The CRA brouhaha last year led the Orange County Register to run an analysis of “more than 12 million subprime mortgages worth nearly $2 trillion” in late 2008.

What did their data based analysis discover?

“Most of the lenders who made risky subprime loans were exempt from the Community Reinvestment Act. And many of the lenders covered by the law that did make subprime loans came late to that market – after smaller, unregulated players showed there was money to be made.”

Among their research conclusions:

  • Nearly $3 of every $4 in subprime loans made from 2004 through 2007 came from lenders who were exempt from the law.
  • State-regulated mortgage companies such as Irvine-based New Century Financial made just over half of all subprime loans. These companies, which CRA does not cover, controlled more than 60 percent of the market before 2006, when banks jumped in.
  • Another 22 percent came from federally regulated lenders like Countrywide Home Loans and Long Beach Mortgage. These lenders weren’t subject to the CRA law, though some were owned by banks that could choose to include them in their CRA reports.
  • Among lenders that were subject to the law, many ignored subprime while others couldn’t get enough.
  • Among those standing on the sidelines: Bank of America, which made no subprime loans in 2004 and 2005; in 2006 and 2007 subprime accounted for just 2 percent of its loan portfolio. Washington Mutual, meanwhile, raised its subprime bet by 20 times to $5.6 billion in 2006 – on top of its already huge exposure through its ownership of Long Beach Mortgage.

These are facts, adduced from analyzing data.

Data based analysis, for those of you who may be unfamiliar with the term, is how research and discovery get accomplished in the real world. It is an alternative way of arguing that the “Blame CRA” proponents are blessedly unaware of. However, outside the universe of rabid partisan sniping, its how actual analysis gets accomplished.

>

click for larger graphic
cra-chartg1109
Chart courtesy of OC Register

>

Source:
Most subprime lenders weren’t subject to federal lending law
RONALD CAMPBELL
THE ORANGE COUNTY REGISTER, Sunday, November 16, 2008

http://www.ocregister.com/articles/loans-subprime-banks-2228728-law-lenders

Graphic

http://www.ocregister.com/newsimages/Graphics/2008/11/hdmachartg1109.gif

Category: Bailouts, Credit, Legal, Real Estate, Really, really bad calls, Regulation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

49 Responses to “Most Subprime Lenders Weren’t Covered by CRA”

  1. you need to look at the secondary market for these loans..

    many of those pools are able to be fit into ‘CRA-eligible’ units that trade at a pemium..

    purchasing ‘Banks’ can use the acquired ‘CRA-eligible’-Loans to fill their Quotas.

    ‘Origination’/ who ‘originated’ the Loans, is not the whole Story..

  2. Mark

    Before we even analyze that thesis, can you please get me some data on this?
    Was it a significant percentage? Did they default in large disproportionate numbers?

    Its a red herring from what I have seen — CRA covered loans actually defaulted in lower numbers than the median — but if you have other data, by all means, provide it.

  3. franklin411 says:

    This article looks familiar! =)

    Barry is doing a great job of keeping on the numbers, but I’d like to digress into politics here. Think about it: since the subprime crisis hit the front pages in late 2006/early 2007, there has been ample motivation for conservatives to prove their contention that the CRA caused the crisis. If they could prove this, then they could have smeared liberals with causing the economic crisis. They could have shielded John McCain against allegations that he was out of touch (because Phil Gramm is a HUGE opponent of CRA). They could have slammed any Democratic politician who ever came out in support of the CRA.

    And yet…they didn’t. Why not? Was there not enough time? Not enough data? Clearly, there was plenty of motivation to do so. Unless some numbers are produced to contradict this assertion, it seems that the only reason they failed to advance any hard data proving that the CRA caused the crisis is because the CRA is not at fault. It’s hard to prove something right when it’s demonstrably, factually wrong.

    PS–
    So I was channel flipping last night, and I saw this on C-SPAN2′s Book TV:

    Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy
    Barry Ritholtz

    About the Program

    Frequent CNBC commentator and CEO of Equity Research at FusionIQ provides his take on why the severe decline in the national economy occurred. Mr. Ritholtz chastises what he calls the misguided philosophies of many players, including Federal Reserve chairmen, presidents, senators and Treasury secretaries.

    Future Airings

    * Sunday, June 28th at 3pm (ET)
    * Monday, June 29th at 2am (ET)

    http://www.booktv.org/Program/10594/Bailout+Nation+How+Greed+and+Easy+Money+Corrupted+Wall+Street+and+Shook+the+World+Economy.aspx

  4. Its not the politics of the CRA — its the ignoring what actually caused the collapse that gets me infuriated by the sort of crap (like what John Carney wrote).

    When opportunistic partisans muddy up the waters with bullshit, how can we ever fix the underlying problems ?

  5. VennData says:

    But… but… I got a large-font, unattributed, unsigned email stating that Phil Gramm and Amity Shlaes proved that the sub-prime crisis was Clinton’s fault.

    Which also explains why Obama nationalized AIG and Lehman Brothers, because Hillary Clinton is now his secretary… are you going to deny that? And are you going to deny that they want government to take over my Medicare?

  6. BR,

    if you were interested in “fixing the underlying problems”, you may care to start at Constitution Avenue NW, Washington D.C. 20551

  7. alfred e says:

    My, my, Cranky (stolen) from CNBC Sucks, what a snarky posting.

    I’m afraid I’m with MEH on the notion of shifting priority from the mortgage meltdown to the upcoming cap and trade rape job.

    If indeed continued energy toward the unraveling of what just happened and what’s going on with the Fed could forestall the continued pillaging of our beloved banana republic, I’m on-board.

    But this freight train remains one step ahead and is intent on steamrolling us all.

  8. wunsacon says:

    Barry,

    Thanks to you and the OC for staying on this.

    Because they’re usually seething with hate for “BJ Bill” and the Democrats, I suspect the folks emphasizing the CRA’s role in the bubble/bust do so less because of the data and more so for political reasons.

    And I don’t know why. Anything Clinton and the Democrats did could’ve been undone in the subsequent 4 years of absolute Republican rule or even in Bush’s 2nd term. Did the Republicans do this? No. Instead, it looks like they embraced the idea of lowering lending standards (including expanding subprime programs and “zero-down”!) and committing Fannie/Freddie to “help”:

    http://www.youtube.com/watch?v=kNqQx7sjoS8&feature=related
    http://www.youtube.com/watch?v=63odt264pR8

  9. Moss says:

    Kudos to u BR for your unrelenting search for the truth.
    You are absolutely correct in your assertion that is is vital to find the true reasons for the excesses.

    We have been manipulated far too long by the partisan politics which manipulate the truth.
    Who cares if it is Democrats or Republicans.

    It is the policies, or lack thereof, that must get rooted out and if they are at odds with the political ideology so be it.

  10. This is a post going up tomorrow, discussing the actual issues in reality impacted what occured ON THIS PLANET — how and where the real issues are —

    Here is a preview:

    PDF: ritholtz-06-09

    Be forwarned — horrific caricature on the front cover

  11. emmanuel117 says:

    Keep up the shotgun blasts, Barry. The monster-that-will-not-die should figure it out soon enough.

  12. alfred e says:

    And now back to our regularly scheduled program.

    BR: You keep doing great work, and I truly hope you don’t turn the CRA thing loose. I too have spent many years frustrated by the notion position and power trump hard data.

  13. CNBC Sucks says:

    Follow the money?

    Those $821 billion in “giveaways” are tax credits against additional taxes that industry would have to pay for their carbon emissions in a cap-and-trade system.

    If the Republicans / Libertarians had their way, there would be no cap-and-trade system, no additional taxes, and the “giveaways” to industry would be 100%.

    Come on, alfred, you can and need to do a lot better than that.

  14. CNBC S,

    if you don’t understand that dB s like: First American LoanPerformance http://www.loanperformance.com/

    see, after you open both eyes, them referenced here: http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4136

    are not ‘ported to the Web’, I’m not sure what else to attempt to explain to you.

    Though, it should be telling, to you, that BR, his ownself, didn’t view my response to his Request as: deflecting..

    Past that, further, please do show me where I mentioned the ‘Climate Bill’? or, rather, was I pointing to the Whole Field, made of Whole Cloth, of Climate Change `nee Global Warming?

    Lastly, if you want to stay Stuck in the, phony, Left/Right paradigm, certainly, feel free — as you’ve been pointing out: ‘feelings’ are all that matter now.. Right?’

  15. alfred e says:

    @CNBC Sucks: I could care less about the tax credits. And I’m all for clean air and water.

    What has me scared is the likelihood the current approach to allow the credits to be speculatively traded with the oligopoly bleeding us dry.

    Remember $4 gas? Enron. Those are going to pale in comparison to what’s about to happen. The rate paying consumer is about to get raped. Period.

    Hey gee, I guess the fact that they don’t kick in for a few years, is a sound rationale. Kind of like don’t worry, nothing’s going to change today. And Social Security will be there for you tomorrow.

  16. wunsacon says:

    >> Who cares if it is Democrats or Republicans.

    Well, I care. I want to know if “Republicans” live up to their brand image or not. If they don’t, then that’s an important problem.

    I don’t know what the solution is. But, knowing of the problem is the first step to something, even if that “something” in the short term simply meant/means not giving them my vote.

  17. willid3 says:

    more on CRA misdirection
    http://seekingalpha.com/article/145657-lax-lending-standards-blaming-the-cra-doesn-t-add-up
    from a source i wouldn’t have expected to say this

  18. BR,

    As I’ve said, before, CRA is a Piece, not the ‘whole Pie’, though, without it, no one should buy it as: Uncut.

    Past that, as we know, ‘Bankers’ don’t work Weekends, more detailed info will have to wait for next week..
    ~~

    Though, more Importantly, to me, I wish you would turn your incisive logic skills to the Topic of Climate Change ‘nee Global Warming.

    The ‘consensus’ view being Promulgated is, truly, faulty in many key respects.

    We are heading, deeper, into a New Era of “Lysenkoism” that will cost us even more than CRA ever could..

    This book provides a fine intro:
    http://www.amazon.com/dp/1933995238/?tag=googhydr-20&hvadid=2767551591&ref=pd_sl_15au9emluv_b

    and, as well, they were on BookTV, as well..

  19. Marcus Aurelius says:

    MEH,

    The global warming “debate” reminds me of those surrounding Intelligent Design/Evolution and Cigarettes/Cancer. While there may be some scientific dissent (one of those who authored the book you cite — Michaels — is a fellow at the Cato institute, as well as having received financial support in research funding and consulting fees from the fossil-fuel energy industry), it is, with each passing day, rendered less and less credible by the results of the huge amounts of research (in most cases, conducted independently of political funding sources) being done regarding this topic. (If you do not believe that most of the research being done is apolitical, please tell me where the huge amounts of money are coming from to PROMOTE the idea of global warming).

    If we are to assume that most of the data collection and analysis currently being done to assess global warming and its causes is a coordinated effort at misinforming the public, and/or that a global network of scientists and researchers is acting in concert with a political motive/agenda, and/or that that same group is somehow engaging in a massive episode of groupthink that only they can’t see, then dismissing the considered opinions of the main stream scientific community would be easy. I don’t think it’s possible that any of these scenarios are involved in the scientific communities’ broad acknowledgement of man-made global climate change.

    No one sees all of the data, but if I have to come down on a side, given the current consensus (or even it it were a 50-50 proposition, and it isn’t), I’ll have to act conservatively and assume that global warming is real, and that it is largely man-made. OTOH, I could be liberal about it and just say “since there’s no proof, let’s keep going and see if the warnings are right,” but that would be irrational (as in: I know my chest hurts, but I’ll keep smoking until the x-rays come back — it might not be cancer) and irresponsible in the extreme.

  20. Lord says:

    Most of these loan types have been around for decades. The arm and option arm dates all the way back to 1982. No doc loans were also done as far back as the 1980s. Even then these required what documentation was available and were only deemed appropriate for those in select professions with offsetting credits. Lenders worked only with trusted mortgage brokers and often kept the paper initially. It was not until the 2000s it was decided these were appropriate for everyone, the borrower was dropped from consideration, and lending standards were completely relaxed and principally after the investment banks displaced the GSEs. It became a competition to offer the most outrageous loans to the most unqualified borrowers. They may have abused the CRA data and applied it to their own bad lending, but this abuse and misuse was theirs.

  21. thetanman says:

    I was driving down the road listening to the radio. I think it was in 1997. Anyway, the news came on and there was a short blurb about a program to help low income people buy houses. Oh shit I thought, this is a bad idea. Not just a bad idea for people that can’t afford houses, but for the poisonous effect it will have on the rest of the system. Trying to cram low income people into houses they can’t afford was the toxic mustard seed of our present shitstorm. Just one more step along our descent into financial insanity.

  22. DMR says:

    Great post, BR! Here’s a link to an older article but with an even deeper dig into that same data. It goes on to show that most of the delinquent mortgages were sold after constraints were placed on Fannie/Freddie.

    http://www.econbrowser.com/archives/2008/10/cra_fannie_and.html

    While your post dealt a resounding blow to the “CRA is one of the causes” meme, I think more data is required to really point the finger to that last column: i.e. the poorly documented loans packaged into fraudulently rated securities bought, not by govt. agencies, but by iBanks that were ginned by with hot cash enabled this time by a govt. agency that set artificially low interest rates.

    Disclaimer: I am a libertarian leaning republican, but I have to say that the conservative wing of that party I identify with is losing the plot by looking at the wrong agency. Forget CRA, Freddie, and Fannie, guys. The real rogues were over at the Fed and the Treasury during the Clinton and Bush years.

  23. MA,

    I suggest you give this Man: http://www.ocean.udel.edu/people/profile.aspx?legates

    a ring, and sally forth your various queries.

    he appeared in the BookTv spot, with the Author, on C-SPAN.
    http://www.booktv.org/Program/10283/Climate+of+Extremes+Global+Warming+Science+They+Didnt+Want+You+to+Know.aspx

    the points, above, that you choose to illuminate (e.g. Cato, fossil-fuel industries, cigarettes/cancer) , only, go to show which echo-chamber you call home.
    ~~

    DMR is on the right track. What’s the old, now rusty, Saw in “Investigative Journalism”? “Follow the ‘Money’”

    BenBer’s response to Auditing the FedRes? “..Cause economic instability..” — tres` Convienent.

  24. WaveCatcher says:

    Why all the fuss re: the CRA? This seems like a pet peeve when there are much bigger issues.

    Even if the CRA didn’t cause the financial meltdown, it certainly didn’t help to have the government telling banks to “ease-up” on their lending standards “or else.”

    BR, are you saying the CRA is a good thing for the health of our financial system, or merely that the CRA was an insignificant factor in the financial crisis and therefore the focus on the CRA is an scheming attempt to distract us from the real root causes???

  25. Onlooker from Troy says:

    WaveCatcher

    Because the banking industry (and others who want to continue in their ways) and a segment of the political right are using this as a scapegoat to divert attention from the reform that we need in the financial world. By repeating their talking points they can get the public’s attention over on to the wrong target and allow the banksters to go on their merry ways, destroying this country from the inside.

  26. DMR says:

    @Wavecatcher,

    Is it possible that the answr to the question is “both” ? i.e. Not only is the CRA such a tangential topic (note that it is not just insignificant, there is NO data supporting the view that CRA loans have any correlation and plenty of data stating that CRA loans in fact have lower delinquency rates) but bringing it up in the first place creates a credibility crisis. If I hire a plumber to fix my toilet and he gives me a quote for a new roof that I don’t need, would I call him back again?

  27. CNBC Sucks says:

    Hoffer, I have no idea what you just wrote or how what you wrote supports your original comment. I would be happy to reply if someone can translate Hofferese for me. Anyone?

  28. DMR,

    CRA default rates don’t matter. We’re overlooking the Effect of expanding Credit Access.

    “Redlining” was Real, no doubt Credit was being to denied to, otherwise, Credit-worthy Individuals.

    The reports are legion: Your name is Leroy? Antonio? Juan? and you live Where?

    The Banker: “I’m sorry, but you just don’t meet our standards. We have to be prudential, don’t you know?” IOW: “F*** ***”

    With CRA-mandated increases in Credit availability, many, who were, previously, denied, gained access to Credit.

    Riddle yourself this: “How many Houses are purchased with Cash?” and “Without Credit, what do you think would happen to Housing prices?”

    Of Course.

    CRA was a vehicle to Increase total Credit. It helped Stimulate the ‘move-up’ Market, thereby. Soon, the effect of Rising Prices reached the ears of the ‘early adopters’/’influentials’ of the cube-clone variety.

    Add in a little 168. HGTV coverage, and a K Street inspired Boulevard of Green Lights, and peep were off to the ‘Races’..and it had Nothing to do with Race.

    ~~~

    BR: You REALLY need to sift thru Bailout Nation — where the actual, quantifiable causes — with numbers and data and evidence — are included in great details.

  29. CNBC S,

    Colons “:” , apparently, f’up the line spacings in WP posts.

    past that, ask the Ed. about redacted posts, post suppression, and timestamp changes.

    past that, dB is shorthand for Database.

  30. CNBC Sucks says:

    Hoffer, I was trying to figure out how the Minneapolis Fed report to which you linked supports your assertion that “many of those pools are able to be fit into ‘CRA-eligible’ units that trade at a pemium (sic)”, when it specifically states that it “lack(s) definitive information on banks’ CRA-induced secondary market activity”.

    Since I have previously admitted that I am personally a registered Republican because of racist tendencies, I am dead neutral on the question of the CRA and whether black people are a reasonable scapegoat for our economic problems. I just want to see if you can back up your statements with actual data when Ritholtz calls you on it.

  31. VennData says:

    Recall Phil Gramm laughed at Americans, telling them in the summer of 2008 that the economic problems were “mental.” I guess Phil Gramm would fall into the camp of “people who didn’t see it coming…”

    http://www.washingtontimes.com/news/2008/jul/09/mccain-adviser-addresses-mental-recession/

    … would be great – in a alternative universe – to see Phil Gramm (hubby of Wendy Gramm, Enron board member) up there on CSPAN as McCain’s Treasury Secretary railing at Congressmen that their constituent’s 401(k) losses were only “mental” in that marbled-mouthed manner that got him so far in the Texas GOP.

    Though at this rate he may end up on the short list for GOP Presidential candidates…

    http://www.foxnews.com/politics/2009/06/25/pub-gop-presidential-prospects/?test=latestnews

  32. DMR says:

    @Mark,

    Yes, but the issue at hand is not expanding credit, per se, but expanding credit to non-creditworthy individuals. As far as creditworthyI hope that we’re not assuming in a knee jerk fashion that the Leroys and Juans are not creditworthy purely because of their ethnic backgrounds. As Barry noted in an earlier post, the LTVs for most of these loans is very conservative (64%) and that’s where I would differ with you in that the delinquency rates are in fact the ultimate indicator. If people buy house they are able to afford, then why does it matter if it cause price inflation/expands credit, etc. These are the “good” conservative kinds of mortgages that would have made a traditional banker from a previous era happy. We should be happy to have more like them.

  33. CNBC Sucks says:

    alfred, while I wait for Hoffer’s inevitable return, I wanted to address your statement:

    “What has me scared is the likelihood the current approach to allow the credits to be speculatively traded with the oligopoly bleeding us dry.

    Remember $4 gas? Enron. Those are going to pale in comparison to what’s about to happen. The rate paying consumer is about to get raped. Period.”

    Before we even get into the rape of the consumer, your statement presumes in the first instance that $4 gas last year was driven by speculation among the “oligopoly”, as opposed to actual supply and demand, which is an entirely different rabbit hole of debate that we should not argue here. Let’s leave it to Ritholtz to address the question of oil speculation in a separate post. But if it’s cap-and-trade speculation that you are worried about – as opposed to the general principle of assigning a cost to carbon emissions – there is always a straight-up carbon tax, which is backed by – of all people – Exxon. It’s not entirely given that we will have cap-and-trade; that specific question will be more contentious in the Senate. I will take you at your word that your concern is about speculation in a cap-and-trade system, as opposed to the very principle of taxing carbon emissions, but I suspect that most people who object to cap-and-trade just find the idea of human-induced climate change offensive or the greatest evil hoax of all time. I personally do not see anything wrong with such “climate change denial” beliefs – not being among the converted myself – but if that’s the case, let’s call a spade a spade.

  34. Moss says:

    >>>I want to know if “Republicans” live up to their brand image or not

    Watch what they do not what they say. IMHO they have not lived up to anything they proclaim as their core principles. Brand and image mean nothing to me, except for the sunglasses I own.

  35. l_emmerdeur says:

    Barry,

    I’m a bit surprised at your hostility towards Carney. Just because you disagree doesn’t mean he should be Phil-Grammed.

    Frankly, your treatment is a bit rude, all the more surprising considering how much of a stickler you’ve been about commenters on this site.

    There’s plenty of true jackasses out there deserving of your wrath. Focus fire and conserve ammo, perhaps?

    Just an opinion, it’s your site, of course.

  36. CNBC Sucks says:

    I am out, Hoffer. I will check on this again sometime, if I remember. To be clear, I don’t actually disagree with you, but I just wanted to see what type of data you would provide.

    Ritholtz, I am in agreement with the Frenchman’s comment above about John Carney. Carney has never struck me as a rabid partisan, and we have exchanged emails. Carney said he was a big fan of The Great CNBC Sucks, and he wanted me to write for Business Insider, plus he’s friends with a friend of mine (or he drinks with a friend of mine), so I can’t picture him as a Republican hack. Maybe he is on CRA, but as Wunsacon would say, no need to harsh a mellow. You are too fine a man to let your frustrations with Don Luskin get to you on your beautiful blog.

    Out.

  37. wunsacon says:

    Obama initially spoke of auctioning off the credits, rather than giving them away to existing polluters. Dems didn’t get behind it. So, once again, some group of shareholders somewhere wins out over taxpayers.

  38. alfred e says:

    @CNBC Sucks: Sorry I too was off to the Saturday Market. They should call it stampede market.

    The Rolling Stone article I linked to : (once again)

    http://www.scribd.com/doc/16763183/TaibbiGoldmanSachs

    does a superb job of explaining why the $4 gas was speculation-driven with some very nice hard data. I really don’t understand how that’s even debatable at this point. What’s debatable is why the feds kept their hands off it. Ooops, welcome to Goldman-Sachs Bananamerica!

    I guess that’s also why the feds will enact legislation that supports it for cap and trade.

    That’s my simple point and I’m sticking to it.

    And I don’t sense Ritholtz is really going to object to this thread topic continuing re: not allowing GS to continue to squirrel things any worse than they already have. He’s the one that first posted the article in Think Tank.

  39. CNBC Sucks says:

    Sorry, alfred, I had based my HESITATION TO CONCLUDE once and for all that $4 gas was driven by speculation on the CFTC report from last year, http://www.cftc.gov/stellent/groups/public/@newsroom/documents/file/itfinterimreportoncrudeoil0708.pdf

    But you are right, who the hell needs the CFTC when you have Rolling Stone?

    It’s dinner time and I am out out. Ritholtz, good luck with that “reality-, data-, and fact based” existence of yours.

  40. DMR,

    I’ll only ask you to re-read my post @ 15:35

  41. alfred e says:

    @CNBC: Hey guy. Thanks for the link. Looks to me like the Rolling Stone got their data from the CFTC report.

    If you read past the executive summary, you’ll find the typical self-serving agency report, as in should we really expect the CFTC to be an unbiased source? Kind of how the Challenger report would have turned out had Feynman not dropped sealant in ice water unannounced.

    The simplest way to correlate the two sources IMHO can be found in Figures 10 and 11 of the CFTC report. IMHO seems a very concrete correlation and correspondence.

    The CFTC report was rampant with speculation that could not be substantiated and statistics that did not prove their point. In fact the growth of oil consumption was slowing.

    So, I guess it’s a simple choice between a self-serving report written to demonstrate superior understanding while confusing the issues, and a Pulitzer Prize-class reporter doing his homework and writing in a style the average American can understand.

    Where have we seen this before?

    And who exactly is running the CFTC now? As then?

  42. wunsacon says:

    >> CRA default rates don’t matter. We’re overlooking the Effect of expanding Credit Access.

    >> “Redlining” was Real, no doubt Credit was being to denied to, otherwise, Credit-worthy Individuals.

    I’m not sure I agree with sentence #1.

    To the extent the CRA led to expanding credit to people who were redlined earlier and didn’t default at any higher rate than others, then the CRA was a success.

    But, if default rates were worse, then the CRA was a mistake.

    So, CRA default rates do matter, if we want to judge the CRA by itself (separate from the other mistakes made in housing).

    No?

  43. Pat G. says:

    I love numbers. Numbers allow you to breakdown complicated issues and understand them more easily. Here we can use a simple 2 piece pie chart for this (mental) illustation. During 2004-2007, a total of $1557.5B was issued in CRA loans. Non-CRA banks/lenders were responsible for 70% or $1098.9B of all CRA loans. The CRA banks; 30% or $458.6B. The pie chart comprises two pieces of which one, is nearly 2 1/2 times larger than the other. The real pigs however, were the Non-CRA lenders who made up 47% or nearly half of all CRA loans at $737.7B. Oink, oink….

  44. philipat says:

    With all due respect to the OC Register, why does it need the OC Register to prepare such data!!

  45. Good Going BR.

    to keep it simple, I would have never expected such from you.

    to provide Context, the utility of which, seemingly, a number of readers don’t understand, I’m referring to his ED: add-in @ 15:35

    “Data based analysis”= “you should really sift thru…”

    BR,

    in as many words you could have delineated my Errors, if any, rather than, merely, shower doubt..

    The Upside is that you show, in Spades, we all, including myself, of course, have room to Grow.

  46. [...] Most Subprime Lenders Weren’t Covered by CRA — Barry Ritholtz – Surprise, surprise. Of course, economists who aren’t ideologues already know CRA played only a very minor role in the housing bubble-and-crash, but it’s good to see further empirical evidence. [...]

  47. Say what says:

    Just because a company was not CRA rated doesn’t mean they were not making CRA loans. They could just have organized themselves in such a way as to avoid the reporting requirements.

    [BR: No, that is EXACTLY what it means -- non depository banks were not under CRA regs. Are you at all familiar with these terms and what they mean? ]

    Who did all these non-CRA lenders sell their loans to? was it Fannie and Freddie? If so why did FRE and FNM buy them? Oh that’s right – CRA

    [BR: No, it was primarily to Wall Street; Fannie/Freddie were not permitted to buy non conforming loans -- only after Countrywide threatened to withhold ALL loans from them unless they bought the sub-prime also, did they begin to buy them. CFC CEO Angelo Mozilo lobbied to allow FNM/FRE to lower their standards -- by the time that happened in 2005, the die was already cast for housing]

    GMAC made car loans and Ditech made home loans. Who owns Ditech – GMAC. So in reality it was GMAC making the home loan. So just because the company is exempt from CRA reporing requirements does not mean they were not making CRA loans.

    [BR: EXACTLY WRONG: Unless DItech was a bank that opened a branch in a low income area and took deposits, the CRA was irtrelevant to them.]

    Oh, but by “clearing” CRA we clear Democrats from involvement in the housing mess and that’s BR’s goal.

    [BR: No, I stick to the actual facts — which you clearly are reatehr unfamiliar with — and it appears you have never read the legislation you are speaking about.

    Sorry, but you don’t have the slightest clue what you are speaking about . . .

  48. Lord says:

    I think their argument is CRA caused a mass epidemic of stupidity Wall Street. Almost sounds reasonable when put like that.

  49. Blissex says:

    «Just because a company was not CRA rated doesn’t mean they were not making CRA loans.»

    What are “CRA loans”? A new type of instrument? Or are you just making this up?

    And whatever “CRA loans” are, why would a “not CRA rated” company feel forced to make loss-making loans, if it is mostly the CRA that is responsible for the huge losses on mortgage based derivatives?

    That is, is the argument that a company might be so afraid it will be forced to make loss-making loans so it makes them anyhow, destroying itself?

    If markets are efficient, why ever would the stock prices of financial companies, both those subject to CRA reporting, and those who aren’t, be climbing for 15 years at amazing rates, making management very wealthy, if both were forced to make loss-making loans?