There seems to be this need to blame borrowers, particulalry low income borrower and minority borrowers.  There is no evidence that the rule to encourage lending in low income neighborhoods caused the subprime disaster.  

The minority and low income communities, matter of fact, were pillaged by this brand of predatory lending that basically stole the accumulated wealth in their homes, savings and their income.  Predatory lending has devastated low income and minority communities.  It was basically criminal activity that was sanctioned and fueled by Wall Street.  

If you want wonky details read below.  

I will keep adding facts.  

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Norman Kelley posted this today, Blame for the Financial Crisis? The Niggers Did It!. This is some information on CRA, the economic crisis and the predatory lending business.  

I have been meaning to put up a post on this topic to dispel the myth, a myth that I think is going to pick up momentum.  

 Background:   The Community Reinvesment Act was passed in 1977 revised in 1989 and 1995.  The Clinton Administration is being blamed for the stricter rules.  What does CRA do and what does it not do: 

• First of all CRA applies only to member banks of the Federal Reserve.  
• The Community Reinvestment Act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound operations.
• The Act requires that loans be made within good lending standards and does not require the loosening of underwriting criteria.  

• After the dot.com bubble, investment banks were looking for the next bubble. Wall  Street flush with money went shopping.  
• Until very recently, the origination of mortgages and issuance of mortgage-backed securities (MBS) was dominated by loans to prime borrowers conforming to underwritingmstandards set by the Government Sponsored Agencies (GSEs) [2]
  − By 2006, non-agency origination of $1.480 trillion was more than 45% larger than agency origination, and non-agency issuance of $1.033 trillion was 14% larger than agency issuance of $905 billion.
• The  GSEs were doing really well, with a robust market and with sound lending.
• Wall Street saw this model as an opportunity for investment developed that was fee driven and was dominated by non CRA lenders.  This was commonly known in low income communities as predatory lending. 
• A reduction in long-term interest rates through the end of 2003 was associated with a sharp increase in origination and issuance across all asset classes.  While the conforming markets peaked in 2003, the non-agency markets continued rapid growth through 2005, eventually eclipsing activity in the conforming market.  In 2006, non-agency production of $1.480 trillion was more than 45 percent larger than agency production, and non-agency issuance of $1.033 trillion was larger than agency issuance of $905 billion. 
• Simply, Wall Street, became a Savings and Loan lender.   Wall Street was not under the CRA requirements.  This was based on complex mathematical models and with no understanding of mortgage lending, real estate or regional market differences. 
• These loans were based on a loop of making fees and sending the loan to the next holder.  From the mortgage broker, to the originating lender, everyone was driven not by the quality of the loan, but by just making the loan.  

CRA Lending:  A recent study of the CRA lenders clearly shows how CRA lending did not lead to "bad lending" and that CRA loans performed better in all categories.  On January 7, 2008, Traiger and Hinckley, LLP, a law firm that specializes in fair lending counsel and Community Reinvestment Act (CRA) compliance, released a report titled The Community Reinvestment Act: A Welcome Anomaly in the Foreclosure Crisis.

• The study concludes that CRA regulations have meant that banks that must comply with the regulations and originate loans in their local communities, or more formally their CRA assessment areas, are substantially less likely than other lenders to make the types of loans that have contributed to the foreclosure crisis.
• The results of this study show that CRA banks are 66% less likely than other lenders to make a high cost loan and 58% less likely than other lenders to originate high cost loans to low and moderate income borrowers.  High cost loans are what is known as predatory lending, teaser rates, prepayment penalties with high jumps in rates.  
•  This difference is even more pronounced in high cost loans to low and moderate income borrowers, with CRA banks pricing their loans 74 basis points lower than other lenders.
• This study also finds that CRA banks are twice as likely as other lenders to retain originated loans in their portfolio. This report notes that the originate-to-distribute model, i.e., the process of loan originators selling off mortgages and servicing rights, is a major contributor to the weakening of underwriting standards.
• WAMU was under CRA.  I will do some research but I think they were uniquely aggressive and expanded really fast. 

Update #1:  Ethnicity and Subprime Lending:

From the Center for Responsible lending

Basically minorities were paying more, the subprime industry made more money off African Americans and Latinos with similar incomes and properties.  

• African American  were more likely to  to receive higher-rate home purchase and refinance loans than similarly-situated white borrowers, particularly for loans with prepayment penalties.
  • The effect of being an African-American borrower on the cost of credit was greatest for loans
  containing penalties for early payoff, which comprised over 60 percent of the loans we examined.
  •African-American borrowers with prepayment penalties on their
  subprime home loans were 6 to 34 percent more likely to receive a higher-rate loan than if they had been white borrowers with similar qualifications. Results varied depending on the type of interest
  rate (i.e., fixed or adjustable) and the purpose (refinance or purchase) of the loan.
•  Latino borrowers were more likely to receive higher-rate loans than similarly-situated non-Latino white borrowers for mortgages used to purchase homes. Differences for refinance loans were not significant at a 95 percent confidence level.
  • Latino borrowers purchasing homes were 29 to 142 percent more likely to receive a higher-rate loan
  than if they had been non-Latino and white, depending on the type of interest rate and whether the loan contained a prepayment penalty.
  • Pricing disparities between Latinos and non-Latino white borrowers for refinance loans were not
  significant at the 95 percent confidence level in our dataset.