The deed shell game

My father always told me: “You don’t own a house, a house owns you.”

I never really understood it until I owned one. Gone is the ability to pick up and move. Gone is the ability to call “the super” or the landlord to deal with things like busted water heaters. Houses depreciate without constant care.

It seems the banks just discovered this fact- now realizing that all that paper they loved generating when they thought the only way housing prices could go is up- is now a boat anchor on their balance sheets. The homes that they are taking back when their loans and house of card Ponzi systems of bundled mortgages and secondary markets collapsed- now require care, and they don’t want to pay.

Of course, politicians who get big financial support from the banking industry and their lobbyists, are all too quick to not look a gift horse in the mouth:

City officials are in preliminary talks that could lead to donations of foreclosed and abandoned properties from the banks holding the mortgage loans.

Negotiating for an exit strategy from the mortgage meltdown, representatives for a foreclosed properties servicer that works with major banks met Monday with Dayton city officials to discuss the abandoned properties.

How the early discussions will shake out is unknown, but a potential outcome includes transferring some properties clogging up bank balance sheets to a land bank or some other public entity, a move that occurred earlier this year in Chicago.

In May, Bank of America announced a collaboration with the city of Chicago and a community group to give away 150 vacant and abandoned properties in and around the city. A bank spokesman said the bank agreed to pay as much as $10,000 per home for demolition, according to the Chicago Sun-Times.

“Unfortunately, many homeowners faced with unemployment, underemployment and other economic hardships, have transitioned to alternative housing situations, and in many cases have walked away from their homes, leaving behind vacant and deteriorating properties that can cause neighborhood blight,” a Bank of America statement said in May.

“To be honest with you, I think we need to walk into this idea of banks donating properties with eyes wide open,” said Aaron Sorrell, the city’s planning director. Sorrell, however, said he believes the discussions are valuable, especially if there are financial incentives the banks are willing to provide to help bring severely deteriorated properties back onto the market.“Everybody believes the finger pointing between the banks and the cities needs to end,” Sorrell said.

via Major banks may give away discarded residences to cut losses.

The real question is why banks aren’t held to the same standards as the homeowners they kicked out of these properties?

Why aren’t they forced to keep insurance on the property- at vacant home price, so that damage from vandalism and theft- can be undone? Maintenance on the houses- lawns mowed, trash picked up, paint kept to standard? Of course not. Recently 5/3rd got it in their head that one of my rentals didn’t have insurance (false) for a period of a few weeks and started charging $95 extra a month on my note- which has been almost impossible to resolve and get refunded- despite many calls, faxes and e-mails. Again- the same standards should be applied to banks.

As a token- the banks are offering up to $10k per home for demolition costs- why could they have not applied that discount to the home when it still had an owner? And of course, the banks will get to write off the highest value of the home- plus the $10K donation, and help boost their bottom line.

If our politicians had balls- they would tell the banks that any home to be turned over, that the bank did not make at least $10K in modifications to the loan while it still had a homeowner, that the bank would either be forced to bring the home to code and fair market value, or not be able to deduct a single cent as a loss from their balance statement. It’s time to protect our citizens before we protect the banks profit and loss.

The cost of foreclosures is not a shell game to be played after the value is gone- we need to be doing our deals before the home owners get kicked out, the houses go into entropy and the entire neighborhood suffers. Proactive assistance is much more affordable than reactive solutions.

Of course, if the federal government had bailed out the mortgages instead of the banks- we would have never ended up in this free fall. Had the Fed stepped in and reduced all consumer loan rates along with the prime, and capped credit cards and forced a linkage to the prime as well, we’d have seen some banks have to tighten their belts instead of the entire working class and state and local governments.

Before we accept a single house in this shell game- we need to start to work at stopping any more homes from heading down the same path. Force banks to make at least 5 modifications in the same community for every home they want to drop off their balance sheet.

End the shell game.

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28 Comments on "The deed shell game"

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Greg Hunter
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Greg Hunter
Obama, Greenspan, Bernanke Bush Geithner, Paulsen and the ilk have fleeced the taxpayer by putting the loans on the public balance sheet.  I find it interesting that Bernanke discussed the housing and finance sector with great concern; however, I never heard that kind of concern when manufacturing was being decimated in this country. The finance boys ruined America and the people that are elected care not about taxpayers as they are not the ones that get them elected.  Politicians know the media is owned by corporations and will not ask embarrassing, err truthful questions of the elected elite.  These people are elected to make decisions for the public good; however, they do nothing of the sort. I do not know when it will happen but people of Dayton are going to have ignore the politicians and financiers and do what is best for them at large.  I keep wondering when the ministers will get together and decide that enough is enough and admit that the Republicans and Democrats are waging a Class War and dividing the people with the most too lose in society with religious rhetoric.  We are all stuck on this grain of sand together and we are in Dayton together, so ignoring what Columbus or DC says might just be in Dayton’s Interest. The funny part about these give backs and destruction is that the overall infrastructure costs do not change unless you wipe out all of the houses in a given neighborhood.  The water lines are still there, the same amount of asphalt is required to keep the remaining citizens viable, but one can bet this fact will not be discussed, because Nan the destroyer, will gush at the 10k demolition price.  So in the end the free market is gone.  Look if Dayton or any community actually cared about the Taxpayer, they would devise either a plan to get taxpayers into these units or provide a mechanism to destroy complete neighborhood blocks.  Cut the services and dismantle them all.  No other way makes economic sense.  So make a decision on a neighborhood, evaluate the remainder… Read more »
David Lauri
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I bet Wells Fargo would love to get rid of the property it owns at 137 Deeds Avenue, featured in a report released earlier this year by the Miami Valley Fair Housing Center and partner agencies on bank-owned properties in Dayton and other cities around the country. The Dayton building inspector issued an order on August 31, 2010 that the house, which was damaged by arson, be repaired or demolished. Now, nearly a year later, the burnt-out shell of the house is still a blight on its neighborhood.
 
MVFHC continues to monitor 137 Deeds, taking photos periodically. The most recent photo is from June 21.

Jeff Dziwulski
Guest
Jeff Dziwulski

Pretty good intel there, David.  

Now, what Id like to know is what properties ARE on the cities demo list.   I want to photograph them as sort of a documenation project.

Anybody have any intel on that…a list with addresses and priorities so I could know which ones to shoot first?

I’m not being snarky or ironic here.  I really do want to document these old houses and buildings before they are torn down.   Help! 

Gary
Guest

Let the firefighters practice on the abandoned houses …

Teri L
Guest

Greg says
>Give em away with qualifiers.
 
Damn straight. And those qualifiers can include common sense, enforceable stipulations like: Owner Occupants only, repairs must be made within x amount of time, usage regulations, must hold the property for a certain amount of time, etc etc. A free house with mighty strings attached but it might get a few people into some the homes and get the city out of the real estate investing business. But it won’t happen because these people don’t fund campaigns, and it won’t solve the very basic problem which is that we still don’t know how er, won’t do what it takes to attract people to Montgomery County.

bobby
Guest

“I bet Wells Fargo would love to get rid of the property it owns at 127 Deeds Ave. ”
They have…. Wells Fargo conveyed the property, per the Auditr’s website, June 2, 2011 to REO Distribution LLC. at a recorded price ( the Auditor’s appraisal) of$19,420. Might this be accounting  fraud as this property is nowhere near this value and undoubtably has negative value.
The city can now chase this “owner”.

Giving away houses to undercapitalized individuals that lack the proper skill sets and resources is a receipt for disaster. On the other hand, this might create jobs for the new bureaucracy that could be created to protect these folks from themselves. 

bobby
Guest

correction…undoubtedly

Thomas
Guest

Didn’t in the City of Dayton there used to have some sort of program where if a person could move into a house at little to no cost – it had to be owner occupied – and do a significant amount of repair (with proof of said repair reported on a regular basis), that the note would be written off. I met a couple of people who were a part of it. Their houses look better than most other houses in their neighborhoods — and they still lived in them!
While some think “Giving away houses to undercapitalized individuals that lack the proper skill sets and resources is a receipt for disaster” – I think there’s more folks who can step in, take pride in their own house & neighborhood, and make it happen.
When we looked for houses initially in Dayton, I remember seeing whole blocks of abandoned and run-down houses. Sometimes only one house on a whole block was occupied. On my own fairly nice street, there are five abandoned houses. Dayton is quickly going the way of Detroit with it’s businesses going and its residents fleeing. Drastic measures are needed to stop it —

Bubba Jones
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Bubba Jones

Not Dayton specific, but the Feds are getting involved in getting rid of some of the empty house inventory….
 
http://www.clarkhoward.com/news/clark-howard/homes-real-estate/fannie-mae-freddie-mac-offering-incentive-home-buy/nC3MG/

Sarah Walker
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Sarah Walker
Hi – your friendly neighborhood appraiser here. David Laurie – you should probably disclose that you worked on the MVFHC report. Now, due to the Community Reinvestment Act anyone with a pulse could get a loan.  Did we as appraisers question this “push” into markets that had never seen the kind of “appreciation” or increases in value since the 1950’s?  Yep we sure did.  Did we say it to the lenders – nope.  We really were not interested in being blackballed or worse sued for “red-lining” or having an asterisk next to our name that read “racist”. I read the MVFHC report – appraiser and/or appraisal is mentioned a total of 5 times in the 43 page report.  Five times.  That’s it.  Appraisers like me who used sales data from the MLS, were located within 40 miles of the Subject property, and had a conscience wrote reports that permitted the funding of these loans legitimately.  However, I cannot tell you how many reports from that time period (2004-2008) that I reviewed when the appraiser had NO membership to the local MLS, came from Mentor, OH (which is about 4 hours one way) and appraisers who weren’t appraisers (they stole the data from the State web site – just brilliant giving our entire license number on-line) or worse – simply making up the entire report.   What was worse was the authorities (a local County Prosecutor for example) did not understand what the fraud was even when confronted with it.  “Aren’t you supposed to sell real estate for a profit?”  Um…yes but not at a 300% increase in 15 days with ZERO improvements!!! Big Bank Lenders were willing to take risky loans in these communities in order to procure the rights and ability to expand into these markets with the assistance of the Federal Government.  Those that did not, do not have a presence – nor do they to this day – in those markets.  A certain credit union only has 2 locations on the West Side of Interstate 75.  Funny – their books are rather clean of REO/Foreclosures.  This credit… Read more »
Ice Bandit
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David Laurie – you should probably disclose that you worked on the MVFHC report…you can’t demand that loans be given to those that are unable to re-pay them and then turn around and demand that the bank maintain a property that never should have been mortgaged. (Sarah Walker)
 
…bodyslam…
 

Jesse
Member

With all due respect to Robert, Ice and Bubba, I have a new favorite poster….Sarah Walker!!!

Bubba Jones
Guest
Bubba Jones
I can’t blame ya there, Jesse!! ;)   But I do think she might have gotten her David’s mixed up.  Does the position that she’s citing (“you can’t demand that loans be given to those that are unable to re-pay them and then turn around and demand that the bank maintain a property that never should have been mortgaged“) actually belong to David E and not David L?   I wasn’t going to waste time commenting on many of David E’ ludicrous points in this essay but since Jesse got me started typing in the little box, I’ll go ahead….   First, David – you seem to think that loan modifications are a big part of the answer.  If that’s the case, you obviously aren’t keeping tabs on the number of defaults on loans that have been modified.  The statistics that I’ve seen vary somewhat, but range from 40% to 70% of all modified loans are subsequently re-defaulted on.  The bottom line is that many of the people that took out these loans shouldn’t have been taking out any loans at all.  Some people are just meant to be renters and not home owners.   Next, David is lamenting the fact that the mortgage holding banks don’t have to have insurance on the properties.  Well, David, I know that you were only a marketing major so you might not know what the primary purpose of insurance on real property is.  Insurance is in place primarily for the benefit of the mortgage company – to protect their investment in case of some catastrophic event at the property.  The requirement that you, the mortgage holder, have insurance in place on the property is not a legal (ie- codified) requirement, it’s a requirement of the bank/lender.  Once the homeowner vacates the property, they no longer give a crap about any of the terms of the mortgage document so the insurance is dropped.  That’s because the insurance contract is between the insurance company and the homeowner, not the insurance company and the bank.  So, the bank is now absorbing 100% of the risk of… Read more »
Greg Hunter
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Greg Hunter

It was always to good to be true….The money generated was either a money laundering scheme or tax evasion, IMHO.

http://www.daytondailynews.com/blogs/content/shared-gen/blogs/dayton/daytoncourts/entries/2011/07/07/design_homes_development_compa.html

I do not know the facts but it was easy to see that something did not smell right, but every politician in Montgomery County had their nose firmly placed…….

Sarah Walker
Guest
Sarah Walker
Bubba – you are correct- but the number is actually worse.  HUD & Fannie & Freddie have found that 80% of homeowners that chose a “loan modification” were back in default within 2-5 years. Just because you throw someone into a pool doesn’t mean that they will “learn” to swim.  The same is true for homeownership.  Far too many homeowners that I met during that time-period had no idea what a roof cost, or that a water heater will just “up and die” and two weeks later the furnace will then decide to die and on and on.  As David E. said “the house owns you…” no truer words were said. Here is the real kicker from my end.  Legal Aid at their meeting in 2008 (when all the $hit hit the fan) was instructed by Richard Cordray to “make every effort to include appraisers in a [foreclosure] action”.  So Legal Aid of Dayton, Cincinnati, Columbus and Cleveland attempted to legally argue that since a real estate transaction was “impossible” without an appraisal that “appraisers should be added as third-party defendants” in foreclosure proceedings. Basically – Legal Aid was arguing that because I did an appraisal on your home and YOU were foreclosed upon it is somehow MY fault; even if no fault was found with the appraisal.  [N.B. I must carry a $1M Errors & Omissions Insurance Policy to perform work for lenders – but I’m sure that had NOTHING to do with Legal Aid’s argument…] Needless to say this was nipped in the bud by the Ohio Supreme Court and Legal Aid was NOT the winner.  I believe the term is “spanked hard” applies? What I find funny is Legal Aid was the same group that railed against “redlining”, “unfair” mortgage practices in minority neighborhoods, and all the other JUNK that led up to this fiasco. Now banks use a middle company called an Appraisal Management Company (AMC) to keep a distance between Loan Officers and appraisers.  So there is no “undue influence” placed upon appraisers to “make value”.  What you as the homeowner DON’T know is that… Read more »
Gary
Guest

Once a homeowner can cancel their Private Mortgage Insurance (PMI), in other words, insurace you pay so the bank won’t default on your note (after a quarter or so is paid for) the payments you pay don’t change diddly squat; your escrow still needs to pay your own homeowners insurance and property taxes, let alone the price you must pay for the appraisal to cance your PMI which does not accept a county tax appraisal … Can someone say, I’m screwed!
@ Bubba, did you save us some ribs?  How were they?  A-1 sauce?

bobby
Guest

Gary, PMI was paid byl buyers that put little down on a house purchase. creating a riskie loan for the lender. This insurance, paid by the homeowner, is designed to make the lender whole if the BORROWER defaults on the note.

bobby
Guest

riskier

David Lauri
Guest
Sarah says, “You can’t demand that loans be given to those that are unable to re-pay them and then turn around and demand that the bank maintain a property that never should have been mortgaged.”   1) Show me where I ever said that loans must be given to those who are unable to repay them.  You can’t do it.  You can’t find a comment on Esrati.com or a post on davidlauri.com or a comment anywhere where I’ve said that because I’ve never said that.  I defy you to produce one single source to back up your claim.   2) Who forced banks to make loans on these properties? Are you claiming, Sarah, that banks were coerced into issuing mortgages? If the mortgages should never have been issued, do the banks bear no responsibility for having issued the mortgages?   3) Why do you think, Sarah, that banks who end up owning the properties should bear no responsibility for maintaining them?   Sarah also says, “David Laurie [sic] – you should probably disclose that you worked on the MVFHC report.”   Yep, I’m the IT Coordinator for the Miami Valley Fair Housing Center.  I developed the database MVFHC uses to track its clients and cases, a database that we’ve also sold to the National Fair Housing Alliance and to fair housing centers in Pittsburgh, Connecticut, Toledo and Akron. I maintain MVFHC’s website (I’m the one who posted the article about the report and the PDF of the report to MVFHC’s website), and I maintain MVFHC’s Facebook presence. I support MVFHC’s computer and IT systems.  I have no training in Fair Housing, although I’ve picked up the lingo in my 10 years working for MVFHC.   As for the report itself, I did work on it but only in terms of editing (thanks to an English major background). And I didn’t mention the report here in order to say anything about its claims of racial discrimination in treatment of bank-owned foreclosed properties but rather to highlight a particularly egregious case of neglect. Whether or not the mortgage that was issued on… Read more »
Sarah Walker
Guest
Sarah Walker
@DL No, I wouldn’t expect your blog to mention anything about mortgages.  Last I checked your blog is primarily about computer/tech issues (many I agree with). However, you are one of 13 individuals that are employed at the MVFHC.  You mean to tell me in the past 10 years of employment you haven’t agreed with their mission statement?  Wow, either you must really, really need the job as you are able to bite your tongue for that long, or you mistake me for born-yesterday. I don’t care if you have ever written one word for or against lending money.  You work there.  As you stated, you have an English Major.  You read the entire report.  You have probably read many a report.  You do know what is going on from the MVFHC perspective. Wells Fargo is Enemy Number One for MVFHC.  It used to be New Century Mortgage but they are long gone.  Who bought all of New Century’s mortgage paper?  Co-winki-dink that would be Well Fargo! The sheer fact that you specifically mention Wells Fargo (to me as an insider) speaks volumes – why not Chase or Huntington or PNC?  Why did the MVFHC mention that property on Deeds?  Is it because the MVFHC took issue in the report with the condition of the property or the ownership?  Look around you – those properties are everywhere in the City of Dayton and they have been there long before the housing market collapsed.  If you can walk a block without seeing one, you are not in Dayton – you are in Oakwood. Has the MVFHC suddenly had an epiphany about run-down homes?  Ummm…not quite.  However, the National Fair Housing Alliance issued a report in April 2011 stating that “[banks] lack of maintenance of foreclosed properties is now [framed as] a Civil Rights issue”.  (http://www.civilrights.org/archives/2011/04/1193-foreclosure-discrimination.html) I wonder who handles Civil Rights issues?  Oh yes, that would be the Department of Justice who can then sue for money (or as the DoJ likes to call it “investigate and levy fines”) for said supposed Civil Rights violations. The banks will pay those fines… Read more »
Gary
Guest

Thanks Bobby, I was feeling that I had my PMI reversed …
@Sarah- What career are you in?  You gave me an epiphany: the tables are starting to turn a fresh paradigm shift on all the scammers; what comes around goes around, and like in Apocalypse Now, the rulers are going down, and the common man, the good men and women of this world are finally going to win — paybacks are hell!
Long Overdue.

David Lauri
Guest
So I guess you have no problem whatsoever, Sarah, with a company that got $25 billion in bailout money and that posted a record profit in 4Q last year leaving an arson-damaged house stand in disrepair for over a year? Sure, there are plenty of other houses around Dayton in disrepair, but many of them are owned by people who can’t afford to do anything about it, in stark contrast to a company that had income of billions of dollars. Poor Wells Fargo, forced against its will to issue mortgages!  Poor Wells Fargo, unable to afford to maintain the properties it forecloses on!   As for MVFHC’s mission statement, yes, I do agree with it. I believe in “eliminat[ing] housing discrimination and ensur[ing] equal housing opportunity for all people in our region.” Do you disagree with that mission?   The word “mortgage” appears nowhere in the mission statement. You can’t contend from the mission statement that because I work for MVFHC I have ever “demand[ed] that loans be given to those that are unable to re-pay them.”   I’m not a Fair Housing Specialist.  I’m not the right person to have a debate with about the Community Reinvestment Act.  However, it does seem interesting that you give no agency whatsoever to these multi-billion dollar corporations, seemingly powerless to say no to anyone who applies for a mortgage, seemingly completely non-culpable for the mortgages they approved.   I do know that at MVFHC people are sometimes told that they’re not in a position to keep their houses and should not try to get loan modifications, that instead arranging for a short sale is a better option. Not everyone is a candidate for continued home ownership.   I also am of the understanding that sometimes it’s in a bank’s best interest to negotiate a loan modification. Foreclosing on a house means no income from mortgage payments, means an unoccupied structure that can deteriorate and cause liabilities. Sometimes getting some money, even if reduced from the original mortgage terms, is better than getting no money. But you wouldn’t agree with that, would you?… Read more »
Sarah Walker
Guest
Sarah Walker

Gary I am a Certified Residential RE Appraiser – have been for over 10 years.

Now David L. I think you DO know about the CRA (quite well).  I certainly am not defending Well Fargo but why THAT house on Deeds specifically?  I could give you 4000 others thru out Dayton.  No I don’t disagree with the MVFHC Mission Statement, but don’t act like you don’t “know anything” about mortgages. 

Um – the agency would be the FEDERAL RESERVE.  But you KNOW that already.  Again, I am really tired of your “I just work there” crap.  Is that like “I just loaded the trains”?

Yes it is in the banks best interest to offer a mod-loan.  Until they realize that the current homeowner could NEVER afford it in the first place (but YEA for groups like your employer for making that a “non-issue”).

Why should a “home owner who can’t afford to make repairs” get a pass?  That didn’t fly so well with the owner of the Icky Bldg.  I saw him in court – scary!  And he took his arson insurance $$ and paid off his personal home and several vehicles.

And yea! – now the Fed Govt is stating that unemployed people get to NOT pay their mortgage for – wait for it – ONE WHOLE YEAR!  That will start Aug 1 – just in time for Obambi’s re-election.  Again I’m sure a co-winki-dink.

My issue DL was with your original response as “gosh I haven’t a clue” – but your current response seems to show something else.

David Lauri
Guest

Eh, Sarah, there’s nothing I can say that will satisfy you.  Anyone who calls the president names such as “Obambi” is not a rational person with whom I can have a discussion.  Have a nice life.

Greg Hunter
Guest
Greg Hunter

It is a free country David my boy and picking up your ball over we got duped about change is really a poor response.  I really do not know where all the negatives for Sarah as she calls it straight from my book.  My ex was a loan officer for a Wells Fargo JV and while she did not deal with low income loans it did not seem to matter as no loans matched what I consider reality.  

Obambi is not offensive, but I like Carmel George as he has not offered one whit of difference from the last bum.  Meet the new boss…

Ice Bandit
Guest

Sarah…Anyone who calls the president names such as “Obambi” is not a rational person with whom I can have a discussion. (David Lauri)
 
…well, the rest of us can. Sarah, you’re en fuego…

David Lauri
Guest
In July, Sarah said, “You can’t demand that loans be given to those that are unable to re-pay them and then turn around and demand that the bank maintain a property that never should have been mortgaged.”  That statement is worth bringing up again now because of a new article, available on Huffington Post, that refutes a similar contention.   The article, “White Speculators, Black Area Foreclosures,” points out that: Some pundits and politicians point to federal policies that encouraged homeownership in low- and moderate-income communities, coupled with reckless behavior on the part of greedy homeowners, as the crux of the problem. One example is the statement by Fox News reporter Neil Cavuto that “loaning to minorities and risky borrowers is a disaster.” Neil Cavuto’s contention sounds as if it comes from the same talking point playbook as did Sarah’s.   However, the article’s authors, John Gilderbloom and Gregory Squires, counter: To the contrary, our recent research demonstrates that it is outside investors living in other, predominantly white neighborhoods, not local homeowners, who account for the adverse impact on our nation’s black communities. They go on to report that: the rate of foreclosures for owner-occupants was no different in black and white Louisville neighborhoods [the focus of their study]. That is, race was not a factor in accounting for differences in the rate of owner-occupied foreclosures among Louisville neighborhoods.   This article reminded me of Sarah because in July she also contended, “[Y]ou surely know that the Community Reinvestment Act (CRA)  WAS coercion.”   Gilderbloom and Squires contend that people like Sarah and Cavuto want to target the CRA.  They counter that by pointing out: The CRA does require federally regulated depository institutions (banks and thrifts) to affirmatively ascertain and be responsive to the credit needs of all neighborhoods in their service areas, including low- and moderate-income communities. But the law also explicitly states they must do so consistent with safe and sound lending practices. The Federal Reserve reported that only 6 percent of high cost subprime loans made to low- and moderate- income borrowers were originated by lenders covered… Read more »
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