TorilMUD Forums

I thought even the democrats got the message, you can't loan money to people who have no money and aren't credit worthy.

They are again trying to force banks to make bad loans, make loans in neighborhoods in decline, make loans to people who statistically are a higher risk. They call it discrimination... and you know what it is, its discrimination on the basis of risk factors which certainly should include where you live but apparently that is against the law.

http://www.businessweek.com/magazine/co ... 594062.htm

Community activists in St. Louis became concerned a couple of years ago that local banks weren't offering credit to the city's poor and African American residents.

== news flash, they weren't making loans to anyone.

The Federal Reserve has cited one of the group's targets, Midwest BankCentre, a small bank that has been operating in St. Louis's predominantly white, middle-class suburbs for over a century, for failing to issue home mortgages or open branches in disadvantaged areas.

== well not buying healthcare is economic activity, so why isn't not opening up branches?

At the Justice Dept., a new 20-person unit dedicated to fair lending issues received a record number of discrimination referrals from regulators in 2010 and has dozens of open cases, according to a recent agency report. Potential penalties can reach into the millions of dollars. "We are using every tool in our arsenal to combat lending discrimination," Thomas E. Perez, the assistant attorney general for the Civil Rights Div., told a conference of community development advocates in Washington in April.

== we need lending discrimination. I wonder if they can find any evidence that a bank wouldn't lend to an affluent black community. I highly doubt it. Greed is color blind.

Like Midwest BankCentre, some lenders are being cited for failing to operate in minority and low-income census tracts near their branches, even when they have never done business there before. "If you put your branches only in upper-income areas, the regulators are not accepting that anymore," says Warren W. Traiger, a lawyer at BuckleySandler in New York, which advises banks on fair lending issues.

== again absolutely hillarious. you can now be discriminating by not targetting marginal customers or customers who are risky.

Mortgage refinancing activity doubled in white neighborhoods but dropped sharply in minority neighborhoods in a sample of major U.S. cities in 2008 and 2009, according to Paying More for the American Dream, an April study by a group of seven community development nonprofits. "The pendulum has swung back too far the other way," says Kevin Stein, associate director of the California Reinvestment Coalition in San Francisco, one of the report's authors.

== I read this as an admission that too many subprime loans were made to poor people, specifically the type of poor people this article is written about... and that was obvious due to zealous efforts by groups like these st louis activists... groups like ACORN and the Rainbow coalition. They literally extort these banks to make loans under threat of lawsuits and federal investigations. Its a class protection racket, work with us, take our direction, make some of these specific loans we want and we'll put in a good word for you with the feds that you're a great community partner.

So you're not familiar with the concept of redlining, then?

Redlining is a system banks use to generalize people who live in different areas. To save themselves the time and expense of doing comprehensive credit/background checks on everyone who applies for a loan, financial institutions will often just generalize residents based on where they live. To make up a ficticious example, if you reside in NE Washington DC between 14th street and 21st, your loan/mortgage request is automatically declined because the bank has determined that region of the city to be too risky. It doesn't matter if you have a steady job with sufficient income and established credit to repay the loan. The address of the house you own is enough for a bank to automatically disqualify you.

The article you linked has nothing to do with the Obama Administration "forcing" banks to make loans to people who can't afford them. It has to do with the government ensuring that banks actually evaluate their loan applications objectively, and make decisions based on ability to repay and not geographic location of residence. Last time I checked, "ensuring that banks actually evaluate their loan applications objectively" is exactly the desired outcome of the mortgage bubble collapse.

fair criticisms... especially about being objective.

but on the other hand, geographic areas should be able to be redlined and can be "too risky" to lend in even if there is no question on whether the borrower can afford it. Blight spreads and the quality of the asset could be diminished as a result. This is very much on banks minds right now. If a house's value drops 50% does it matter if the owner put down 25%? Bank is still going to get soaked. Its happening in a lot of subdivisions where many people have been foreclosed upon, then the copper thieves move in, then the entire subdivision becomes blighted.

Besides, isn't that what the FHA, fannie mae and freddie mac are for? Making risky loans guaraneted by the government? Why do we want to force private institutions to take on risk without compensation?

Kiryan, they're discriminating against people based on where they live now, not where they wish to buy property.

It has nothing to do with people. In this case it is about the property. Mortgages are 'secured' debt, meaning that the debt is backed by the value of the property the mortgage was issued for. If the value of that property is projected to decline, why would you be stupid enough to issue a mortgage?

If the property value declines significantly, the projected loss in the value must be considered unsecured debt. If your credit and your income history are SO good that you can get a credit card with a limit of $200,000, you CAN get a mortgage in a verboten geographical location - for the part of the property that can be mortgaged without risk. The rest of the property you're putting on your super card.

Another fact is that we have created a society where minorities will call rascism or descrimination whenever they dont get what they want. And since we feel that we need to make up for the slavery and discrimination from decades ago, we have a tendicy to believe it. Heaven forbid that a bank decline a mortgage of someone, i wonder how many white people they declined mortgages too? My guess is a hell of a lot.

However the idea of descriminating based on where you live is kinda ridiculous, if a person is looking to move out of thier ghetto neighbourhood and manage to save up money, keep good credit why would a bank turn down a possible good client? I know plenty of people who are living in poorer areas of town in order to save up money for a down payment on a mortgage, myself being one of them. I work a great job, save money, and keep my credit relatively clean, I choose to live in a poor area to save on rent, 800 compared to 1200 for something similiar in a better area of town. That 400 goes right into a savings account for my down payment. should i be discriminated against based on the fact that im okay with living in this area so i can achieve a goal i have?

kiryan wrote:fair criticisms... especially about being objective.

but on the other hand, geographic areas should be able to be redlined and can be "too risky" to lend in even if there is no question on whether the borrower can afford it. Blight spreads and the quality of the asset could be diminished as a result. This is very much on banks minds right now. If a house's value drops 50% does it matter if the owner put down 25%? Bank is still going to get soaked. Its happening in a lot of subdivisions where many people have been foreclosed upon, then the copper thieves move in, then the entire subdivision becomes blighted.

That's not what redlining means. I'll use your example.

You, kiryan, moved into a flourishing suburban development in 2005. You put a 20% down payment on your house, have never missed a mortgage payment, and are gainfully employed. When the housing market crashed in 2008, your house was devalued, but you were smart about your mortgage and didn't get involved with stupid interest-only ARMs, so you're doing ok. Your neighbors weren't so smart, and several of them have entered foreclosure. As time goes on and the quality of life in your neighborhood decreases, you consider selling your house and moving to a different part of town. You meet with the bank to discuss your mortgage options. Unfortunately, the mortgage consultant informs you that there have been so many foreclosures in your neighborhood that the entire development is now considered a credit risk, and your mortgage application has been declined. In order to secure financing, you would be required to take a loan at a much higher interest rate than you're paying now, thereby putting you into the same position that caused so many of your neighbors to foreclose. In essence, you're now trapped in your devaluing property.

That's redlining. You're considered a credit risk not because of your payment history or employment status, but because you live in an area populated by other people who have defaulted on their commitments. It has nothing to do with the value of your house, the equity you've accrued, your credit score, or any other factor except your physical address.

That is exactly what I understand redlining to be... and I realize its prohibited by federal law... but I'm saying geographic area needs to be something banks can consider and use. The fact you know live in a bad neighborhood where your home value is spiraling downwards at no fault of your own is a serious problem when I consider whether or not I want to lend you money... no matter how rich you are, I don't want your asset on my books.

its too risky. If I have to make a loan to you anyway, can you really blame me when I demand you bail me out? If you want to make these kinds of loans, then the government needs to guarantee them because no private party in his right mind would make the same loan at the same rate to two equally credit worthy buyers when one is in a nice stable neighborhood and the other is in a ghetto that is in a downward spiral. The home in the stable neighborhood is a MUCH more attractive and less risky asset.

The article presents a major argument on refinancing:

"Mortgage refinancing activity doubled in white neighborhoods but dropped sharply in minority neighborhoods in a sample of major U.S. cities in 2008 and 2009, according to Paying More for the American Dream, an April study by a group of seven community development nonprofits."

Refinancing is done on the same property, this is not 'redlining,' because the property is part of the equation in the decision to provide financing.

Hmm thats fair.

however when you refinance, you are generally paying off the old loan and making a new loan usually with a new entity.

I could probably understand it being invalid discrimination if you are redlining properties on which you already own the loans... but I wouldn't willinglly pay off another bank's loan and issue a new loan in my name on a property in a redlined district unless I'm getting a substantial risk premium... and I want to deal in risky properties.

kiryan wrote:no matter how rich you are, I don't want your asset on my books.

You do realize it would be the new house on the books, not the old one in the "blighted" neighborhood... right?

The home in the stable neighborhood is a MUCH more attractive and less risky asset.

So then explain why the bank wouldn't give you a loan to buy it if you have a perfect credit history.

Or maybe just re-read Rags' post a few times until you actually understand it.

Sarvis wrote:

kiryan wrote:no matter how rich you are, I don't want your asset on my books.

You do realize it would be the new house on the books, not the old one in the "blighted" neighborhood... right?

If you are trying to say that the bank wouldn't give you a loan on a new property in a different neighborhood because you presently lived in X neighborhood that would be somethign I disagree with.. Maybe I did misundersatnd what Ragorn said. Your mortgage application would be on a new house in a non redlined district. They would accept that application (minus any considerations for say having to sell your house first and the fact thats its in a bad neighborhood etc etc etc). Redlining is targetting neighborhoods and saying we won't make loans on houses in these areas because they're risky.

http://en.wikipedia.org/wiki/Redlining

the practice called "redlining" began with the National Housing Act of 1934, which established the Federal Housing Administration (FHA).[10] The federal government contributed to the early decay of inner city neighborhoods by withholding mortgage capital and making it difficult for these neighborhoods to attract and retain families able to purchase homes.[11]

== clearly, the loan is for a house in the redlined district. This is how I understand redlining.

The home in the stable neighborhood is a MUCH more attractive and less risky asset.

Yes but they would make that loan (unless it was supposed to be secured / dependent by your present house or something)

So then explain why the bank wouldn't give you a loan to buy it if you have a perfect credit history.

They shouldn't, I would say that is discriminatory.

Or maybe just re-read Rags' post a few times until you actually understand it.

ok... maybe im misundersatnding it, but if i am, then i think he/you don't understand what redlining is. redlining is about the quality of an asset. If the gripe is that banks wont open up branches in crappy neighborhoods where they dont want to make loans (for houses in those crappy neighborhoods) just so the residents can apply for loans on houses clear across town... seriously... i think it should be up to the bank whether they want to locate their office and if they don't think there are potential customers for the kinds of loans they want to sell in ghettos... they shouldn't open up branches there. The rich man from the ghetto can come uptown if he wants to apply for a loan. Seriously what kind of crap is this that now you have a right to have an uptown bank in your ghetto?

If you are trying to say that the bank wouldn't give you a loan on a new property in a different neighborhood because you presently lived in X neighborhood that would be somethign I disagree with..

Yes, that is exactly what Ragorn had said. I, frankly, don't know if it's true or not but... seriously, you need to learn how to read or something.

kiryan wrote: Seriously what kind of crap is this that now you have a right to have an uptown bank in your ghetto?

Well, do you believe a person from the ghetto should have an equal chance at improving his life or not?

are banks in up town saying sorry we don't serve customers from downtown?

Quit being retarded. They can pick up the phone and call an uptown bank, they can take the bus up there. whatever, Yoshinoya not opening up a restauarant in whitesvill, MT doesn't make it discrimination. It makse it a business who knows better than to open up branches where its customers don't live. If you live in the ghetto, you're generally not credit worthy. Thats not discrimination thats fact of credit scores.

kiryan wrote:If you live in the ghetto, you're generally not credit worthy. Thats not discrimination thats fact of credit scores.

And if you're a serf, you could never lead or handle owning land.

Feudalism is alive and well!

The difference being you can walk uptown and into a bank.

kiryan wrote:are banks in up town saying sorry we don't serve customers from downtown?

Quit being retarded. They can pick up the phone and call an uptown bank, they can take the bus up there. whatever, Yoshinoya not opening up a restauarant in whitesvill, MT doesn't make it discrimination. It makse it a business who knows better than to open up branches where its customers don't live. If you live in the ghetto, you're generally not credit worthy. Thats not discrimination thats fact of credit scores.

I agree. And I think we should extend this to states. You live in Montana, which is a shitbag state with a low per capita income, so I think your mortgage rate should increase because you're a credit risk.

You can drive to California and take out a loan from there if you want.

It is good exercise, and you're less likely to get stabbed in the nice uptown!

Ragorn wrote:

kiryan wrote:are banks in up town saying sorry we don't serve customers from downtown?

Quit being retarded. They can pick up the phone and call an uptown bank, they can take the bus up there. whatever, Yoshinoya not opening up a restauarant in whitesvill, MT doesn't make it discrimination. It makse it a business who knows better than to open up branches where its customers don't live. If you live in the ghetto, you're generally not credit worthy. Thats not discrimination thats fact of credit scores.

I agree. And I think we should extend this to states. You live in Montana, which is a shitbag state with a low per capita income, so I think your mortgage rate should increase because you're a credit risk.

You can drive to California and take out a loan from there if you want.

Uh, many, many loans are from out of state banks. The majority of revolving credit is from out of state banks.

Nice try though.

kiryan wrote:If you are trying to say that the bank wouldn't give you a loan on a new property in a different neighborhood because you presently lived in X neighborhood that would be somethign I disagree with..

YES.

YES.

YES.

YES.

YES.

YES.

This is the definition of the word "redlining." The bank will not give you a loan on a new property in a different neighborhood because you currently live in X neighborhood. That is literally how redlining works.

Are we all clear now?

Teflor Lyorian wrote:Uh, many, many loans are from out of state banks. The majority of revolving credit is from out of state banks.

Nice try though.

Yeah, but it's a shame he lives in a redlined state and doesn't qualify for loans from any of them. Sorry.

Nice try though :)

Ragorn wrote:

Teflor Lyorian wrote:Uh, many, many loans are from out of state banks. The majority of revolving credit is from out of state banks.

Nice try though.

Yeah, but it's a shame he lives in a redlined state and doesn't qualify for loans from any of them. Sorry.

Nice try though :)

I don't care if Kiryan can't get a loan. I also didn't say anything about redlining.

Nice try though.

Good, then you agree with me :) Guess we're done here.

Ragorn wrote:Good, then you agree with me :) Guess we're done here.

No, I was correcting the stupid shit you were posting. Also, I only agree with about 50% of what you've said.

The 50% I agree/agreed with:

Redlining is illegal. It's *somewhat* justified by Equal Housing Opportunity.

What I disagree with:

Banks should have the ultimate authority to decide who they do business with, unless they are subsidized or supported by taxpayer dollars that the bank has opted to accept. Banks that refuse public funds for operation or do not participate in government programs beyond what other businesses do, should be able to discriminate the same way other businesses do.

So if a private club can say 'we refuse to do business with you,' a bank that is not reliant upon public funds should be able to say the same thing. However, there should be some regulation in regard to how that interacts with fair housing/equal opportunity.

Yes, banks participate in fractional or reserve lending an rely upon a public system - but that's due to their dependence upon the US dollar. Compliance should not be compelled.

Furthermore, I don't believe it's fair to force all banks to lend to anyone the government considers credit worthy. It prevents banks from having unique business models and strategies, thus limiting investor choice. However, I do believe credit should be available to all, including the credit unworthy in some shape or form.

The solution would be to hook up potential clients with willing lenders. This could be done while preserving the right of Americans to conduct business without obscene government interference.

Teflor Lyorian wrote:The 50% I agree/agreed with:

Redlining is illegal.

Not only did I not say that, but it's not true. Redlining is currently legal, and the article that kiryan linked in the first article describes what the Obama Administration is doing to make it illegal. All opposed by the Republicans of course, who believe that banks should be permitted to practice geographical discrimination, even when accepting public funds for operation.

But hey, you can't count on Republicans to support any policy that doesn't fuck the public in favor of business.

Ragorn wrote:

Teflor Lyorian wrote:The 50% I agree/agreed with:

Redlining is illegal.

Not only did I not say that, but it's not true. Redlining is currently legal, and the article that kiryan linked in the first article describes what the Obama Administration is doing to make it illegal. All opposed by the Republicans of course, who believe that banks should be permitted to practice geographical discrimination, even when accepting public funds for operation.

But hey, you can't count on Republicans to support any policy that doesn't fuck the public in favor of business.

1)The redlining we have discussed in this thread is already illegal.
The fair housing act, community reinvestment act, the civil rights act, eoca, etc. makes the vast majority of redlining illegal.

2) The Obama administration is not making anything illegal - it's not in the power of the executive to do so. All they are trying to do is expand enforcement of existing laws by reinterpreting the regulations in a manner that uses executive power to force banks to do things they weren't doing before (in the hope they will do so simply to avoid regulatory action).

3) Banks should not be offered public funds for operation in the first place. If they are offered public funds, are not compelled to accept them, and choose to accept them, then they should be open to greater scrutiny from the Federal government. Not overreaching scrutiny, but more scrutiny.

4) By the way, fucking business is fucking the public that owns, invests, works for, and relies upon it.