Read the rest of the article. It gets worse. But a little background needs to come before the parody, to set the stage, so to speak.
(Don't worry, there will still be footnotes. "Whew"! ... collective sigh of relief.)

For decades, the three "Cs" of home mortgage lending were: Capacity, Credit, Collateral.

Capacity: Ability to repay, as demonstrated not only by income, but by the *stability* of said income. Have you held the same, or steadily-improving, positions for years, or do you change jobs frequently without benefit, get fired, etc.? What percentage of your take-home pay is consumed by mortgage debt, installment debt (cars, boats, etc.), and revolving debt (credit cards)? These "debt-to-income" ratio standards used to be quite strict, but have been relaxed in recent decades under pressures including those discussed here.

Credit: Have you demonstrated responsible repayment of previous and current debts, or do you often run late, have a history of judgments, liens, foreclosure, repossession, bankruptcy, etc.? Contrary to Treasury Secretary Lloyd Bentsen's statement below, having plenty of income is not enough. You must have the self-discipline and sense of responsibility (and *honor*) not to squander your income, but to pay your debts, budget for necessities, put aside savings for a down payment and a rainy day, etc. Also, criminal record. Going to jail tends to interfere with making your mortgage payments. (Sometimes referred to as the fourth "C", for "character", as demonstrated by driving record, criminal record, civil judgments [failure to pay child support or alimony, e. g.], etc. Honest people, on the average, repay their debts more often than those who frequently break the law.)

Collateral: The value of the property in relation to the loan sought. TT's first home required saving up a 20% down payment, a requirement steadily whittled away, until at the height of the ridiculousness, banks were lending *more* than the value of the home (to pay for closing costs, insurance, etc.), so that you didn't have any of your own money in it (probably because you didn't have any savings and never have had any), and therefore had no incentive not to walk away at the first sign of trouble. Perhaps if you'd spent years saving up tens of thousands of dollars for a down payment, you might work more hours, get a second job, quit smoking, gambling, drugging, ho'ing, or take other drastic measures to keep your home.

Good collateral also helps reduce the bank's losses if you don't repay the loan. We are seeing today the effects of that. TT knows personally of one person who bought a $400,000.00 home, which is very expensive in Turtleville (not so much in New York City or San Francisco, etc., of course), with NOTHING down. I think you know the end of that story. The bank took it on the chin.

The value of a home is determined by what other buyers are willing to pay for it. Not by the bank, not by the Government, but by people just like you and me. If most of us choose not to buy homes in run-down inner-city neighborhoods, then *we* are establishing the (lower) value of those homes.

Whether such differences among neighborhoods are due to past injustices is a valid philosophical and political question. The answers might be remedial education, job training, training in financial management (actually offered by FNMA, or Fannie Mae), improvements in streets, lighting, more police to keep crime rates down..... NONE of which are the responsibility of banks. Forcing banks to lend despite the real difference in value and *ability to re-sell* the property, and in violation of the other "C"s as well, is to use our deposits and lives' savings, and the lives' savings of the bank's stockholders (which might be you and me, perhaps through mutual funds, our IRAs, pension funds, etc.) to redress wrongs that we did not commit.

In 1977, Democratic President Jimmy Carter signed into law the Community Reinvestment Act, subsequently made more powerful by the (Democratic) administration of President Bill Clinton in 1995. This Act pressured banks to increase their lending in minority areas, even if actual property sales, values, incomes, debt ratios, credit histories, etc. violated the standards described above.

Discussing the reasons for the Clinton administration's proposal to strengthen the CRA and further weaken a bank's ability to refuse a loan to a minority buyer, even if not qualified by these time-tested standards, Lloyd Bentsen, Secretary of the Treasury at that time, said, "The only thing that ought to matter on a loan application is whether or not you can pay it back, not where you live."

Excuse me, Mr. Secretary, please read the primer on lending at the top of this page, especially regarding credit history, *down payment*, savings, job history, criminal history, etc., since you obviously never were taught these things. (Despite the fact that you were at one time the head of a financial holding company, which is a scary thought.) If all of these are indeed satisfactory, then the bank is foolish to turn down what is likely to be a profitable loan, and if one *is* so foolish, or biased, they will lose good business to a non-biased competitor.

(Please note that Secretary Bentsen majored in Law, whereas TT majored in Finance and Economics. TT also has a few more years' experience in the financial field than Secretary Bentsen, all of it "in the trenches", not as a cushy CEO position, and some of it with his own hard-earned seaweed, unlike the banker who lends out other people's money. And a far greater percentage of it in minority neighborhoods than most banks, probably including Mr. Bentsen's. Or you, for that matter. So *before disagreeing*, PLEASE let me know how much business you've done, or how much of your own money you've invested, in minority neighborhoods. Without that info, we can't judge the credibility of your disagreement, so it will be zero. Fair enough?)

(Fun fact: During the Korean War, then-Congressman Bentsen advocated using atomic weapons against North Korean cities if they did not withdraw north of the 38th parallel. He never got the chance, but nuked us all instead.)

Presidents Clinton and George W. Bush both bragged of the huge increase in minority home ownership that resulted from pressuring banks to make loans that did not meet traditional, time-tested standards.

This general loosening of standards encouraged less-qualified non-minority borrowers and investors to buy as well. The total increase in buying among all of these formerly-unqualified buyers caused a rise in prices. This is called the "Law of Supply and Demand", which is stronger than any law that can be passed by Congress, most of whom have never heard of it. This rise spiraled, as first investors, then ordinary homeowners, began speculating on continued price increases of 40-45% per year, despite being obviously unsustainable. (At that rate, a $100,000 house would cost $800,000 in six years, and $1,600,000 in eight years, and how many of us could afford that?)

Parody time.
(FINALLY! ... massive round of applause.)

Act I, Scene 3.
Lord Polonius, the retiring president of the Bank who made the loan for TT to buy said first home, is giving advice to his son, Laertes, who will succeed him. (Last 14 lines of OS speech -- how sonnet-like! Sonnet-of-which! heh heh)


Let everyone apply, but careful: choice
Check each one's credit, their reserves, and judgment [1]
Is debt their habit? Do they curse, or pay?
Do not be pressed: loans, chancy; ACORN? Shady! [2]
For their embezzling sloughs their claims as scam
They're *loans*, not grants; to those best ranked, proration
Deposits: customers'; don't "generously" lend that
Not "any" borrower, should you: lender, be
Such loans oft lose taxpayer bucks, no end
No borrowing: those who lack of husbandry [3]
CRA: fall! With our own pelf, deal you
"Race card", don't swallow; else, the plight today:
Loan applications: false; a zany plan [4]
This Hell-recession: reason, plain to see!

***************************
OS speech parodied:

Give every man thy ear, but few thy voice;
Take each man's censure, but reserve thy judgment.
Costly thy habit as thy purse can buy,
But not express'd in fancy; rich, not gaudy;
For the apparel oft proclaims the man,
And they in France of the best rank and station
Are of a most select and generous chief in that.
Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
This above all: to thine ownself be true,
And it must follow, as the night the day,
Thou canst not then be false to any man.
Farewell: my blessing season this in thee!




[1] In TT's early days, required "reserves" (savings in the bank, CDs, etc.) were six months' income. Later reduced to three months' *mortgage payments*, then to two. (Hey, if you lose your job, in addition to making mortgage payments, don't you still have to buy food, electricity, gasoline to hunt for a new job, keep making your car payments, etc.?)

[2] A JPMorgan Chase mortgage officer, Guilermo Loaiza, until recently was on the board at ACORN Housing Corp. He also served as presidents of Arizona ACORN Housing Corp. and ACORN Beverly, a limited liability corporation through which ACORN developed a Phoenix subdivision with help from $4.8 million in credit from JPMorgan Chase. Uhhh... conflict of interest there, methinks? (no pun intended on "interest", heh heh)

[3] "husbandry" -- Nothing to do with being married, but "prudent management of one's resources".

[4] You use to have to prove, or document, all that stuff at the top, by showing two years' income tax returns, last two pay stubs, bank statements, etc. But under this pressure, the "no-doc"(-umentation) loan was invented. "Say whatever you like on the application, or whatever we need you to say, and we'll take your word for it". ACORN doesn't take all the blame here. Plenty of mortgage brokers and loan officers are known to have encouraged borrowers to falsify their applications, just as in the famed "sting" video, where ACORN urged the undercover "hooker and pimp" to lie on their application for housing assistance; plenty of homebuyers had no trouble figuring this loophole out for themselves.

For the record, on your loan application, you sign under penalty of law that everything stated is true and correct. Knowingly making any false statement on an application for a loan from any institution whose deposits are insured by the FDIC (Federal Deposit Insurance Corporation, an agency of the US Govt.), which would include all banks and the overwhelming majority of all home loans made, is a felony against the United States, punishable by five years' imprisonment. Have you read any stories of any of these foreclosed homeowners going to jail for lying on their loan application? ... just asking.

The banks themselves often did not take the losses for their promiscuity. Loans were being packaged and sold to insurance companies, pension funds (there go your and my retirement dollars again), and other investors, most of whom were unaware, until very recently, of the poor quality of the borrowers, loans, and documentation. They were also sold to Fannie Mae (Federal National Mortgage Association, in response to Phil Alexander's complaint a while back that "Fannie Mae" was a "twee" name, whatever "twee" means to those twee Brits), which had also loosened its standards in the face of pressure from Congress and from both aforementioned White House occupants. (They've since said that they'll buy no more no-doc loans. Now that all of the cows and horses are gone from the barn....)

One report a couple of years ago, as the massive wave of foreclosures was becoming apparent, noted that 81% of the loans being foreclosed were of the "no-doc" type, quickly labeled "liars' loans" (good one!), but that fact has been drowned in the wave of pity and scapegoating from the bleeding hearts, who, oddly enough, never seem to bleed for honest, hard-working, taxpaying, bill-paying citizens. Strange choice of bleeding.