Sunday, February 5, 2012
The dark side of those subprime mortgages
At the height of the US housing boom over half of subprime mortgages went to the CREDITWORTHY as brokers emphasised easy/fast approvals and hid the back-end costs. Big bonuses went to brokers who sold loans with IRs greater than those for which the borrower could have qualified. Creditworthy blacks and Latinos were far more likely than creditworthy whites to take on such mortgages. (A recent case US v Countrywide showed that the targetting of minorities was systematic, and cases against Wells Fargo show that it sent black salesmen into black churches to peddle subprime to creditworthy worshippers - with no corresponding effort in predominantly white churches.) The creditworthy then lost their homes as the punitive conditions kicked in, and minorities were hardest hit when the bubble burst.