Obscene Justice Department Bullying: Suing A Bank For Prudent Lending
You'd think you'd want a bank to discriminate based on color -- the color of a person's money. Is it green and are there bushels of it, and are bushels more of it likely to come in? That's the person I'd want to give a housing loan to, and that's apparently how California-based Luther Burbank savings operated.
And that's a no-go with our "Justice" Department, which has sued the bank for not loaning to buyers who weren't well-qualified. From the WSJ:
In a complaint filed Wednesday and settled the same day, Justice claimed that California-based Luther Burbank Savings violated the 1968 Fair Housing Act and 1974 Equal Credit Opportunity Act by setting a policy that had a "disparate impact" on minorities. Between 2006 and mid-2011, 5.2% of Luther's single-family residential mortgage loans went to African-Americans and Hispanics, compared to an average of 41.7% for other lenders in the area. The complaint doesn't cite evidence of intentional discrimination because there wasn't any.Luther Burbank might not have been in this business were it not for government. The bank was largely focused on multi-family mortgages until its regulator, the former Office of Thrift Supervision, asked the lender to diversify its portfolio in the mid-2000s. Luther Burbank then hired a team to do "nontraditional" loans such as interest-only or option adjustable-rate mortgages that the bank would keep on its own books. Yes, this is the same stuff that eventually blew up the housing market.
Luther Burbank wasn't a fly-by-night operator that marketed those loans to any and all. The bank insisted on a minimum $400,000 loan amount and made loans with an average 680 FICO score and 67% loan-to-value. Over the period that Justice examined, Luther Burbank foreclosed on a mere 11 borrowers out of 629 loans outstanding--a loss ratio of 1.75%. In a normal world, Luther Burbank would get a medal from regulators for its risk management, having chosen borrowers even at the height of the housing mania who could meet their monthly payments.
But Assistant Attorney General for Civil Rights Thomas Perez has a different priority: He wants banks to meet lending quotas to minorities--regardless of whether those borrowers can afford the loans. Many minority borrowers have low incomes that make them riskier lending bets. Is that a bank's fault?
Unfortunately, Luther Burbank had to settle to avoid costly litigation fees. They admitted no guilt and have agreed to lower their minimum loan to $20K, commit $2 million to a "special financing program" for "qualified buyers," give payouts to local community groups, and fund "consumer education programs."
Who needs the mob for extortion when our government does such a fantastic job of it, while flying under the moniker of "Justice"?
The bank I used to work for would do liar's loans on occasion, but only ones they knew they could sell to Fannie or Freddie and then sell off the servicing.
The reason -- the OTS gave them a better rating.
Jim P. at September 17, 2012 12:20 AM
If you have to modify a word like Justice with a wor like social, or any word really, it aint justice you're after
lujlp at September 17, 2012 3:20 AM
Once again, proof positive that no good deed goes unpunished.
How is it that people think that giving someone a loan that they are guaranteed to default on, causing huge amounts of stress as they fight to keep the home they never could afford, is doing them a favor? Why aren't they telling them the truth, that maybe they should look at a townhouse, or keep renting, because they are just setting themselves up for a world of hurt if they sink themselves eyeball deep into debt.
Oh, wait, that would require personal responsibility, wouldn't it? What was I THINKING?!?!?
*snort*
Kat at September 17, 2012 5:13 AM
Kat,
Apparently no one should ever have to hear the word "no."
Pirate Jo at September 17, 2012 9:29 AM
THIS was the mortgage crisis... and it originated from govt. pressure. There may have been "evil banks" here and there. there always are people ready to do the less than good, both consumers and companies... but when aided by the govt. things spiral out of control.
And they are still doing it, as if nothing went wrong. This is where the campaign for equality of outcome hits the wall of reality. Taking all sorts of people trying to do right with it.
SwissArmyD at September 17, 2012 9:59 AM
We are not doing people favors by lending them money they can not afford to repay. One could argue that these lending practices have a disparate affect on minorities, who are more likely to get loans they cannot afford. Think that's good for them? for the bank? who exactly IS it good for? oh right, the politicians . . . that's just great.
chickia at September 17, 2012 11:24 AM
In logic and mathematics, any mistake or bad assumption allows mistakenly proving anything. So, you can prove anything by starting by assuming 0 = 1.
Disparate Impact is the assumption that people naturally are the same across all cultures, colors, and by sex. So, if your customers, employees, or suppliers are not exactly representative of your local population by color and sex, then it must be because you discriminate unfairly, even if you do not intend to, or are not aware of it. So, the government can prove that you are a bigot and do anything it wants to your businesss in almost all cases.
Equal pay for equal work is another form of disparate impact. If the job description is the same, then the pay must be the same, despite different hours and abilities. Everyone is the same, so pay should be the same. QED
Banks are a prime target of these prosecutions because they have money supposedly just lying around.
The bank robber Willie Sutton may have been a Liberal/Progressive social theorist:
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[edited] Why did I rob banks? Because I enjoyed it. I loved it. I was more alive when I was inside a bank, robbing it, than at any other time in my life. I enjoyed everything about it so much that one or two weeks later I'd be out looking for the next job.
But to me the money was the chips, that's all. Go where the money is and go there often.
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Andrew_M_Garland at September 17, 2012 6:55 PM
This is straight out of Atlas Shrugged...Who is John Galt?
Julie Chris at September 19, 2012 10:56 AM
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