Different media outlets have publicized this story by claiming that this program was just for Black and Latino buyers (pretty racist for a company to sell different products and have different policies for people based on race), while this story says that this program is in historically Black and Latino neighborhoods. Kind of a difference if it's open to all people or not. Which is it?
Personally, I'd say that the ''bankers'' are using the guise of ''helping the people of color'' to actually prey on them. This is a slam dunk setup for another government bailout (''Help us Uncle Sam, so many people defaulted on their loans, nobody could see this coming.'') as well as taking control of lots of property during the next economic downturn.
Historically in the US, white people and white neighborhoods have gotten substantially better loan availability and terms (and disproportionately higher appraised home values) than minorities or people living in neighborhoods with large minority populations. See: https://en.wikipedia.org/wiki/Redlining for a very concrete example.
> white people...have gotten substantially better loan availability
I've heard this said a lot of times, but this feels more like a slogan than an actual data point to me. Bad statistics are endemic in these sorts of discussions. Is this statistic comparing all Black people to all White people or is this a clear apples-to-apples comparison?
And where do other races like say Asians fit into this here? Apparently, Asians make even more in America than average White people (according to stats I've seen) so do they get better loan terms than White people? And if they do, is it because of their race, or because they make more money? If racism exists, is it affecting Asians in the same way? And if not, why not?
I'm not going to completely dismiss your comment and I want everybody to do well, but I think it merits a much deeper investigation for full understanding.
I am not commenting on anything to do with the discussion at hand, purely just commenting on Wikipedia and the idea of "primary sources."
Wikipedia articles are not really vetted by any authority nor are the sources. Anyone can simply add citations to claims; there are no standards for what constitutes a valid source other than a URL exists to some resource.
You can even take a benign article about something that is not political and start clicking through the sources and realize a lot of them don't support the claim they were cited to support on Wikipedia. In my experience, its less than half the sources I've clicked on are credible and support the claim but this is anecdotal. A lot of Wikipedia is editing by people with ulterior motives now that its so often presented and received as fact.
So? That's how research/research culture works. People mock the [Citation Needed] culture on Wikipedia but it is still far better than "no sources presented". Wikipedia knows that it can't be "objective" so long as it is edited by people with "ulterior motives" and the usual other biasing faults of being merely human. The tools that Wikipedia has to counter that are requiring sources to be cited so that future editors have tools to dispute the claims and by doing that in large aggregate policy they hope to "trend better" over time.
I point out the primary sources part of Wikipedia especially because I very much understand Wikipedia is edited by humans with all their quirks and faults and it is worth not just starting at Wikipedia, but also all that "boring footnotes part" at the bottom of almost every Wikipedia page. Even if it has the same problems as the rest of the data in Wikipedia, it's still so much more information beyond the top-paragraph summary which is all many people ever read of Wikipedia. But critically, that's the part of Wikipedia that most embodies the "Reading Rainbow spirit" of "but you don't have to take my word for it". That's where Wikipedia itself reminds you that it isn't the final word on a subject, but the first word, the summarizing word on it, and points you to other places to explore.
Even if "less than half the sources are credible", a .490 can be a startlingly good batting average, depending on if you are talking Baseball or Cricket. In this specific case 50% of 107 is still a chance at maybe 54 good and worthwhile and credible supporting claims. That's still 54 different places more to start your own research with than you had before you got to the Wikipedia page. Even though anyone can add citations to claims, it's still far more organized than "let me google that for you" because it's still likely human curated and not just whatever SEO has made the machine algorithms happy this day. It's still a good suggestion to start there with those sources. If you are arguing that you maybe shouldn't stop there, then absolutely, I agree, but the above poster was asking where to start, and the poster above that gave them one place to start with 107 leads of further places to start. I thought that was a useful reminder, regardless of what you think the overall batting average of Wikipedia is.
It's easy to hand-wave the discussion away by citing a bunch of links, but taking a gander over that Wikipedia page seems to verify much of what I stated about bad statistics. Much of what's mentioned is comparing the median of giant groups rather than making an apples to apples comparison.
That's the same bad statistical approach that lets activists claim that women make a fraction of what men make: they compare the incomes of all women to all men rather than taking into account individual choices, education, career fields, etc. When you do a good comparison (comparing women with equivalent careers, education, ages, etc to men) the wage gap between men and women is blurred.
For this question about Black loans, all I'm interested in is an apples to apples comparison. Compare loan rates of Black people in X career with X education making $XXX with XXX+ credit scores to the White, Latino, and Asian equivalent. That's the better approach to see if bias exists. Does that study exist? You tell me because I'd be interested in it.
It's easy to claim no evidence exists if you get to be really picky about which evidence you will accept. Sociologists don't get clean room labs and from scratch experimental design for their studies and have to work with the available data.
That "perfect" study you are looking for in fact can't quite exist because you can't control for all variables with respect to any systemic issue and variables like career and education are likely too deeply connected co-factors with housing.
It doesn't sound like you have any interest in being convinced, and it sounds like you are happy being a contrarian here.
Restrictive lending standards for minorities is redlining, which is racism. Permissive lending standards for minorities is predatory lending, which is also racism.
This seems materially different than the predatory adjustable rate mortgages pushed on minority communities in the 90s-00s. They're assessing creditworthiness using other metrics to try and work around institutional racism, not pushing bad mortgages on people who can't afford them. I deeply mistrust banks, but I don't find anything outwardly malicious here.
The loans they are proposing do not require any down payment, have no closing costs, and do not factor in credit score. There are a couple things here that are predatory in the same way that the loans in the 90's-00's were.
First, the no down payment means that the borrower would have no equity in the home. Most mortgages are very front loaded with interest. If something were to happen in which the borrower had to get out from the house/loan they would be in a very precarious financial situation since the seller is responsible for the agents' fees and commission.
Second, and I may not be sure how this works, but no closing costs means that presumably there isn't an escrow account set up with any prepaids such as taxes. The article doesn't really touch on this but worse case scenario this means that the borrower could be surprised by huge tax bills?
Third, if the bank is not using credit score, and is taking on all the risk by issuing loans that are 100% LTV, I can't imagine the interest rates are going to be favorable to the borrower which kind of exacerbates my first point above, where the borrow is going to be making huge interest payments and not building any equity.
Bank of America is not stupid and they are certainly not a charity. To me this seems kind of predatory. I am sure they have run the numbers on what the risk is, how many borrowers they expect to default, what they anticipate making, etc. If this isn't predatory towards black or latino people, they should release those numbers.
Mortgages being front loaded with interest is unrelated to not requiring a down payment. If you have to sell a home in the first 3-6 years it's usually pretty bad, as your equity doesn't outstrip your fees and taxes yet (this usually isn't too bad, but depending on the situation it might be nice to have the closing costs, agent fees, taxes, and difference between your mortgage and your rent over N months back). Having a down payment just means you also locked that up, so that's probably even worse, not better as you're arguing.
And depending on the market, down payments may not be large anyway. People with higher credit scores (honestly not that high) can get an FHA loan for as little as 3.5% down. That's not that significant, especially compared to 10-20%.
Re: being surprised by a big tax bill, BofA is running this program under its Community Homeownership Commitment, all of the programs under which provide--and sometimes require--new homeowner financial education.
Re: interest rates, the existing Affordable Loan Solution loans (again under the same Community Honeownership Program) are around .25 and .5 points higher than comparable normal mortgages. That's significant, but hardly predatory, and they're all fixed rate and have caps on LTV (105%).
I mean, I'm also distrustful. I feel like a bank shill, which is pretty uncomfortable. I believe their policies have immiserated and killed people knowingly, and they should probably be regulated out of profitability. But this program seems like what most people in the field have been advocating for for a while: lower barriers, educate and support people, help them start building wealth in their homes and grow their communities.
Insurance companies are not allowed to redline (excluding an area where they offer their product), and then use the excuse of 'not targeting by race' by claiming they excluded everyone, not just POC.
Feels like the reverse of offering a product only in a certain area should be true.
The US government made money from the 2008 bailout. I don't understand why people think it was free money to the banks. No, they were loans that were fully paid back with interest.
This is fugazi concocted by the financial industry to mislead the public. The devastation they wrought on the economy and the consequences for ordinary people weren't fully captured by those loans. For example: the Fed's aggressive quantitative easing policy that had been in effect for more than a decade post 08.
Agreed--there is potential in seven years, fallout from this will be dubbed as racially-targetted, predatory lending, and it would be difficult to argue with.
Prior to the 2008 housing crisis Bush made big push for home-ownership ("ownership society") for everyone, and we saw the subsequent hordes of zero down payment mortgages, etc.
Why is it less racist to do something which you know will statistically generate the exact same outcome as something you'd consider racist but to add a step of indirection to it?
Well it’s not, Bank of America says it’s available to first time buyers of all races so your insinuation is actually racist.
On a side note, I can’t imagine a better reason for a government bailout— if it results in tens of thousands of first time buyers owning a home, many of whom would continue to do so regardless of the bailout.
> Well it’s not, Bank of America says it’s available to first time buyers of all races
That's what I was asking for above. Both the media reporting about this and even their own press release makes this story a bit ambiguous.
> so your insinuation is actually racist.
Normally I'd smirk in being called racist for advocating treating all races equally, but I'd like to simply state that the media reporting on what this program actually is has been extremely confusing. That's why I asked what this program was for up above and pointed out that a program that treated different races differently would be racist.
> On a side note, I can’t imagine a better reason for a government bailout— if it results in tens of thousands of first time buyers owning a home, many of whom would continue to do so regardless of the bailout.
I view this as penny-wise and pound-foolish thinking. The resulting economic fallout of getting people in homes that they can't afford in a downturn and the resulting bailouts that would happen is much worse for most poor people in the long-run.
The less charitable assumption is that it's a way to help gentrify these communities by making it easier for people to buy in what are now cheaper neighborhoods. Raising home prices means more money for banks on future mortgages.
> this story says that this program is in historically Black and Latino neighborhoods. Kind of a difference if it's open to all people or not.
Even if open to all people, this is a clear case of disparate impact [1], which runs afoul of the Civil Rights act. But I wouldn't hold my breath for an even application of the law.
It seems to me a huge bank like Bank of America is well-capitalized to start a huge investment project into a troubled area of a city that will:
1. provide wealth to it's residents
2. fix crime and blight
3. help alleviate housing affordability crisis
Right now, a troubled area might have housing wealth be 1/4 of a nearby affluent area. But generally, this is simply because of crime and bad schools due to the cycle of poverty. If you're able to quickly alleviate the crime and poverty, suddenly that troubled area is basically as desirable for housing as the rest of the area.
Now, usually, this "gentrification" process has happened slower, over decades, and without the corresponding wealth accrual of its current residents. So it doesn't work out for the current residents and the clash between people is much harsher.
But what if all the wealth that was created when a $300k East Oakland home becomes $1m, was equally shared between investment and residents? Could you pay people (give them some type of community job) and/or make sure everyone has housing equity, to break that cycle, stop the crime, so that everyone wins?
It feels doable if tackled on a large scale, what am I missing?
> But generally, this is simply because of crime and bad schools due to the cycle of poverty.
What makes the schools bad, if they receive on-average marginally higher per-pupil funding than mostly-white schools [1]?
[1] on average, both Black and Latinx total per pupil expenditures exceed White total per pupil expenditures by $229.53 and $126.15 - https://journals.sagepub.com/doi/full/10.1177/23328584198724... - I can't find a source now, but the average per-pupil funding is around $20,000, so a difference of $200 is negligible.
If you're surprised that the funding is almost the same, despite schools being funded by property taxes, which are much higher in whiter neighborhoods, that's because you were hoodwinked by the media. Schools are funded by local property taxes and state taxes, with the latter distributed to even-out the funding. For some mysterious reason, the latter funding source receives much less coverage than the former.
When schools have increased funding it doesn't magically solve the problems. You will still have high crime levels, gang problems, lower attendance, less educated parents, less likely to have a stay at home parent, less money for tutoring, less stable housing, less likely to have 2 parents in the household, etc.
Don't get me wrong, money does play an impact, but only when the families have it. When families are wealthier their kids do better even if their school is getting less funding than some of these schools in poor areas.
I'm not really talking about just handing out more money to schools, nor debating whether schools received less funding. The school problem comes from both not valuing education and people who have had a rougher go at life that the problem keeps perpetuating in their children. (dad in jail, mom on drugs, mom working 2 jobs so has no time and the children just hang with other older children, etc.). Feel free to send your kid to that school if you think it's just as fair a shot at life.
Those sound like problems with the pupils, not the school. This is not semantics - it affects how to solve the problem, and informs what consequences various solutions may have.
You're missing the fact that gentrification is caused by the movement of people, and that always takes a very long time. Crime goes down in gentrified areas because the criminals can't afford to live there anymore.
How is that similar? I'm not talking about anything with PD. Simply incentivizing troubled areas with wealth for simply not doing the things that makes their assets worth so much less. There is absolutely a non-zero amount of people, who if given steady income, would not be committing crimes of poverty. That income can come from the housing wealth generation. It's just a matter of where on the range of 1 - 100% can those issues be stopped with adequate wealth.
I'd also note that the we haven't figured out the whole nearly invincible cyborg cop aspect yet either, so that's a fairly significant difference too.
Mostly I assume that if Bank of America thought they could make money doing what you say, then they'd probably be doing it already. If they'd lose money on it, then there's no way they'd do it. That's one of the ways that American companies are just refreshingly simple.
On another note - I really don't understand what housing wealth is supposed to do for people. My house has increased in value around 200% in the last decade. And? Sure I've got more money on paper, but what am I supposed to do? Sell it and live in my car? (I think I could pull off van life maybe.) All that's happened is I have to pay ever more in property taxes.
> The GOP was in the White House when the Housing Bubble was brewed up in 2002–2005. President George W. Bush strongly pushed the finance industry to lend more to nonwhites at his Oct. 15, 2002, White House Conference on Increasing Minority Homeownership. There he told his federal regulators not to worry so much about traditional credit standards regarding down payments and documentation of income because he wanted to see 5.5 million more minority homeowners by 2010. ...
> Angelo Mozilo, CEO of Countrywide Financial...wanted to boost Countrywide’s share of the national mortgage market from 10 percent to 30 percent. He believed he could safely do that by increasing lending to marginal customers, especially Hispanics. ... In 2003, Mozilo, citing Bush’s push for minority home ownership, pledged to a Harvard audience that Countrywide would lend $600 billion to minority and lower-income borrowers by 2010. In 2005, he boosted that promise to one trillion dollars. ... Countrywide went under in 2008. ...
> For example, a 2015 paper by Lin, Liu, and Xie found that in a sample of 18,000 households: The difference in the mortgage delinquency rates between immigrants (15.7%) and natives (4.4%) is significant.
> Similarly, a 2013 paper by Luea, Reichenberger, and Turner revealed 2009 default rates for whites of 3.4 percent, blacks 11.3 percent (3.3 times the white rate), and Hispanics 16 percent (4.7 times the white rate)
> A 2013 paper by Reid featuring data from the fifty largest metro areas for mortgages originated just in 2005 shows that foreclosure rates by 2009 were twice as bad for blacks as whites and almost three times as bad for Hispanics as whites. By 2010, 10.5 percent of Hispanics were in foreclosure versus 4 percent of whites.
> According to Zillow, Hispanic neighborhoods nationally exploded in price by 280 percent from 2000 to 2006 versus about 160 percent for white neighborhoods. Remarkably, by the peak of the Bubble, the median home in a Hispanic neighborhood was worth almost a hundred thousand dollars more than the median home in a white neighborhood. Not surprisingly, the decline in home value from peak to trough was almost twice as severe in Hispanic neighborhoods as in white neighborhoods.
> In summary, immigration was seen as a vast boon to the housing market until it turned out that Hispanics tended not to be able to afford the huge mortgages they had been given. At that point in 2008, housing prices in several high-priced Hispanic-heavy states, such as California and Florida, plummeted, taking down financial institutions like Lehman Brothers, Washington Mutual, and Countrywide Financial. This carnage set off a national recession even in places without a Housing Bubble.
> Santayana famously said, “Those who cannot remember the past are condemned to repeat it.” But what if you haven’t forgotten it because you never had a clue in the first place?
This stuff is basically all true, and I'll add that it started in the Clinton years. Dems wanted to open up homeownership to minorities, Republicans wanted more mortgages, it was a pretty perfect policy, then they forgot to regulate the mortgage industry. The documents that came out of banks revealing predatory lending tactics are... basically evil.
Quick reminder to everyone in the thread that this isn't an example of reverse racism, which doesn't exist, nor is it an example of racism, which would require that BofA consider Black and Latino mortgage seekers as superior to Whites based on their race.
Not to be all Eeyore, but it's a little exhausting to have any post about any race-conscious action get bogged down by commenters who haven't even read the Wikipedia pages for racism and reverse racism. There's an interesting discussion to be had about these kinds of policies:
- housing as infinitely growing store of wealth is probably bad, is it a good idea to get more people on that train? Is it unfair to effectively bar Black and Latino mortgage seekers from the gravy train?
- is it a good idea to do this now, as we're descending further into a housing crisis, or are these markets more liquid than others
- what are other non-credit-score measures of creditworthiness? Is credit even a good idea? Should the government just back things like mortgages, school, and auto loans?
As always a token of good faith from bankers only makes sense when viewed through the lens of Gordon Gekko - “It’s all about bucks, kid. The rest is conversation.”
Personally, I'd say that the ''bankers'' are using the guise of ''helping the people of color'' to actually prey on them. This is a slam dunk setup for another government bailout (''Help us Uncle Sam, so many people defaulted on their loans, nobody could see this coming.'') as well as taking control of lots of property during the next economic downturn.