A letter to the editor in today’s (9/19)Globe spouts a fast-growing urban myth of the right wing: that the Community Reinvestment Act of 1977 (CRA) is at the heart of the mortgage/foreclosure crisis. The writer asserts, we should blame the Democrats for the problem and praise Bush for trying to fix it.
This isn’t true. The fact is that independent mortgage companies, which are not covered by CRA, made high-priced loans at more than twice the rate of the banks and thrifts. Beginning in 2005, the Bush administration exempted banks with less than $1 billion in assets from the most stringent CRA provisions, but these smaller banks did not expand substantially their subprime lending in poor areas. Reliable estimates are that about one in four sub-prime loans were made by the institutions fully governed by CRA.
Urban myths die hard. This one should be exposed for the right wing delusion that it is.