Do not look for the real truth behind the credit crisis we now find ourselves in from the liberal media. However, a good place to start your research is to investigate the Community Reinvestment Act (CRA) which compels banks to make loans to low-income borrowers or those banks could possibly face financial penalties or see their business plans for mergers and expansions blocked.
The Community Reinvestment Act encouraged mortgage lending through two government sponsored enterprises (GSE’s), Fannie Mae and Freddie Mac. Both or which are now under government control.
In an article written by Steven A. Holmes dated September 30, 1999 in the New York Times titled, Fannie Mae Eases Credit To Aid Mortgage Lending, talks about easing credit requirements.
Full article link below:
In the middle of the article check out what Peter Wallison had to say, “If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”
That was back in 1999 and look where we are today.
As early as 2004 Republicans have been concerned about this issue and tried to reign in Fannie Mae and Freddie Mac. However Democrats such as Barney Frank, Gregory Meeks and Maxine Waters said there was no problem with either one of these two entities which we now know today is/was a lie. Congress was told disaster loomed but the Democrats sat back and did nothing.
The Community Reinvestment Act became a quota based system rather than a processed based system intended to change lending behavior. In the credit evaluation process if you ignore the income, net worth and credit history and analyze only acceptance rates in lower income communities you are going to see lower approval numbers. Now if you force banks to lend, as the Community Reinvestment Act has done, banks must then extend credit to those that should not have been approved in the first place thus creating an additional burden on the community it is intended to help.
We should repeal the Community Reinvestment Act. Meeting the needs of communities is best left for those within the community without government interference.
In 2008, we are now looking at a $700 billion bailout program that could have been averted had the Democrats not failed to act back in 2004. As a taxpayer, a business owner and a father I am angry that I have to possibly pass this burden on to my kids in the form of higher taxes. We are a much smarter nation than this. When government comes in to play there is no end to how much of our hard earned money they can waste.
For further information on new home purchases, the sale of your existing home, for sale by owner, refinances or the Money Merge Account please visit Midwest Mortgage Solutions of Missouri, at: http://www.midwestmortgageresource.com or http://www.mwmortgagesolutions.com
This article is brought to you by Tom Wurdack and Midwest Mortgage Solutions of Missouri. Tom Wurdack is a licensed mortgage broker in the state of Missouri, with over 10 years experience in the real estate industry. He is best known for his ability to place his clients in the perfect mortgage solution. Feel free to contact him at tom@mwmortgagesolutions.com.
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