50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision; another 30% were made by banks or thrifts which are not subject to routine supervision or examinations. How was this caused by CRA?
Thrifts (savings and loan) are under the same scrutiny as any depository bank. The FSLIC (Federal Savings and Loan Insurance Corporation) insured the deposits and must follow the same lending practices as all other lending institutions. Credit Unions are similar except they are insured by NCUA (National Credit Union Association).
Mortgage service companies are just mortgage originators, often writing mortgage on behalf of, BoA, Wells Fargo, CountryWide, Citibank, et cetera. Not only do the brokers have to follow the same lending requirements as the financial that holds the mortgage, they also must be insured in each state. Independent mortgage brokers are not subject to CRA, but the institution that holds the loan is.
I am not blaming the CRA for all bad mortgages. ACORN put lots of pressure on financial institutions. [nomedia]http://www.youtube.com/watch?v=NhQAHKxuR1Q[/nomedia]
The reason for the 120% loans was simply the fact that for a long time housing values went up at a rate that was higher than inflation. The 120% loans would be at 90% in a few years, so the financial institutions foresaw little risk.
"Subprime loans were not made to meet regulations, they were made for profit." Is a gross miscalculation on your part. At a traditional financial institution, all loans are for profit, it is how they work. At a mutual financial, (S&L, CU's) loans help pay for operating expenses, which is why rates are lower. To say that loans are made with disregard to regulation is not true either. The Office of The Comptroller of the Currency, which runs the FDIC, has strict lending guidelines, for all types of loans.
Remeber, Fannie and Freddie were bundling all of this junk and selling it as mortgage backed securities.
Like I said in a post before, many things caused the meltdown and blaming just one thing is not correct. I just wanted people to know what my employer experienced with CRA and ACORN, as the MSM has not fully given all of the details of what is really going on behind the scenes.
