I’ve run out of patience with tired memes and discredited claims by fools and partisans.

The rhetoric of those pushing nonsense on the public in an attempt to confuse rather than illuminate  — the phrase is “agnotology” –  only serves to aid the lobbyists working on behalf of the Banks and Investment houses to maintain the status quo.

All is well, nothing to see here, move along.

Well, its time to put up or shut up: I hereby challenge any of those who believe the CRA is at prime fault in the housing boom and collapse, and economic morass we are in to a debate. The question for debate: “Is the CRA significantly to blame for the credit crisis?”

A mutually agreed upon time and place, outcome determined by a fair jury, for any dollar amount between $10,000 up to $100,000 dollars (i.e., for more than just bragging rights).

I can’t help but applaud this. No matter how many times it has been shot down, the blame-the-CRA myth keeps coming back to life. As TWI has explained, the CRA, a 1977 anti-redlining law, didn’t even cover the unregulated lenders who made most of the subprime loans during the housing boom. There’s simply no evidence for this assertion.

The movement to blame the CRA started during the fall campaign season, seized by conservatives as a convenient scapegoat for the financial crisis. It  came back to life recently, when bloggers like The Atlantic’s Megan McArdle picked up on Clusterstock postings by John Carney, once again citing the CRA as regulation gone wrong.

As McArdle put it, the CRA’s role in the crisis is “understated by liberals who are unwilling to admit that regulation, too, can produce hideous unintended consequences.”

Felix Salmon at Reuters has knocked down most of this. But I’d like to add something that’s regularly missed in the CRA debate. What the anti-regulation types miss is that the CRA never was much of a regulation to begin with. As Guy Cecala, publisher of Inside Mortgage Finance, which covers the subprime industry, told TWI, lenders never took the CRA all that seriously to begin with. The lending industry viewed the CRA as an extremely loose regulation. Lenders joked about how you’d have to mug an elderly, disabled, minority woman in a wheelchair to lose your positive CRA rating.

How that got turned on its head so that the CRA has become a symbol of regulation gone wrong is an example of what happens when idealogues who don’t know how an industry really works take over the debate. If Ritholtz’s bold offer gets some of this out on the table — and then off the table for good — it’s all for the better.

Salmon reports that Carney may be willing to take up Ritholtz on the challenge. So let the games begin. And let them put an end to the blame-the-CRA movement for good.

This hasn’t worked out on many levels for Andrews, particularly since Atlantic blogger Megan McArdle  turned up evidence of his second wife’s two bankruptcy filings — one while married to Andrews. Andrews wrote that one reason he bought a $460,000 home he really couldn’t afford, given his steep child support payments from his previous marriage, is that his new wife wanted the house. Now Clusterstock notes that Andrews’ tale has spawned a chorus of “But My Wife Made Me Buy This Crappy Overpriced House”‘ excuses on real estate blogs.

On StreetEasy, a New York region real estate blog, one soon-to-be homeowner already regretting his impending purchase wrote this:

I went into contract this week, and this is mostly a function of needing to find a place to live due to relocation. My corporate housing was running out. Wife pressure to close a deal probably also adds to the mix.

The wife made him to do it, too! Apparently, Andrews isn’t the first to make this argument. Clusterstock links to an infamous 2006 Century 21 television commercial titled “Suzanne Researched This” that espoused the same theory.

Basically, the commercial touts the fact that your Century 21 broker will team up with your browbeating wife and guilt you into buying the home you can’t afford. It must be watched. We still think it kind of might be a parody.

I can’t buy this theory in any form, because it’s nothing more than a sexist throwback. In the excerpt of his book, I thought Andrews dodged his responsibilities a bit by emphasizing his wife’s desire for the house; he’s the economic reporter — couldn’t he just have said the numbers don’t add up? Of course, as we pointed out earlier, families under financial stress sometimes stay together through a recession and fall apart when times get better. I’d imagine this is especially true for couples who are already blaming each other for home purchase decisions they made together.

From Thornberg, a California real estate economist:

How about a national tax break for buying not just any home, but only a foreclosed property? How about generating a new group of potential buyers by simply not allowing current defaults to be recorded on people’s credit reports? How about streamlining the foreclosure process, making it quicker and easier for banks to clear properties and find a new buyers, thus reducing their losses?

I’ve previously talked about the possibility of wiping defaults away to let delinquent homeowners start over, calling it a Get out of Jail Free card for people too far underwater on their mortgages to keep their homes. That way, with clean credit credit, they can either find a decent rental or buy again someday, as Thornberg notes. I’m assuming they’ll buy a less expensive home the next time.

The Atlantic’s Megan McArdle also has had similar thoughts:

My lunatic proposal for the day: why not make it easier to move homeowners out of homes they can’t afford? Set up a streamlined foreclosure proceeding where a current or mildly delinquent homeowner can simply give the house to the bank and walk away. Do this with two legal provisos:

1. No tax on the forgiven loan

2. No black mark on the credit record. The bank marks the loan as fully satisfied.

The homeowner gets a fresh start, and the bank gets the house without the huge administrative costs that are normally associated with foreclosure. Everyone loses something, but no one loses a crippling amount, and there is no net transfer between two parties who are both in financial trouble.

These aren’t perfect fixes. I’d be rightly suspicious of trusting that banks and credit bureaus will be diligent in keeping their side of the bargain. Still, I’d rather explore ideas like these, instead of leaving the fallout to the former subprime wolves, who still seem to be at the door.

]]> http://washingtonindependent.com/32328/a-get-out-of-jail-free-card-for-troubled-homeowners-and-other-mortgage-rescue-ideas/feed 0