From a Reuters article dated Jan 30, 2008:
USAToday reports that minorities are hit especially hard by the subprime scandal:
As an economic slowdown and the subprime mortgage crisis deepen across the United States, Hispanic immigrants are increasingly in danger of losing their jobs and their homes.
Illegal immigrants were able to buy U.S. homes during the boom years, either by showing evidence that they pay taxes or by simply presenting false documents.
Many of them took out high interest fixed-rate loans or subprime mortgages with a low entry rate that later rose sharply.
The article goes on to blame politicians and community organizers for pressing for more minority home ownership:
Recent immigrants lack credit histories, and 35% of Latino families don't have checking accounts. Hispanic families are more apt to have undocumented income, leading them to lenders who make loans without income verification, according to the National Council of La Raza.
The West Australian reports 'NINJA' loans were the cause of the world-wide financial meltdown:
Another reason for the subprime surge: Lenders have been supported by politicians and community leaders eager to promote minority homeownership, which remains about 25 percentage points below that of white non-Hispanics.
"Access became such a buzzword that people forgot about basic lending practices," says Keith Corbett, executive vice president of the Center for Responsible Lending. "You are really in debt servitude, having a loan with a loan-to-value ratio of 100% or greater."
Perhaps we should have known it was too good to be true when an American lender came up with the “ninja loan”. No, it’s not a loan draped in black that flies across the rooftops of the Imperial Palace. It is a loan offered to potential homebuyers who have No Income, No Job, No Assets.
[W]hen banks and non-banks, particularly those in the US, ran out of risk-free clients they moved on to riskier and riskier customers. Hence, the ninja loan, the sub-prime mess and the turmoil we have today.
The target customer for 'NINJA' loans is the illegal immigrant, because they are the ones who have no verifiable income, no verifiable employment, and no social security number with which to track credit worthiness. Since we have no way of tracking the credit history of illegal immigrants, they are capable of just walking away from their loans as soon as their adjustable rates went up.
As such, the greatest amount of foreclosures occur in states that are also suffering the greatest amount of illegal immigration, as depicted in these two charts:
Illegal immigrant populations by state:
Source: Pew Hispanic Center
Home Mortgage Foreclosures by state:
There are those that place the blame for these risky 'NINJA' loans on the lenders that made them available to those who clearly had no means of paying them back, but these people fail to recognize the role the Community Reinvestment Act played.
The Community Reinvestment Act, which requires lenders to make loans available throughout their entire market and not just in wealthier neighborhoods, was modified by the Clinton administration to require lenders to make these unsustainable loans available inorder to reach certain percentage of minority home loan goals.
In 2003, the Bush adminisatration along with Sen. John McCain recognized that the two largest, quasi-governmental organizations that were garruanteeing these risky loans, Fannie Mae and Freddie Mac, were in dire need of regulation. They proposed moving the regulation of these two companies under a new agency within the Department of Treasurey. However, democrats strongly opposed this move and killed the bill in committee.
Democrat Representative Barney Frank said at the time, "These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."
Democrat Representative Mel Watt also stated at the time, "I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing."
The link between illegal immigration and the housing crisis only furthered when congress passed its $800 billion dollar bailout. Representative Michele Bachmann blew the whistle first:
"At the same time that the American taxpayer was being asked to bail these companies out, Barney Frank, the chairman of the Financial Services Committee, instituted a sort of tax on Freddie and Fannie, and that tax goes into what's called an affordable housing trust fund," explains Bachmann. "It's a really a taxpayer-subsidized housing fund, but that money will go to organizations like La Raza and...ACORN."
Both La Raza and ACORN have been strong advocates of illegal immigrant home ownership and have been tied to voter fraud.
If congress fails to recognize the substantial role illegal immigration has played in the current financial crisis they will only continue to make the same disastrous mistakes in the future.