Why a housing scheme founded in racism is making a resurgence today

[ChristsSoldier115]

"There is a law prohibiting that". Well that just fixes everything, statists give me a good chuckle.

When businesses break the law it isn't ever bad. White collar crimes are a-ok in America. Stealing without holding a gun to someone's head like a common street thug is perfectly fine and ok. It might be why companies can get away with it all the time.

Remember the Pinto? Ford felt liabilities were cheaper than the $11 part that would prevent their car from turning into a death trap. People still buy Fords don't they?

 

[SummerMadness]

The one in this thread. The whole piece is about contrasting the racial motivations of the previous wave of these loans with the profit-driven motives of the current wave. The piece never claims that it's all racially-motivated like it used to be.

I linked two studies earlier in this thread that discuss the subprime lending crisis, where lenders claimed that African Americans were given these types of loans because they couldn't afford regular loans. After adjusting for income and credit worthiness, this was shown to be false. We're now seeing contract deeds popping up again with the same excuse used before, people can't afford them. The question is after this wave resides, will we see the same type of targeting as we did back in 2009 and the 20th century?

 

[smaneck]

Why a housing scheme founded in racism is making a resurgence today

There is a lot of rent-to-own stuff going on in Mississippi although Frank-Dodd was supposed to prohibit it. I know one lady who had been doing this for fifteen years. Then the house burned down. The owner got the insurance pay-out and she walked away with nothing. With a traditional mortgage you can fall up to four months late in the rent, with a rent-to-own you lose everything if you fall a month behind. I own eight houses in Mississippi and prospective tenants ask me if I rent to own. I tell them I consider that predatory lending, but tenants always have first dibs when it comes to buying my property. I tell them whenever they are ready to buy, come to me and we'll figure out how to make it work, but rent-to-own is scam.

 

[smaneck]

This is awful. Why are they shut out of conventional lending?

Poor credit scores for one thing. And most poor credit scores are the result of unpaid medical bills. Also, all my tenants pay their rent in cash, although I have repeatedly said I prefer a personal check. Why? They don't trust checking accounts. Most have no idea how credit works and I spend a lot of my time trying to educate them.
The other problem is that property is so cheap right now, that no bank wasn't to give such low mortgages. At today's rates they can't make a profit at it. However, I recently found out that local banks (as opposed to large regional ones) cannot deny mortgages because of the size of the mortgage. So sometimes it is a matter of asking the right bank.

 

[smaneck]

I had zero credit up until I was 30. I paid everything directly. My credit has taken a crap lately because it was good and I co-sogiend with a family member who turned out to be unreliable and it destroyed it. But I dislike the process of credit.. I have to be in debt to prove I am trustworthy with money.. makes no sense to me. I hate having debts do go out of my way to eliminate them.

Rule number one is never, never cosign a loan for anyone. When my son graduated from college and needed a car, we bought it in my name and he made payments directly to me. That way I'm still in charge of the loan my name is on and I won't have it any other way. Better to loan people money directly than co-sign for something. However, if you have good credit there is a way to help someone out with poor or no credit. Add them as an additional user on your credit card. Mind you, don't give them the credit card, lock it away. But they will inherit your credit history on that card. I did that when my son was 16 just so he could occasionally run errands for me. The result? When he graduated from college his credit score was over 700! By the time he went to buy his own brand new car, it was 840.

 

[smaneck]

Even when controlling for income, African Americans and Hispanics received a higher proportion of subprime lending, so it's not simply poor credit to blame.

Wait a minute. Income and credit worthiness are not the same thing.

 

[smaneck]

NOT having banks in the area isn't always a bad thing if you need that tax base - which most communities do.

Not having local banks in an area is very bad if the value of properties drops below 50K as it has here. Local banks must write mortgages for such properties. Big, regional banks don't have to, neither do online mortgage brokers. I know I've been buying up properties at 30-35K which I can turn around and rent for 825-1000 a month (I kid you not.) If my tenants bought these properties their mortgage payments would be $200 a month, but they can't find lenders willing to finance such low mortgages.

 

[SummerMadness]

Wait a minute. Income and credit worthiness are not the same thing.

I wasn't suggesting they were.

 

[smaneck]

But in many cases the person could receive a conventional loan, but they were not afforded the same opportunity. There is bias in the market.

They probably could have gotten the same opportunity if they had known about how to go about getting it. Business will always try and sell a higher priced product if they can get away with it. They may well see African-Americans as easier marks but they would do the same to whites if they could. Part of the problem is blacks all too often are easier marks. So the question becomes how do we change that? What I see here is too many people on one side saying racism is the problem and too many people on the other side, who are quite happy to see blacks at the bottom, saying 'it's their own fault' and just walking away. If there is a discrepancy between access to credit between races the question we should be asking is how do we fix this? How do we get rid of predatory lending practices? How do we make monies available to low income people to buy relatively cheap properties, hopefully in ways that contribute to urban renewal. How do we help more under-served people understand how credit works? Above all, how do we make sure no one graduates from our public schools without an adequate understanding of how money works?

I know when I graduated from high school, I didn't even know how to write a check.

 

[smaneck]

How is it different than owner financing?

The main difference is when you owner-finance the buyer builds up equity in the home, whereas in a rent-to-own deal they do not. Only if they fulfill the entire contract, usually over 10-20 years will they get the home and the seller is betting they won't. In the meantime, he as landlord no longer has responsibility for the up-keep of the house, that falls on the tenant.

 

[TheBear]

The idea that a financial institution bears any risk for anything in this day in age is so laughable that I will be chuckling all day about it (I actually won't laugh because it is sad that some people sincerely believe this).

What's truly laughable are the SJW idiots who think that there are no financial risks for the lenders. That's the height of stupidity.

 

[TheBear]

"There is a law prohibiting that". Well that just fixes everything, statists give me a good chuckle.

A bigger chuckle arises when morons think there's no recourse or relief, (such as sanctions, penalties and lawsuits), against companies who break the law in their lending practices.

 

[aieyiamfu]

What's truly laughable are the SJW idiots who think that there are no financial risks for the lenders. That's the height of stupidity.

Not sure who the SJW is, I'll take credit as an idiot, but not an SJW. I'm not sure how housing lenders take any risk. First of all they create the loaned money out of nothing, to be payed back with earned dollars, at interest no less. On top of that when they engage in high risk behavior and get burnt the government (read you and I) bail the criminals out. It would be the height of stupidity to assume that the bank takes any risk in that transaction, when if you don't pay they take your real property for their phoney money.

 

[aieyiamfu]

A bigger chuckle arises when morons think there's no recourse or relief, (such as sanctions, penalties and lawsuits), against companies who break the law in their lending practices.

Are you trolling me? I can't believe anyone, even a hard core statist, in full sprawl at the alter of his governmental gods would believe that. LOL.

 

[cow451]

If you qualify for a low interest loan, you probably don't need to borrow money.

 

[cow451]

Racism can be part of an issue without being the only part. The all-or-nothing thinking about racism is totally useless.