One of the central themes that I've written about extensively over the course of the past few years here at HousingWire is that the current mess isn't the result of any one single group -- there are, of course, now no less than 25 books out there that you can buy that provide some detail on these sort of claims. But the one group that has clearly been given a free hall pass, at least thus far, are consumer advocacy organizations. In June of last year, HW published commentary that shed light on just how involved many advocacy groups really were in driving the push towards greater homeownership, particularly in lower-income geographies and minority-heavy neighborhoods. I suggested then that the push towards ever-greater homeownership, particularly in minority communities, was aided and abetted in most cases by the very same groups now indignantly suing lenders for so-called "reverse redlining." On Monday, the Wall Street Journal caught up with this theme in a story that looks at how homes were marketed to the Hispanic community as part of the Bush administration's vision for the "ownership society." The story focuses on California Rep. Joe Baca, chairman of the Congressional Hispanic Caucus, but the message within is a bit broader: that many of the so-called advocacy groups now indignant about lending practices in their communities actually helped push their constituents into the muck to begin with. Consider:
Between 2000 and 2007, as the Hispanic population increased, Hispanic homeownership grew even faster, increasing by 47%, to 6.1 million from 4.1 million, according to the U.S. Census Bureau. Over that same period, homeownership nationally grew by 8%. In 2005 alone, mortgages to Hispanics jumped by 29%, with expensive nonprime mortgages soaring 169%, according to the Federal Financial Institutions Examination Council. An examination of that borrowing spree by the Wall Street Journal reveals that it wasn't simply the mortgage market at work. It was fueled by a campaign by low-income housing groups, Hispanic lawmakers, a congressional Hispanic housing initiative, mortgage lenders and brokers, who all were pushing to increase homeownership among Latinos.
A spokesperson for the Center for Responsible Lending told the Journal that "lenders were seeking out those borrowers and charging them through the roof." Perhaps, but it was also often done hand-in-hand with community groups, and those through-the-roof fees were often charged at the hands of brokers that represented the interests of the communities they allegedly served: agents and brokers, for example, that were members of the National Association of Hispanic Real Estate Professionals. Consider that in Sept. of 2004, ACORN -- an advocacy group for low and moderate income families -- and Citi jointly touted a partnership to push mortgages out into minority-led neighborhoods. “With this agreement, ACORN will be able to expand our mission of strengthening communities by helping low- and moderate-income families, including new immigrants to this country, become homeowners,” said Maude Hurd, ACORN president, in a press statement at the time. We now know all too well how that sort of effort turned out. As for the CRL itself, a review of the group's available press statements back to 2003 show the group focusing primarily on mandatory arbitration clauses, as well as the fees and prepayment penalties charged by subprime lenders, during the run-up in housing. No focus was given by the group to "reverse redlining" at the time, nor did the group look to warn consumers of the dangers of community groups pushing high-cost loans within their own neighborhoods. The Journal article also looks at how seller-funded down-payment assistance was used to market loans to Hispanics; as HW readers likely well know, the DPA program was killed by legislation last year, after such loans came to comprise one-third of the FHA's loan book and defaulted at three times the rate of other FHA-endorsed loans. Many of these loans went to minorities, especially as the private-party market for subprime mortgage credit began to falter. California's Baca last October sponsored legislation in an attempt to revive seller-funded DPA; the WSJ reported that his introduction of the legislation managed to coincide with a $25,000 gift by Ameridream, a non-profit that specialized in providing DPA funding, to a charitable group established by Baca. Both parties told the Journal that the contribution had nothing to do with the introduction of the legislation, which has since stalled after making it out of a key committee vote in September. Regardless of what may or may not be the truth behind DPA programs, however, the point here is this: the entire push to grow homeownership centered largely (but not entirely) on the astronomical growth of the previously-untapped subprime market -- and many subprime borrowers are minorities, meaning the collapse of subprime is an event that has been felt in many minority communities, including among Hispanics. The number of abuses that took place in originating loans in this market sector is wide-ranging, and clearly involves lax lending standards and aggressive lending policies. But many of those now fingering blame upon lenders shouldn't allow community groups to whitewash history; after all, many such groups had a direct role in enabling -- and, in some cases, profiting from the push into subprime mortgages. Write to Paul Jackson at