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Results 1 to 2 of 2

Thread: Who to Blame

  1. #1
    I just googled this. In case anyone needs someone to blame for the current economic crisis. read this article from 2000.

    http://www.socialfunds.com/news/article.cgi/179.html

    March 06, 2000

    Fannie Mae Faces Scrutiny over Minority Lending Practices

    The home loan supplier will undergo inquiry into whether their lending policies discriminate against minority borrowers.

    SocialFunds.com -- Social investment managers have long considered home loan suppliers Fannie Mae and Freddie Mac a staple, for their leadership in lending to minority and other underserved populations. But a recent report from the Department of Housing and Urban Development (HUD) reveals that their lending policies include barriers to home ownership for tens of thousands of minorities, especially African Americans.

    The Federal Home Loan Mortgage Corporation (FHLMC) and the Federal National Mortgage Association (FNMA), known as Freddie Mac and Fannie Mae, buy home loans from banks and other mortgage lenders. These government-sponsored enterprises were chartered by Congress to ensure a plentiful supply of mortgage money in the nation, and are given an estimated $6 billion each year in tax breaks and other benefits in return.

    If Fannie Mae and Freddie Mack buy proportionately fewer loans of minority borrowers, credit costs for these groups go up. HUD is conducting an inquiry into whether the credit rating process used by Fannie Mae and Freddie Mac discriminates against African American and other minority borrowers.

    "Fannie and Freddie have always been considered to be darlings of socially responsible investing, mainly by the non-minorities in the movement," according to Creative Investment Research, a firm specializing in investment products for minorities and women. "But we've known that there were some problems with these companies, including the finding by the EEOC that Freddy had a hostile work environment for African Americans."

    Although Fannie Mae and Freddy Mac portray themselves as leaders in minority lending, the HUD report showed that the share of their mortgages going to minorities trails the national average of 15.3 percent. Fannie Mae lent only 14 percent and Freddy Mac lent only 12.2 percent to minorities.

    The disparity is even more pronounced in mortgages to black Americans. While the total market for mortgages to blacks is 5 percent, Fannie Mae only lent 3.2 percent and Freddie Mac lent only 3.0.

    By law Freddie Mac can only buy loans with less than a 20 percent down payment if the borrower has purchased private mortgage insurance, which is very expensive and puts such loans out of the reach of many people, particularly minorities. This has proven to be a barrier to tens of thousands of black Americans, who must pay higher mortgage rates or may not be able to get a mortgage at all.

    HUD reported on these disparities as the housing agency prepared to unveil their 500-page rule proposal requiring the companies to do more business with underserved consumers. For their part, Fannie Mae and Freddie Mac agreed that it was a critical issue to address and defended their record of trying to reach minority borrowers.

    "This is a real test for the socially responsible investing movement," said Creative Investment Research. FNMA and FHLMC are commonly held in socially responsible portfolios, considered a stable investment with emergent community benefits. "It will be interesting to see how the industry deals with this issue."

    The HUD revelation is cogent reminder that even investments that are widely regarded as socially responsible can stand improvement. For instance, in 1992, Creative Investments launched mortgage-backed securities, similar to the concept of Fannie Mae and Freddie Mac, which were backed by loans that had gone only to minorities and women.

    "We enhanced the profile of their products from a socially responsible standpoint," reported Creative Investment Research. "I think you'll continue to see development in these types of products."
    © 2008 SRI World Group, Inc. All Rights Reserved.

  2. #2
    I just googled this. In case anyone needs someone to blame for the current economic crisis. read this article from 2000.

    http://www.socialfunds.com/news/article.cgi/179.html

    March 06, 2000

    Fannie Mae Faces Scrutiny over Minority Lending Practices

    The home loan supplier will undergo inquiry into whether their lending policies discriminate against minority borrowers.

    SocialFunds.com -- Social investment managers have long considered home loan suppliers Fannie Mae and Freddie Mac a staple, for their leadership in lending to minority and other underserved populations. But a recent report from the Department of Housing and Urban Development (HUD) reveals that their lending policies include barriers to home ownership for tens of thousands of minorities, especially African Americans.

    The Federal Home Loan Mortgage Corporation (FHLMC) and the Federal National Mortgage Association (FNMA), known as Freddie Mac and Fannie Mae, buy home loans from banks and other mortgage lenders. These government-sponsored enterprises were chartered by Congress to ensure a plentiful supply of mortgage money in the nation, and are given an estimated $6 billion each year in tax breaks and other benefits in return.

    If Fannie Mae and Freddie Mack buy proportionately fewer loans of minority borrowers, credit costs for these groups go up. HUD is conducting an inquiry into whether the credit rating process used by Fannie Mae and Freddie Mac discriminates against African American and other minority borrowers.

    "Fannie and Freddie have always been considered to be darlings of socially responsible investing, mainly by the non-minorities in the movement," according to Creative Investment Research, a firm specializing in investment products for minorities and women. "But we've known that there were some problems with these companies, including the finding by the EEOC that Freddy had a hostile work environment for African Americans."

    Although Fannie Mae and Freddy Mac portray themselves as leaders in minority lending, the HUD report showed that the share of their mortgages going to minorities trails the national average of 15.3 percent. Fannie Mae lent only 14 percent and Freddy Mac lent only 12.2 percent to minorities.

    The disparity is even more pronounced in mortgages to black Americans. While the total market for mortgages to blacks is 5 percent, Fannie Mae only lent 3.2 percent and Freddie Mac lent only 3.0.

    By law Freddie Mac can only buy loans with less than a 20 percent down payment if the borrower has purchased private mortgage insurance, which is very expensive and puts such loans out of the reach of many people, particularly minorities. This has proven to be a barrier to tens of thousands of black Americans, who must pay higher mortgage rates or may not be able to get a mortgage at all.

    HUD reported on these disparities as the housing agency prepared to unveil their 500-page rule proposal requiring the companies to do more business with underserved consumers. For their part, Fannie Mae and Freddie Mac agreed that it was a critical issue to address and defended their record of trying to reach minority borrowers.

    "This is a real test for the socially responsible investing movement," said Creative Investment Research. FNMA and FHLMC are commonly held in socially responsible portfolios, considered a stable investment with emergent community benefits. "It will be interesting to see how the industry deals with this issue."

    The HUD revelation is cogent reminder that even investments that are widely regarded as socially responsible can stand improvement. For instance, in 1992, Creative Investments launched mortgage-backed securities, similar to the concept of Fannie Mae and Freddie Mac, which were backed by loans that had gone only to minorities and women.

    "We enhanced the profile of their products from a socially responsible standpoint," reported Creative Investment Research. "I think you'll continue to see development in these types of products."
    © 2008 SRI World Group, Inc. All Rights Reserved.

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