I keep hearing that the drop in housing values and the shakiness of some sectors of the mortgage industry are due to "predatory lending," sometimes more gently described as "subprime mortgages" or "extension of credit to consumers without full verification of ability to repay."
I seem to recall that not many years ago Socialist Congressmen, some sectors of the federal executive, and the usual suspects from the perpetual grievance community loudly threatened to regulate and/or sue the mortgage industry into paralysis over the practice of (a) writing mortgages only on property likely to retain its value for the life of the mortgage and (b) only to people who could prove that they had the ability to repay the loans. The position of the bellyachers was that lenders' failure to make high-risk loans must be racially motivated because restrictions (a) and (b) resulted in relatively lower rates of loan extensions to members of ethnic minorities and on property in minority-predominant neighborhoods.
The complaint, of course, was ridiculous. Corporations in the mortgage business have absolutely no reason to care what color a lender is, provided that his money is plentiful and green and the note is adequately secured. In fact, a refusal to make sound loans to competent borrowers would be a breach of a corporation's duties to its shareholders. The current complaint is likewise absurd. What possible motive could anyone have to deliberately make bad loans? Is it conceivable that the personal and individual humiliation of some number of financially marginal black people and rednecks somehow advances the interests of a corporate lender? Even if the mortgage is sold rather than held by the original lender, shaky borrowers or questionable security will result in a lower price at the time of sale.
I know that there are people on this board far better informed in these matters than am I - and people cleverer, even if similarly benighted.
So what say you? Was the alleged extension of questionable loans a result of short-sighted risk-taking, of race- or culture-based malice, or of a strategy to avoid ruinous regulation and litigation?