It is more than clear that the qualified residential mortgage will stifle access to home mortgages, but the Federal Reserve is pressing ahead with its campaign to ramp up the standard for down payments. The QRM is a part of the Dodd-Frank bill that implements a risk retention standard for loans. The idea is to make sure that borrowers have “skin in the game” when they take out a (more…)

News that the Federal Reserve will buy more debt is good news for many American workers, but bad news for working people in the rest of the world.

During last week’s meeting, the Fed said that it would buy$600 billion in Treasuries. When coupled with existing, but as yet unrealized commitments to buy other debt (MBS), then the Fed is poised to double down on US debt.

One key distinction in the new policy is the means by which the Fed plans to implement the buy. The Fed (more…)

The Federal Reserve will hear the first round of testimony next Thursday on the construction and dissemination of data provided for by the Home Mortgage Disclosure Act. The meeting will be held at the Atlanta branch of the Federal Reserve. Three other meetings are scheduled in the following weeks for Washington, DC, Chicago, and San Francisco.

HMDA data is freely distributed each fall through the Federal Financial Institutions Examination Council (FFIEC). The (more…)

I am worried about this spring. There are too many things happening all at once. Our nascent recovery is going to be put to the test, and it seems all too likely that it will be hobbled.

Why do I say that? Don’t I see that the Dow is well above 10,000? Haven’t I noticed that Bank of America trades at 16, and that the rate of increase in the national unemployment rate is leveling off?

Our economy is being driven by stimulus, and a few fumes.  Those fumes include the sudden demand among businesses to restock inventory.  That’s not enough, though. The real fuel comes from the forces of intervention.

Among the most important are the efforts by the Federal Reserve to restore some kind of liquidity to mortgage markets.  Last fall, amid all of the uproar over TARP, the Fed announced that it would buy $1.25 trillion in mortgages.  That is almost one-sixth of the national debt for mortgages in 2009.  Well, it was a nice party while it lasted.  All of that demand kept things stable.  It kept money going through the doors at (more…)

People who work in the trenches on Community Reinvestment Act policy seem to have some pretty differening notions of how to modernize this bill.  They agree that something needs to be done.  It is just a question of how.

On the right, a lot of people have come out call the CRA a specious bill that provoke subprime lending.  They use it as a scapegoat for all of problems.  From people like Peter Wallison at the American Enterprise Institute, to commentators on Fox News, the right is pretty uniform in the opposition to the bill.  Here is Wallison in action, putting the fault both on CRA and on President Clinton at the same time.  Here is Wallison, focusing the blame of the financial crisis upon both CRA and the GSEs.

Generally, their solution is to tear down at the existing obligations spelled out in the Act.

Then there are an opposite set of voices, largely coming from academics and advocates who support the CRA and actually want it expanded in the wake of this crisis.  This group includes people on the left, and some moderate Republicans.  The latter have written some of the most influential papers cited by within this perspective.  Former Federal Reserve Governor Randall Kroszner tells people “not to blame” the CRA. His key statement, noticeably driven by data, is this:

Only 6% of all the higher-priced loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas, the local geographies that are the primary focus for CRA evaluation purposes.

He finds that independent mortgage companies are actually the main root of subprime lending.  This squares with what former OCC Comptroller Eugene Ludwig observed about Cleveland.  CRA made about 650 loans in Cleveland, but there are 15,000 foreclosures there right now.  And, he says, the leading lenders were Argent Mortgage (a non-CRA regulated subsidiary of Citi) and New Century (an independent mortgage firm).

In a court filing led by Cuyahoga County, it noted that Argent made 4,800 loans in Cuyahoga County for the three years ending in 2006.  Those loans accounted for 27 percent of all subprime loans (pdf). In 2006 and 2007, Argent and its corporate partner Ameriquest made 1,600 foreclosure starts.

Going forward, though, the public is likely to feel slightly different.  Few even know what the CRA is.  Fewer still would probably pick a bank, or avoid it, based upon their CRA score.

Consumers want to know that they have a good economy.  They want jobs.  They understand that the stock market is crashing and that it is undermining a lot of things beyond just the share prices of bank stocks.

In short, they want safety and soundness measures. That means that the pragmatic opportunity, for either side, will probably be the set of policy solutions that best grafts their interest (end the CRA, or grow the CRA) into the larger public concern for restoring order to our economy.