Obama’s house of cards

By PAUL SPERRY

Last Updated: 12:53 PM, July 22, 2012

With studies showing home foreclosures hitting blacks and Latinos hardest, the Obama administration’s answer is baffling as well as destructive — to lend them more money, repeating the cycle of easy credit that led to the housing boom and bust.

A new AARP report finds that even elderly minorities are facing serious mortgage delinquencies. Fifty-and-over African-Americans, for example, are almost twice as likely to lose their home as older whites.

“This crisis is far from over,” AARP policy chief Debra Whitman said. “We need to think about more creative solutions.”

Illustration by Leah Tiscione

President Obama’s solutions, however, look a lot like the original problems that landed minorities in the financial mess they’re in today.

For starters, his new consumer credit watchdog agency has quietly adopted weaker, minority-friendly mortgage underwriting guidelines first published in a landmark 1994 policy statement released by the little-known Interagency Task Force on Fair Lending.

The 20-page “Policy Statement on Discrimination in Lending” — signed by the heads of 10 federal agencies, including then-Attorney General Janet Reno — warned banks that “the agencies will not tolerate lending discrimination in any form.”

It was a noble goal — undercut by the fact that the statement also set lower standards by which banks could qualify low-income minorities with spotty credit.

“Applying different lending standards or offering different levels of assistance to applicants who are members of a protected (minority) class is permissible in some circumstances,” it said. “Providing different treatment to applicants to address past discrimination would be permissible if done in response to a court order.”

The policy planted the seeds of the mortgage crisis, as lenders abandoned prudent underwriting standards altogether. Yet the 1-year-old Consumer Financial Protection Bureau, which was created by the Dodd-Frank financial overhaul, has dusted off the Clinton-era regulation.

“The CFPB, which did not exist at that time, concurs with the policy statement,” the bureau said in a recent bulletin outlining its policy on battling against “lending discrimination.”

Separately, CFPB chief Richard Cordray announced last week that the agency will, for the first time, regulate the credit-reporting bureaus that provide the credit scores lenders use to assess the default risk of loan applicants.

The CFPB has been soliciting complaints from minorities with damaged credit who claim the reports are inaccurate and racially biased. The agency assumes as few as 60% of consumer credit profiles are accurate.