CRT Caused The 2008 Recession

     I was a loan officer and then a document specialist before the collapse of the mortgage industry in 2008. I worked for a mortgage broker and direct lender called New West Funding. To become a loan officer I had to sit through 8 hours of ethics videos most of which were saying, "Even if you can, and it would make you more money, don't charge a higher interest rate."

     I take ethics seriously, so I never wrote a loan for any adjustable rate mortgages or ARMs shorter than 7 years. Our company offered three and five year ARMs, but when I was asked about ARMs by customers I told everybody the same story. I said, "Half of all people in California stay in their homes for 7 years or less, if that's you, we can consider a seven or ten year adjustable rate mortgage, versus a 15 or 30-year fixed rate mortgage." Then I would run the numbers on the shorter adjustable rate mortgages and some hypotheticals for the interest rate rising, and ask if they could afford an extra $300 a month if the rates went up.

     People also called all the time asking for No-doc Loans and Interest Only loans, but we didn't offer those at our company. To the best of my knowledge Countrywide invented the No-doc Loan, and brought back the Interest Only loans from the 1920s, but over a longer term. No-doc literally meant that no documentation of your qualification for the loan was required, and companies like Countrywide would still give you a loan.

     Interest only loans are the original loans from most of time up until the 1920s in the United States. A mortgage loan in the United States in 1920 was typically for 5 years, and your monthly payments were for the interest only with a single balloon payment at the end for the principal, but in the 2000s Countrywide allowed people to do that on 15 and 30-year loans, as well as writing No-doc Loans.

     Starting in 2006 people began defaulting on the loans that they were never qualified for in the first place, and by 2008 the mortgage bubble had burst and we headed into a recession. No more than 65% of the United States is meant to live in a house that they have a mortgage on, and 35% of the United States is meant to rent. For more than 50 years the homeownership rate in the United States has hovered just over 64%, and when you try to put renters into homes with a mortgage it just doesn't work out. You can't upset that balance, because among other things some people make their money off of being landlords. 

     When I was a loan officer people would call up all the time that weren't qualified, either they didn't have two years worth of taxes from a legitimate job (W2s), or they didn't make enough money to qualify for the loan (debt to income ratio), or their credit was really bad (mid-range FICO score below 620). Either way we had a word for those people and it was, "renters." Some people are meant to rent, some people are meant to be homeowners, and some people are meant to be landlords. That's how America works. The owner of Countrywide said many things about equity and doing good things for African Americans, but in the end all he did was put a bunch of unqualified renters into mortgages. Countrywide gave mortgages to unqualified black, latino, and white borrowers, many of whom ended up defaulting on their mortgages, which hurt their credit scores for years to come.

     Despite the fact that many companies have settled with the federal government when sued over racist mortgage practices there is no racism in the mortgage industry, and there never has been. In previous posts I have addressed the lack of racism in the mortgage industry, specifically about redlining which was based on creditworthiness, never on the color of a person's skin. It is a direct manifestation of Critical Race Theory to claim that redlining was racist, and it is the foundation upon which Critical Race Theory is built.

     For perhaps the last time I will say this, in Detroit when redlining was instituted blacks made up only a tiny portion of the city, and yet an entire giant area encompassing over half of the city in the shape of a giant upside down T was inside the redlined area, so the single large redlined area in Detroit was not drawn around black people. And despite the lies told about redlining, a black or white person inside the redlined area was not blocked from getting mortgages, redlining simply meant that your credit was not as good as the best credit so you were charged a higher interest rate, exactly as is done today. Nothing has changed in the mortgage industry in the last 80 years, your creditworthiness determined your rate then, and your creditworthiness determines your rate now. 

     So what caused the mortgage bubble to burst in 2008? It was early proponents of Critical Race Theory spreading the lie that the mortgage industry was racist, and to compensate for this they intentionally put unqualified people of color into mortgages. A few years later when the inevitable defaults started, it not only affected the U.S. housing market it caused a recession in the United States that spread to become worldwide, all because of false claims that the U.S. mortgage industry is racist. When I worked in the mortgage industry 20 years ago everything was already being done online, credit applications, everything, the only time a person's skin color would have been noticed was at the signing, and no one is denied a mortgage at their signing because of the color of their skin.