Apparently, CRA was not the cause of the subprime crisis.

[Spider-Dan]

http://www.mcclatchydc.com/251/story/53802.html

An excerpt (it's a long article):

As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.

Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems.

Federal housing data reveal that the charges aren't true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.

Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height from 2004 to 2006.

Federal Reserve Board data show that:

    * More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

    * Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

    * Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.

--

Cliff notes:

- Subprime lending peaked from 2004-2006
- Private sector companies (i.e. ones that were unaffected by the CRA) made the overwhelming majority of these loans
- Laying blame at the foot of the poor for the housing bubble is as factually inaccurate as it is callous

[YoFuggedaboutit]

The blame can lie at the feet of borrowers and predatory lenders.  It was the borrowers who chose to buy a house that cost more than they could realistically afford.  They kept buying $300K or $400K houses when realistically, they could only afford $150K houses.  The predatory lenders are people who didn't give a shit about the borrowers financial situation.  They weren't actually lending out the money, a bank would do that.  They would just convince these people to get this type of mortgage so they could get their commission.  The borrower would agree to the mortgage because they were convinced that property values would always go up, so they could refinance when their interest rate adjusted. 

Then the bubble burst.

[YoFuggedaboutit]

Here's the real cause of the mortgage crisis explained in layman's terms.  Too funny!!!!

http://docs.google.com/TeamPresent?docid=ddp4zq7n_0cdjsr4fn&skipauth=true&pli=1

[run_to_win]

    * More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

    * Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

And why did lenders start making these loans?

Did you listen to former HUD Secretary Cuomo's press-conference?
http://www.youtube.com/watch?v=ivmL-lXNy64

    * Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.

I'll have to take your word for that.  I didn't get that impression from the press conference.

- Laying blame at the foot of the poor for the housing bubble is as factually inaccurate as it is callous

"We" say "ignorant lenders who were duped and greedy lenders who knew better" and "you" automatically think "poor"?  Oh boy...

The timing of the subprime peak is about right for the defaults to be happening now.  Fraudulent mortgages DO fail right away as the "buyers" never intended to make a payment, but people who simply made bad decisions wouldn't default right away.  Adjustable rate mortgages, for example, have very affordable payments for the the first 6 months or year.  Our neighbor's payments went from $1200 to $6800.  There are also loans in which the balance actually increases for a period with the payments not evening covering the interest. 

We'll still have to disagree on the actual lenders making very unsound decisions without being forced/encouraged by the government (which is covered in the video linked above).  The retail broker have no stake in the loan remaining solvent.  Once the loan is signed they get their fee and that's the end of their involvement or responsibility.  Even most wholesale mortgage companies don't carry the loans.  All they care about is selling the loans and once sold they have no responsibility.  It's those investors who ultimately carry the loan that need to make sure the loans are realistic and I think that includes Fannie Mae and Freddie Mac, as well as Countrywide.

[Spider-Dan]

And why did lenders start making these loans?

Did you listen to former HUD Secretary Cuomo's press-conference?
http://www.youtube.com/watch?v=ivmL-lXNy64

Yes, I did.  If you read the article I linked, you would discover that the businesses who were making the vast majority of subprime loans were NOT affected by the law Mr. Cuomo was speaking about.  They made those loans because they thought they could make money off of it, period.