Talk:Community Reinvestment Act

Changes and edits

I'm glad to see that this page has been edited a fair amount since I last visited the article. Last time I visited this page I thought it was very strange to see a strong bias in the article, with statements written in bold/italics as if someone was trying to say that certain facts were more valid than others (under the "Relation to 2008 financial crisis" section).Arandomwikiguy (talk) 11:54, 2 July 2009 (UTC)

CRA as purported cause of the housing crisis.

I have made several changes: 1) fleshed out the commentary of FDIC chair Sheila Bair and the remarks of Fed Governor Grosznor who both relay extensive evidence against the proposition that the CRA was a significant cause of the housing crisis. Bair's remarks are unequivocal and deserved to be quoted. 2) removed an irrelevant citation from the section of people making the charge. I read the article, and it was almost entirely about blaming Freddie and Fannie for the crisis. It mentions the CRA once and presents no evidence (nor makes the claim) that it caused the housing crisis. 3) added 2 citations by Paul Krugman who has been especially vocal in refuting this idea. I trust he is "noteworthy" and his opinion on the matter is worth including.

In general I think the whole section is too long, relies too much on listing people on each side of this nonsensical debate, without stating more emphatically that this is not an idea taken seriously in economics. Aside from some opinions of right wing economists, there is no empirical data presented to make this case. It is simply an ungrounded hypothesis, plausible in the abstract but completely speculative. It turns into farce when all the available hard evidence shows the hypothesis to be false.--FNV (talk) 03:38, 18 February 2010 (UTC)

A few notes:

a.) Does anyone know where we could find the hard data/statistics that breaks down mortgage loan default rates among CRA-backed sub-prime loans vs non CRA-backed sub-prime loans or other non sub-prime loans? I've checked the Harvard database and it is pretty complex, I wouldn't mind seeing someone break down some numbers for the general population.

b.) I have personally found Paul Krugman's assertions with regards to current economics and politics to be of dubious worth. One reason the NYT and Obama administration love giving him so much exposure is because his column/articles always support increases in governmental power over the economy. Strangely enough this is not what he won the Nobel Prize for. His 55% quote is completely irrelevant considering he was talking about current loans a year after the initial market drop had occurred. Whether or not the CRA caused the collapse means the data we want would be from months leading up to collapse, not a year after when all markets were hurting from the overall economic collapse. Also he unfortunately cites data that is closed off to the general public (Wall Street Journal) which, if he were a Wikipedia contributor, would not be a valid reference.

c.) Opinions of people at the Federal Reserve and government agencies are suspect. Of course someone at working for the government is going to say that the current crisis is NOT the government's fault. Unless they give hard data to back up their claims then they should not be quoted in this article.

d.) Are the claims that the CRA didn't contribute to the collapse of 2008 contradicted by the earlier statements regarding CRA loans and Freddie Mac in the 3rd paragraph of the "Sound Practices and Profitability" section?

What we need to find is a good study showing whether or not CRA loans to low-income and other demographics had a higher instance of default than non-CRA loans. Right now the "Relation to 2008 Financial Crisis" is about 20% supporting the assertion that it helped contribute the crisis and 80% opposing which violates NPOV. Fatrb38 (talk) 06:27, 13 July 2010 (UTC)

I added many of the sources to this section. If you want data, one source that's better than most is the Traiger Hinckley study. Check it out and get back to me. The government does not seem to be lying when it says the empirical data does not support a connection. II | (t - c) 07:59, 13 July 2010 (UTC)

I just made a few changes to the section on CRA and the alleged connection to the crisis. There are many critics of CRA, but only a few had been noted, so I added a few more. Also, check out the Krugman reference, which is pretty simplistic. It comprises 145 words (3 short paragraphs) and it only notes the existence of a commerical loan bubble and the deflation of that bubble. So what? Krugman doesn't address the commercial loan delinquency rates, and he fails to note that there were huge differences in the collateral requirements of residential and commercial loans. While residential loans were backed with little or no down payments, commericial loans generally had 20 to 35%. The reason we had a crisis (in the view of people like Peter Wallison of AEI) is that residential loans were backed with crap, people could walk away, and that led to bank failures. A lot of commerical loans may be underwater now, but that doesn't mean that the businesses taking out those loans are able to walk away from their obligations. If Krugman has addressed this issue in a more complex manner (and I doubt it) please make the appropriate adjustments. Thanks. Nicholas007 (talk) 23:53, 26 December 2012 (UTC)

I just made one more change, which was to remove this statement: "Legal and financial experts have noted that CRA-regulated loans tend to be safe and profitable, and that subprime excesses came mainly from institutions not regulated by the CRA." I removed it because it is a sweeping statement, and it is not specifically supported with a citation. Also, a statement asserting the exact opposite is just as true. I could say: "Legal and financial experts have noted that CRA-regulated loans have not been safe and profitable, and that subprime excesses came mainly from institutions regulated, directly or indirectly, by the CRA." (The reference to indirect regulation is to acknowlege that 75 nonbanks voluntarily agreed to be subject to the CRA standards (after some arm-twisting by HUD.)The point is that there are experts lined up on opposing sides of this issue.Nicholas007 (talk) 00:05, 27 December 2012 (UTC)

A new study “Did the Community Reinvestment Act (CRA) Lead to Risky Lending?” by Sumit Agarwal, Efraim Benmelech, Nittai Bergman, Amit Seru (discussed here, for example New Study Finds CRA 'Clearly' Did Lead To Risky Lending) finds that it was not a cause of the crisis, but clearly amplified the problem. CWuestefeld (talk) 14:44, 23 January 2013 (UTC)

Mis-use of Wikipedia

I have become concerned of late about bias in Wikipedia. Frankly, for 10 years I've been impressed as to how well it worked, and has worked - and have been a repetitive, although not prolific or frequent contributor. In cases where my contributions weren't good they were deleted. In cases where they were good, they were improved. Everything as it should be.

I'm concerned that the NPOV and anti-bias rules can't be maintained, and have seen some troubling things lately (from moderators as well as well as normal contributors.) I don't know that any policy changes are appropriate. Wikipedia's weakness - that it can be changed by anyone, for whatever reason - is also it's strength, of course. Anyway, this youtube video is worth watching, for any concerned about the future of Wikipedia:

http://www.youtube.com/watch?v=TxgSubmiGt8

To the honest founders, moderators, editors, and contributors of Wikipedia - You've made a great resource, and shown me that such open collaboration can work. Thank You. —Preceding unsigned comment added by 97.89.22.141 (talk) 14:45, 25 June 2010 (UTC)

Agreed! It seems that this article has a large amount of bias toward proving that the CRA had nothing to do with the housing crisis, and none of the editors really seem interested in rebutting such arguments. The inference that ACORN or other low-income housing groups tried to prevent sub-prime lending (except, perhaps, where such sub-prime rates were higher than normal) is laughable, as encouraging low-income (which most often means sub-prime) housing is ACORN's and related groups' stated goal. —Preceding unsigned comment added by 71.11.175.42 (talk) 21:56, 15 July 2010 (UTC)

independent mortgage company statistics

I would like to add a citation relating to the following references.

He noted that approximately 50% of the subprime loans were made by independent mortgage companies that were not regulated by the CRA, and another 25% to 30% came from only partially CRA regulated bank subsidiaries and affiliates. Barr noted that institutions fully regulated by CRA made "perhaps one in four" sub-prime loans, and that "the worst and most widespread abuses occurred in the institutions with the least federal oversight".[114]

These quotes are accurate, but they imply that loans issued by independent mortgage companies are in no way related to the CRA. Independent mortgage companies arrange loans for CRA regulated banks. Hence, the regulations of the CRA would apply to these mortgages, as they would to any other, owned by CRA regulated banks, regardless of the fact that the loans originated at independent mortgage companies. To cite these statistics as somehow showing no link between the CRA and loans made by independent mortgage companies is misleading, and does not tell the whole story.

I am trying to add a comment that, at least, points out that CRA regulated banks fund loans from independent mortgage companies, and says nothing further. It would take more data to show whether or not the loans resulting in CRA credit for banks had a higher default or foreclosure rate. However, at the same time, it takes more than these statistics shown to unlink the CRA from loans made by independent mortgage companies.

This issue is independent of assigning causality of the financial crisis to the CRA. It simply gives these statistics more clarity. —Preceding unsigned comment added by Voightkampf (talk • contribs) 05:56, 22 August 2010 (UTC)

Actually, these quotes may be a logical fallacy, and should just be removed instead of clarified. If the point of these quotes is to show that sub-prime loans were largely not under the CRA, then this is a logical fallacy. This is equivalent to saying that, since member A is in set B, then it is not in set C, where A is a sub-prime loan, B the set of loans made by mortgage companies, and C is the set of loans regulated by the CRA. Clearly, one can construct a Venn diagram in which sets B and C intersect, and A is a member of both. The argument is only valid if you show or assume that no member of set B is a member of set C, i.e., that B and C do not intersect. In this case, for the point to be valid, it must be shown that these sub-prime loans made by independent mortgage companies were not arranged for or purchased by CRA regulated banks. No such assertion is made. As such, these statistics communicate very little meaning, and should probably be removed, instead of clarified. —Preceding unsigned comment added by Voightkampf (talk • contribs) 08:07, 22 August 2010 (UTC)

All well and good but Barr didn't absolve independent mortgage companies from affecting CRA ratings of host institutions rather points out the flaw in the regulatory structure that allowed the collusion to go unchecked. Your point implies that the primary motivation was not the over-exaggerated bundling and leveraging of mortgage backed securities by the majority of financial institutions in question here but the obtaining of an artificially inflated CRA rating by said institutions was the driving factor instead.

Before the National CRA Aggregate Report at FFEIC went down, it was fairly clear to see that CRA measured institutions, for the most part & even in key MSAs, were consistently no where near falling short of CRA compliance for a decade or more. Any collusion between key financial institutions and independent mortgage companies operating together with unsound business practices in play that happened to bring along it some padded or artificial CRA "points" was minor compared to the securitization and subsequent leveraging boon, if any benefit at all.

This entire CRA-is-to-blame talking-point is politically driven rather than fact based (various Housing and Community Development Acts over the years set the percentages for low and middle income lending; not the CRA) and, in my opinion, the connection between the obligatory CRA examination & rating as a major factor in this latest financial crisis is flimsy at best. It really has no place here, but such is the nature of community consensus I suppose <groan>. George Orwell III (talk) 08:54, 22 August 2010 (UTC)

My goal here is to discuss the presentation of these statistics specifically, whether or not they are presented in a clear way, and whether or not they should be clarified or removed. I do not think this should be a function of consensus as to what extent we think the CRA contributed to the housing crisis. If we're going to cite experts and paraphrase statistics and arguments for either side, we should present them in a clear context, or not at all. Saying that an expert says that the CRA is not to blame, and then citing the independent mortgage loan percentage of sub prime loans merely points out that many loans originate by mortgage companies and not at banks, nothing else. It is a statement that has no relevance to the CRA, since those loans were very possibly arranged for CRA regulated banks.

In fact, Countrywide Home Loans had a CRA program specifically oriented towards making loans for low-income people and selling them as mortgage backed securities to banks for CRA credit. Here's a quote from Countrywide's old website:

"Countrywide's goal is to meet the Six Hundred Billion Dollar challenge, funding $600 billion in home loans to minorities and lower-income borrowers, and to borrowers in lower-income communities, between 2001 and 2010. As of July 31, 2004, the company had funded nearly $301 billion toward this goal. The result of these efforts is an enormous pipeline of mortgages to low- and moderate-income buyers. With this pipeline, Countrywide Securities Corporation (CSC) can potentially help you meet your Community Reinvestment Act (CRA) goals by offering both whole loan and mortgage-backed securities that are eligible for CRA credit."

So, presenting statistics like this implying that mortgages originated by mortgage companies like Countrywide were never regulated by the CRA is fallacious and misleading. I would argue more in favor of their removal than their clarification, since these statistics give the wrong impression to readers who are unfamiliar with the relationship between mortgage companies, banks, and the CRA, and since there is no effort spent pointing this relationship out, along with these statistics. —Preceding unsigned comment added by 208.127.232.30 (talk) 21:09, 22 August 2010 (UTC)

Please keep in mind that any arguments made in the article MUST be attributable to a reliable source, synthesis and original arguments to justify a point are not allowed. It is also inappropriate to remove material that has been properly cited to reliable sources, based on synthesis and original arguments of the editor him/herself. LK (talk) 03:42, 23 August 2010 (UTC)

That is all well and good, Lawrencekhoo, but you keep removing any attempt to point out that mortgage company loans end up under the CRA if they are arranged for or owned by a CRA-regulated bank. This is material that is properly cited to a reliable source. Would you permit this factual addition that clarifies statistics already in this document under a different citation? It is a fact that mortgage loans from mortgage companies fall under the CRA when they are purchased either as a whole loan or a mortgage backed security by a CRA-regulated bank, and a critical one to understanding the independent mortgage loan statistics. It's not a fringe view that gets undue weight by mention with these statistics. Is there some format in which you would allow this additional fact? —Preceding unsigned comment added by 137.78.133.248 (talk) 20:33, 23 August 2010 (UTC)

I'm starting to agree with George Orwell III, and with earlier topics on balance. This section spends several paragraphs not only citing experts deemphasizing the role of the CRA with sub-prime mortgages, but actually delving into their arguments for why they don't think it matters. The alternative viewpoint is only mentioned in a few sentences, citing experts with no statistics or arguments. If one side of this issue is such a fringe view, or if we are only going to establish one side but not the other, perhaps we should just remove the entire section for balance issues. Or limit this section to one paragraph emphasizing influence of the CRA's influence, citing experts, and one paragraph deemphasizing the CRA, citing experts, with no statistical breakdown supporting either. See Wikipedia:Neutral point of view.

---

In this whole section, I see only one reliable secondary source which bears directly on the question of CRA's involvement in the crisis; namely, the BIS working paper, which concluded (in a footnote) that the CRA did not play a major role. Other than that, I see a lot of original research (people taking papers on other topics and asserting that they support or refute CRA as a cause of the crisis), plus an assortment of opinion pieces and unsupported statements from people whose econ credentials range from the impressive to the nonexistent. Ron Paul as an authority on economics? Really?

I propose whacking the whole section except for the introductory paragraph and the conclusions of the BIS paper. Then let anyone with additional reliable secondary sources, on either side, put them in. If there is a real debate going on in mainstream economics, then such sources ought not be hard to come by. On the other hand, if all available RSSes refute the claim of CRA being involved in the crisis, there is no need to give undue weight to the opposing view. Dausuul (talk) 16:03, 1 September 2010 (UTC)

New scrutiny

Recent ~14 May 2011 addition....

The Obama administration has increased scrutiny of the provision of credit to poor and African American neighbourhoods. Lenders have come under investigation for not operating in such areas, whether they have halted service there or have never operated in them before.^[78] Atlantic financial editor Daniel Indiviglio attributes increasing noncompliance with the CRA to tightening lending requirements.^[79]

The italics (my emphasis) gave me a clue to what may be the real driver behind this & it has not been reported yet as far as my searching for straight article goes.

The instance mentioned in the Atlantic piece referring to a Bloomberg report of a bank in St. Louis being suddenly in non-compliance most likely never bothered to adjust their practices in light of the post 2010_Census' LMI zone changes within the long established Census tracts leftover from the 2000_Census based ones. Checking old map and data for St' Louis against the 2010's latest did indeed show the shift -- indirectly altering the old "community-to-service" lines to a somewhat economically different one if not just geographically "redrawn".

I just haven't found a way to incorporate this dynamic of 'Census tract change oblivious banks' possibly contributing to the percieved increase in recent scrutiny without it being shot down as original research. Thought I'd mention it here so it has a chance of being supported with a credible citation some day. -- George Orwell III (talk) 05:19, 14 May 2011 (UTC)

Removal of Relation to 2008 financial crisis section

The "CRA caused the 2009 housing bubble" talking point has no credibility. Why is this conspiracy theory even included in the article? Ron Paul is not an economist, why is his opinion in the article? I understand wikipedia should avoid bias, but including this article is like reporting on the issue of big foot as follows: "Biologists say big foot is a myth, but others say he is real." In other words we are sacrificing accuracy for "fairness" and "sympathy" to those of a certain political persuasion. 99.169.66.28 (talk) 01:25, 28 December 2011 (UTC)

This isn't bigfoot hunting, and the NBER isn't Ron Paul. A new study “Did the Community Reinvestment Act (CRA) Lead to Risky Lending?” by Sumit Agarwal, Efraim Benmelech, Nittai Bergman, Amit Seru (discussed here, for example New Study Finds CRA 'Clearly' Did Lead To Risky Lending) finds that it was not a cause of the crisis, but clearly amplified the problem. CWuestefeld (talk) 14:47, 23 January 2013 (UTC)

Unfortunately, even patently untrue theories (like the water fuel cell for instance) can still generate enough attention to be notable. This particular right-wing talking point has generated enough attention that leaving it out would mean that the article did not appropriately cover this subject. LK (talk) 05:37, 24 January 2013 (UTC)

Some Relationships between the Community Reinvestment Act and the 2008 Financial Crisis do not make much sense

Isn't the idea that the Community Reinvestment Act had something to do with the Financial Crisis this? The Federal government dragged lenders kicking and screaming to make subprime loans to minorities. Lenders knew such loans were a poison pill. So why would those not under the Act take upon themselves to make such loans unless they had negotiated sufficient payment from regulated lenders to avoid later bankruptcy? Even more problematic, you can infer from the Countrywide ad it first made the loans and then was trying to find regulated banks to negotiate with. Rdengrove (talk) 18:51, 2 September 2013 (UTC)

ORweasely

Most experts on the subject,...hold that the CRA did not make a significant contribution of the subprime crisis. I suggest we remove this as OR and weasel wording. None of the sources in this sentence support the statement. a reader may incorrectly believe economic experts were polled and the majority agreed, instead an editor has found 3 economist who disagreed with one economist. Darkstar1st (talk) 07:16, 28 October 2013 (UTC)

Give me a bit of time to find something. I think I've seen reports from investigatory committees about this issue, and they found the CRA is not a factor in the housing bubble. 123.203.195.18 (talk) 14:14, 1 November 2013 (UTC)

Latest addition has "poor" sourcing

Addition in question

An investigation by a major newspaper found that "The City of Cleveland has aggravated its vexing foreclosure problems and has lost millions in tax dollars by helping people buy homes they could not afford." The newspaper added that these problem mortgages "typically came from local banks fulfilling federal requirements to lend money in poorer neighborhoods." In his book on the crisis, CPA Joseph Fried notes that many of the loans given in the Cleveland program - including a loan to a woman living in a car - would be counted as "prime" by CRA advocates. This is, according to Fried, because many notable CRA proponents, including Janet Yellen, Randall Kroszner, John C. Dugan, and Elizabeth Warren, treat all loans as prime provided they have stated interest rates no higher than 3 percent above average. Fried added that, since many loans related to government programs carry low interest rates by design, the 3 percent method makes them appear better than they are.

Not only is there a sourcing issue to the above but I don't see how Cleveland translates into the entire affected sector in question never mind what/how the 3% thing "fits" into any of this (if at all) in the first place. -- George Orwell III (talk) 01:38, 13 December 2013 (UTC)

CRA relation to crisis changes

George Orwell wanted to know how the "3% thing" fits into this. Many of the defenders of CRA, such as John Dugan, Randall Kroszner, Janet Yellen, Eric Rosegren, Richard Neiman, and Elizabeth Warren, defined the quality of loans (prime vs. subprime) on the basis of interest rates rather than the credit-worthiness of the borrower (which would be the normal and conventional way to do it). These people declared that any loan with a rate 3% or more over the normal rate must be "subprime," and any loan with a rate lower than that must be "prime." This was a self-serving standard for government advocates to use since many government home loan program involved low rate loans - even if made to people with subpar credit. The quote from the Cleveland Plain Dealer and from Fried's book on the financial crisis is important because it informs people about this matter. (Eg, the loan made to the woman who lived in a car was considered "prime" because the interest rate on the loan was not excessively high).

I was surprised and dismayed to see the recent removal of Krugman's canard about commercial real estate loans. Let us keep it, but with the counterpoint (I added) that puts it in proper perspective.

If you don't like a citation don't remove it. Rather, add your own to counter it. Nicholas007 (talk) 05:41, 13 December 2013 (UTC)

I believe your additions keep getting removed because, for starters, both citations associated with the added material are not easily verifiable - do you have something with a working link? - followed by, imo, because it belongs in the Subprime mortgage crisis article more so than the CRA article (if anything). You've kind of synthesized these portions (hidden in the section above) to "fit" into the notion that CRA covered loans that were eventually securitized made up a larger share than the roughly ~6% of all the loans in question. Sorry, I just don't don't see how "prime" or "sub-prime" nuance, even if absolutely true, ultimately matters here - are you saying only "true-sub-prime" loans were counted towards CRA evualations and the "faux-prime" ones were not? -- George Orwell III (talk) 09:10, 13 December 2013 (UTC)

I think I understand the point Nicholas is trying to make. If we are going to cite people like Dugan, who claims that CRA did not significantly contribute to subprime lending, we ought to know how Dugan defines subprime vs. prime. However, I also agree with Orwell that the presentation was a little confusing. I think the very latest version is a big improvement.Georges1254 (talk) 14:50, 13 December 2013 (UTC)

I think it's pretty straight-forward now - the assertion is claiming "near-prime" (or Alt-A) loans need to be counted separately in the accounting concerning the nuances between "prime" and "sub-prime" calculations, etc. While technically a valid point, in the overall picture & at the time in question - even with the worst case estimates for that "near-prime" class - it would still only shift the data roughly ~4% or so. So if you accepted that CRA qualified loans made up ~6% to ~7% of the total number of loans eventually securitized under the "bubble", using the new sub-class with worst-case accounting would only shift that baseline to ~10% or ~11% (again, assuming all of those can be counted towards CRA evaluation/rating as well).

That said, I still don't see how splitting this particular hair changes anything and would now justify inclusion in the article. Quite the opposite - this nuance belongs in one of the several other articles that fall under this "financial crisis" umbrella (if at all) and, more importantly, the references are lacking the support needed to avoid the perception of synthesized content - especially after locating the How Cleveland Aggravated Its Foreclosure Problem and Lost Millions in Tax Dollars - All to Help People Purchase Homes They Couldn't Afford piece - which seems to be all about secondary loans once a mortgage was secured (secondary home/flipping?). -- George Orwell III (talk) 04:55, 14 December 2013 (UTC)

I'm going to remove anything cited to a source that doesn't mention the CRA in the source. Read WP:SYN, you cannot 'rebut' what is in the article if an RS has not already done so. Doing that is original research. Darx9url (talk) 08:06, 15 December 2013 (UTC) Also, I'm removing stuff that's not sourced to a WP:RS. Darx9url (talk) 08:10, 15 December 2013 (UTC)

Due and undue weight

Editors here need to read the policy on balance and giving material due and undue weight. Essentially, arguments and opinions should be giving weight in the article depending on their prominence in reliable sources and the prominence of the person(s) making the argument. The section on the CRA has become unbalanced recently. When the views of the Federal Reserve is given a brief sentence, and the views of someone not notable enough for a Wikipedia article is given an entire paragraph, there is something wrong with the weight in the article. Also, please don't include extended quotes, paraphrase the arguments and attribute them, don't state them as facts. Thanks, LK (talk) 06:02, 16 December 2013 (UTC)

Two important matters have been airbrushed from this article: 1) Krugman's statement exonerating government programs on the basis of difficulties with commercial real estate loans and 2) the conflation of "high interest loans" with "subprime loans." Someone reading the article, as it now exists, would not have a clue that these are controversial matters. (Krugman ignores evidence showing that commercial loan problems developed after the crisis; and the use of the high-interest proxy is a brand-new creation, developed by affordable housing proponents after the crisis occurred.)

I will be putting back into this article information that will let the reader know that these two issues exist. I absolutely welcome and encourage you to add all the rebuttal you want. If you feel a Krugman is worth 5 times more print than a "Fried," so be it. I have no problem with that. But, I will not allow entire controversies to be removed, without a trace.Nicholas007 (talk) 11:35, 16 December 2013 (UTC)