This guy does not understand the mortgage market

Reader comment on: Thomas Sowell on Race and Red-Lining

Submitted by ben (United States), Apr 7, 2010 13:39

The problem was REVERSE red lining in the mortgage market. Sowell is exactly wrong. Minorities were being targeted with predatory loans that the lender knew they would not be able to repay. Sowell makes it sound like the government was forcing the banks to make these risky loans. This is a complete misreading of recent history. As Michael Lewis clearly explains in his book the Big Short, the banks targeted minorities to boost fees regardless of their ability to repay. The heartless among us will say that the people should have rejected these loans knowing they would have difficulty paying, but presented with an offer from a bank with a low teaser rate and a lot of unintelligible fine print, it is no wonder that people took these loans. The banks are responsible for creating a market for garbage no-doc loans, and the mortgage brokers were all to happy to meet that demand by trolling for loans in poor and minority neighborhoods. In New York City, civil rights firms have done testing with banks that show that when two people with identical economic circumstances go for loans, the minority borrower receives less favorable rates than the white counterpart. Just because we wish there weren't racism doesn't make it so.

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