect. All Ritholz did was try to change
> the subject, why waste time with a debate?

2009 Jul 01 10:09 AM

[Kint]

Remember, there was demand for CDOs at the height of the bubble - and the ratings agencies, banks, Wall St. investment firms all willingly played a huge part. More than anyone, they are to blame.

2009 Jul 01 03:44 PM