![]() However, according to new research from the Sloan School of Management at MIT, that isn’t what happened. … Tragically, when prices fell, lower-income folks who really could not afford these mortgages under normal credit standards, suffered massive foreclosures and personal bankruptcies.” The phrase “subprime” became commonplace. What’s more, in the Clinton push to issue home loans to lower income borrowers, Fannie Mae and Freddie Mac made a common practice to virtually end credit documentation, low credit scores were disregarded, and income and job history was also thrown aside. ![]() Banks were effectively rewarded for throwing out sound underwriting standards and writing loans to those who were at high risk of defaulting. “Under Clinton’s Housing and Urban Development (HUD) secretary, Andrew Cuomo, Community Reinvestment Act regulators gave banks higher ratings for home loans made in ‘credit-deprived’ areas. In particular, they argue that the Community Reinvestment Act (CRA), legislated in 1977, is to blame: One story of the housing crisis goes like this: Government programs that helped low-income households purchase houses led to widespread defaults on the subprime loans they held, sparking the entire the financial meltdown.įor example, Lawrence Kudlow and Stephen Moore, both of whom have been named as economic advisers to Donald Trump, argue that the financial crisis and recession were caused by policies Bill Clinton implemented that were designed to stop discrimination in housing loans, known as “red-lining,” in poor areas. ![]()
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