I have written frequently that I estimate that one-third of the mortgage foreclosures in the 2007-10 period were of Hispanic homebuyers. Very many had been granted mortgages, despite bad or dubious credit, by lenders who then fobbed them off on Fannie Mae and Freddie Mac or other mortgage securitizers, in the meantime gaining brownie points with regulators for lending to “minorities.” Evidence supporting this comes, inadvertently, from an Urban Institute report spotlighted by the industrious and provocative blogger Steve Sailer. You can see that there was a huge increase in the number of mortgages granted to Hispanics in the years running up to 2006, when housing prices peaked, centered in metro Los Angeles and the adjacent Inland Empire to the east, in California’s Central Valley and in metro Las Vegas and Phoenix. Not coincidentally, these “sand states” (plus Florida) accounted for more than half of mortgage foreclosures when housing prices plummeted and buyers who suddenly found themselves underwater and/or out of work defaulted on their mortgages.
This was an enormous policy failure, attributable both to the Clinton and the Bush administrations. Both presidents championed Hispanic home-buying, which in practice meant granting mortgages, by bending the rules or simply ignoring them, to non-creditworthy borrowers. Some liberal analysts like to speak of credit standards as somehow embodying racial (or anti-Hispanic) prejudice, but this is obviously not so. The consequences of this misguided policy were horrendous, for the entire economy of the nation, indeed much of the world — and for the foreclosed-on homebuyers themselves. They had been sold a dream, that they could with little or no money down put themselves on the road to accumulating a six-figure net worth because, hey, housing prices always go up. That dream turned out to be a nightmare. I suspect that that nightmare has played a major rule in the cessation of net migration to the United States from Mexico, which the Pew Hispanic Center estimates as zero from 2007 on to the year of the latest available data.
Now the Urban Institute and the Obama administration are pushing for more mortgages for blacks and Hispanics with subpar credit ratings. Haven’t America, the world and the intended beneficiaries already suffered enough from this perhaps well-intentioned but indubitably misguided policy?