From released court documents, today, we learn that the Obama administration is bringing back “Ghetto loans,”, a term coined by Wells Fargo in the 80s for subprime loans made to minority communities whose bad credit kept them from qualifying. At that time, Wells Fargo employees also had another derogatory label for those who qualified for the “Ghetto loans” calling them “The Mud People”, resulting in a lawsuit by the NAACP.
However court documents reveal that the loans are being resurrected and will now include even including “public assistance” as “income” which begs the question: If banks are again forced to give loans to folks with bad credit and incomes that don’t qualify, will the racial slurs follow? Which comes first, the loans or the slurs?
These “amends” are supported by the Justice Department.Even though it is considered absolutely “outrageous” in the post-recession many consider brought on by the crash of the housing bubble created by loans made to folks who didn’t qualify prompting former Rep. Ernest Istook, and Heritage Foundation fellow, to demand, “How can someone both be financially stable enough to merit a mortgage at the same time they’re on public assistance? By definition, you don’t have the kind of employment that can support such a loan.”
Justice spokeswoman, Xochitl Hinojosa claims that the Justice Department feels these kinds of anti-discrimination measures are “essential to remedy the harmful effects of the banks’ conduct.”
According to court documents reviewed by Investors Business Daily, as part of a Justice Department crack-down on alleged racial discrimination against banks, the results of DOJ discrimination prosecutions, some already settled, but with over 60 more bank investigations underway – it’s run-away PC federal government deja-vu.
In what could be a repeat of the easy-lending cycle that led to the housing crisis, the Justice Department has asked several banks to relax their mortgage underwriting standards and approve loans for minorities with poor credit as part of a new crackdown on alleged discrimination, according to court documents reviewed by IBD.
Below are highlights from that report in which “settlements include setting aside prime-rate mortgages for low-income blacks and Hispanics with blemished credit and even counting ‘public assistance” as valid income in mortgage applications”:
- Discrimination prosecutions by the Obama Justice Department “have already generated more than $20 million in loan set-asides and other subsidies from banks that have settled out of court rather than battle the federal government and risk being branded racist.”
- Government orders:
- “Bank defendants must post in all branches and marketing materials a notice informing minority customers that they cannot be turned down for credit because they receive public aid, such as unemployment benefits, welfare payments or food stamps.” (See the spoof bank ad on the left sidebar for “Obama Ghetto Loans: Get down & dirty & bring in “Mud People” to win a trip…”)
- Remedies include favorable interest rates and down-payment assistance for minority borrowers with weak credit such as special financing “for residents living in predominantly black areas and conventional home loans at fixed prime rates for African-American borrowers who would ordinarily not qualify for such rates for reasons including the lack of required credit quality, income or down payment.”