Two June 23 Motor City newspaper reports -- one in the Detroit Free Press ("Group blasts subprime loans," by Amber Hunt), the other in the Detroit News ("ACORN focuses on vote," by Mike Martindale) -- portrayed the Association of Community Organizations for Reform Now (ACORN) as a noble enterprise dedicated to helping troubled borrowers and increasing voter involvement in the political process.
Reality differs.
Hunt and Martindale were either unaware, or perhaps didn't care, that ACORN has had myriad problems over several years, including but not limited to voter-registration fraud, employee mistreatment and intimidation, and home-loan irregularities. Days before the group's national convention in Detroit, the Consumer Rights League, a group whose stated mission is "protecting consumer choice," issued a scathing whistleblower report charging ACORN with "misusing taxpayer dollars for political ends and by attacking lending corporations for the same 'predatory' lending practices it regularly engages in."
Here are selected paragraphs from each reporter's virtual press releases (HTs to Michelle Malkin here and here):
(Detroit Free Press)
Long before the mainstream media began reporting on those sneaky subprime mortgage loans that have forced millions into foreclosure, the Association of Community Organization for Reform Now was blasting them.
On Sunday the group continued to raise awareness about the need for changes, highlighting the issue as it relates to Detroit, which earlier this year had one out of every 153 households in foreclosure.
"They targeted African Americans and Latinos," U.S. Rep. Maxine Waters, D-Calif., said of certain mortgage companies.
..... ACORN is a liberal-leaning grassroots organization with more than 400,000 members who gather to address issues such as funding for urban schools and affordable housing.
(Detroit News)
About 2,000 members of ACORN, an advocacy group for low-income individuals, focused on getting out the vote this fall as they gathered for their national convention Sunday.
ACORN, or Association of Community Organizations for Reform Now, is the nation's largest such group, with offices and 400,000 member families in 42 states.
..... It's estimated that this year, ACORN will help 1.2 million people register to vote in 26 states, including 120,000 in Michigan to date.
Sunday's sessions at times resembled part political rally and part revival meeting.
ACORN's involvement with electoral process-related irregularities has been extensive. Links to related posts on that topic are here, here (at NB; at BB), here (at NB; at BB - last item at each link), and here (at the Employment Policies Institute).
Employee treatment issues at ACORN have included alleged union-busting and violations of minimum-wage laws.
As to housing, here are just a couple of key excerpts from the CRL's full press release (PDF accessible at this link):
Executive Summary (in part)
ACORN leveraged the Community Reinvestment Act in order to attack lenders’ reputations and secure financial resources for itself; it has also endorsed loans offered by companies that fund ACORN operations.
ACORN’s decades of lobbying and publicity seeking have contributed to the current housing crisis by lowering lending standards.
It’s Documented: ACORN Housing Works for its donors, Not for the poor
Most people unfamiliar with AHC (ACORN Housing Corporation) would assume that a group dedicated to protecting consumers from abusive loans would advocate safe, traditional 30-year mortgages which build equity and help buyers experience the American dream.
Records show otherwise. Professor Liebowitz notes: “On the Web, you can still find CRA loans available via ACORN with ‘100 percent financing . . . no credit scores . . . undocumented income . . . even if you don’t report it on your tax returns.’ Credit counseling is required, of course.”
Conclusion
ACORN’s long history of abusing the public’s trust seems to have continued through the housing bubble. Its advocacy for loose credit played a role in the current subprime mess. Its advocacy of exotic loans calls into question the wisdom of giving taxpayer money to the organization. And its record of inappropriate ties between a non-profit that receives government funding and a political organization may violate federal laws.
In late May, Stanley Kurtz at National Review Online extensively chronicled ACORN's awful history and aggressive tactics, while noting that the organization may be Barack Obama's "most important radical connection."
Among other things, reporters Hunt and Martindale totally missed the hypocrisy of ACORN's complaints about the subprime loan mess it helped create. Given all the evidence readily available, their whitewashes were negligent and inexcusable.
Cross-posted at BizzyBlog.com.
—Tom Blumer is president of a training and development company in Mason, Ohio, and is a contributing editor to NewsBusters
Editor at Large
Comments Policy
International Socialists
June 28, 2008 - 13:35 ET by JDWProtection for all workers – both native and foreign-born – by upholding fair wages and working conditions for U.S. and immigrant workers...
How does Pelosi fit the criteria as an employeer?
JDW
Remember the Countrywide Six?
Who forgot to write about the advances in Iraq?
If bin Laden is presumed innocent, why not just shoot him there?
Biased Sources
June 28, 2008 - 14:22 ET by Agrarian-DecentralistPerhaps ACORN has its problems, and perhaps the Detroit papers are at fault for not highlighting those problems. But Mr. Blumer is going to have to move out of his conservative bubble and reference more than obviously biased conservative and business-oriented sources to convince me of that.
Oh stop it ....
June 28, 2008 - 14:42 ET by Tom BlumerIf you go to any of the linked NB or BB items you'll find plenty of references to your precious "unbiased" mainstream press.
Oh, I know they're not "unbaised," (they're definitely lefties") but is MyDD good enough for you? It's linked at one of my previous posts, if you stopped your ignorant ranting long enough to look:
In Response to the Canvassers' Union -- http://www.mydd.com/...
Y'know, there's also this handy thing called Google.
Try ACORN "vote fraud" (exactly as typed), or click here. In the first 50, you'll see either "mainstream" links (Cincy Enquirer, Seatle Times, Columbus Dispatch, etc.), or plenty of forum and other posts containing "mainstream" links.
You can say "I was wrong, I'm sorry" any time.
I'm not the one in a bubble, pal.
Under The Radar
June 28, 2008 - 16:13 ET by JDWACORN's goal is socialism.
Obama became involved as an organizer/trainer. He started in housing working against asbestos and quickly moved on to recruiting. Obama pushed organization, the ideas which would ultimately reconstruct America's economy. He wanted to change welfare, wages, and companies such as Wal-Mart. Obviously cities would not survive with such transformation and ACORN realized it.
JDW
Remember the Countrywide Six?
Who forgot to write about the advances in Iraq?
If bin Laden is presumed innocent, why not just shoot him there?
Oh and while you're at it, A-D ....
June 28, 2008 - 14:54 ET by Tom BlumerCheck out the first and third comments that came in out of the blue today at the BizzyBlog version of this post.
I have waited patiently for
June 28, 2008 - 21:24 ET by bigtimerI have waited patiently for years for congress to investigate and do something about ACORN...let alone the Justice Dept.
I gave up long ago.
Their communist network continues with nothing but a mere slap on the hand now and then.
I blame the repubs...they had control.
"Never murder your opponent when he is committing suicide." ~ W. Wilson
Huh?
June 29, 2008 - 15:45 ET by j. frank wilsonA 10/40 fixed rate home mortgage loan is not exotic - let alone predatory. Unless there is a prepayment prevention provision - and the cited "Report" does not state that there is - the borrower is not "prevented" from building equity. That's a flat out lie.
This program could be a great loan for a first-time homebuyer. They can convert rental payments into tax-benefited home mortgage interest payments. They have 10 years to build income, then the loan rolls into a conventional 30/30 program (at apparently no cost of any kind to the borrower!). There's nothing inherently wrong with that. That could be a great loan.
Reverse mortgages are a tool - great for some people, terrible for others, ok for still others. It's a case-by-case basis. This "Report" is using scare tactics - not facts.
As for the Report's claims that ACORN helped to trigger the current sub-prime debacle, there are remarkably few facts presented to back up that claim. Blaming CRA is just silly - that law has been on the books for over 30 years. Suddenly, zombie-like, it arises from the grave to wreck havoc on the community?
And - if CRA drove this crisis (and IF ACORN is responsible for those horrible early 1990's CRA amendments) why aren't the agencies suffering from purchasing all the bad paper?
The CRL website, by the way, features a Wall Street Journal op-ed opposing more regulation of payday lenders. The largest single group of people victimized by these sharks is the United States Military - and several states have passed laws reining them in because so many military families have gotten caught up in their web.
"Consumers Rights League"
June 29, 2008 - 15:52 ET by j. frank wilsonWhere does this organization get its support? There is no financial information of any kind presented on its website - no offer to send any, either. It does state that as an advocacy organization contributions are not tax-deductible (although it is a self-stated "non-profit educational organization").
What are the odds this is just another industry-funded astro-turf front group?
Support
June 29, 2008 - 16:31 ET by JDWHow much money has ACORN received from HUD to fund how many leftist groups to obtain mortgages for illegals relying on undocumented income with Citibank using 10yr interest free loans? Where does Obama stand on the issue?
JDW
Remember the Countrywide Six?
Who forgot to write about the advances in Iraq?
If bin Laden is presumed innocent, why not just shoot him there?
That is such a tired argument
June 29, 2008 - 17:20 ET by Tom BlumerThe first question is: Is what they are saying true?
The second is: Who funds them?
You want to start with the second question, because you're afraid of the answer to the first. In fact, libs often use this tactic to prevent the answer to the first question from coming out, preferring instead to silence it.
Horse manure. If you're so worried, find their tax return. Regardless of who's funding them, it doesn't change the degree of truth of what they're saying.
@Tom Blumer:
June 29, 2008 - 23:41 ET by j. frank wilsonFirst answer: No (please see above).
Second answer: Read their website and other items on it. Clearly this organization has a very specific agenda that seems industry-driven to me. "Consumer choice" is a code term for "unlegislated."
Anyone who suggests this organization is doing a great job can explain why a 10/40 loan couldn't be a great deal for most borrowers - precisely why it is "predatory" and how exactly does it "prevent" building equity? What makes every reverse mortgage "predatory?"
And do you support the CRL's view of payday lenders? Title lenders? Should they all have unrestricted access to members of the United States Military? Should any lender be free to offer any loan product - no matter what interest rate or other terms - to anyone?
Question 1
June 30, 2008 - 03:30 ET by Tom BlumerYes. Such loans are exotic when they are given to people whose credit scores aren't high enough and don't have the legal income to support it.
ACORN appears to have been instrumental, along with many others, into convincing Freddie Mac and Fannie Mae to lower credit-score approval thresholds as follows in about 2004-2005 (this is based on a discussion with someone in the industry at the time):
- from 670 to 630 for conventional.
- from 630 to 590 for subprime.
People with scores that low have high predicted default rates, yet Fan and Fred said, "you sell 'em, we'll buy 'em." Then to boot, they went with things like interest-onlies, etc. It was a goat-screwed mess waiting to happen.
Did I tell you that a lot of people in Fan and Fred are Clinton-era cronies, some of whom got prosecuted, some of whom got outrageous bonuses with no correlation to real (vs. cooked-book) performance (some of which had to be given back, I hope), and many of the rest of whom let orgs like ACORN get their way against anything resembling sound business judgment?
Also, have you ever wondered how it is the many if not most of the high-foreclosure areas are Democrat-dominated (Metro Detroit, Metro Cleveland, Cook County/Chicago)? Not because they're Dems per se, but because the deals I just described got largely done in (Dem) areas where ACORN has a lot of influence, and where there were probably plenty of Dem "businesspeople" willing to work the system -- the borrower be damned.
The reason CRA got teeth in the 1990s is because bank mergers were being held up by frivolous CRA claims, and the banks gave in rather than hold up the deals. Just another lesson in the costs of appeasement.
No, I don't agree with PDL, universal default, and similar items. That doesn't change the fact that CRL's work in this matter looks very solid, and the conduct it accuses ACORN of is reflective of ACORN's conduct in election fraud, union-busting, and employment-law flouting.
@Tom Blumer:
June 30, 2008 - 12:52 ET by j. frank wilsonThe report you rave about doesn't have the information you provide in your comment. The report flat out states that the 10/40 loan program is predatory. It calls reverse mortgages predatory. Where is the proof?
Credit-scoring has proven to be a remarkably poor predictor of residential mortgage borrower performance. Lowering the credit score required for a 40-year fixed rate loan (and what is the default rate on this product, by the way?) has very little to do with the ultimate success of the loan. What is the national default rate for fixed rate vs. ARM loans? Personal cash flow is the key.
The report you think is so fine states that the 10/40 loan program "prevents" building equity. You have yet to explain how this lie is true.
Are you suggesting the agencies have taken heavy hits in their portfolio from purchasing high LTV (low DP) option/ neg am ARM's and other stupid loans? You toss a lot of mud and very generalized accusations that "appear" and are "probably" - but you're short on facts.
You still haven't explained how changes to CRA in the mid-1990's led to mortgage vintage 2005 & 2006 defaults. Mortgage brokers pocketed 3 and 4 points from selling high LTV low (or no) doc option ARM's that would build negative amortization very quickly. What exactly did ACORN have to do with these programs?
And - in your position as a financial expert - please explain to me how a careful review of CRL's tax returns would yield any useful data as to the identity of any corporate or other supporters of this organization?
You're asking me ....
June 30, 2008 - 15:48 ET by Tom Blumer.... to reverse-engineer the report. I suggest you contact CRL to see if you can do that with their data and the anecdotes. My auditor-instinct smell test tells me they will hold up.
In times of flat housing values vs. inflation, a 10-year IO in a 10/40 doesn't build real equity. What about "interest-only" don't you understand?
I'm also not going to do a three month investigative report just to please you. It is a historical fact that deals were held up in the name of alleged "red-lining" of neighborhoods and other fantasies, and they were made to go away very often when the banks agreed to give money to or set up cozy relationships with "community organizations" like ACORN. Entities like ACH then got into the "business" and did risky loans.
Credit-scoring has proven to be a remarkably poor predictor of residential mortgage borrower performance.
FICO says:
- I your score is 750-799, there is a 2% chance you'll default (I think technically go 90 days or more past due).
- I your score is 500, there is an 87% chance you'll default.
I don't like certain elements of the scoring algorithm, but people don't invent models and sell them for years unless they tend to work. There are always others, internally or as vendors, trying to do better models.
But you say we should ignore them or downplay their relevance? I'd say it's your turn to "prove" otherwise.
A not-for-profit is, I believe, required to ID major donors on its form 990.
Yes, the "agencies" have taken hits. Again, I'm not about to do a research project just to please you. Read the news.
Mr. Blumer:
June 30, 2008 - 16:24 ET by j. frank wilsonMy, what a warm and friendly comment! You seem a wee bit defensive.
You comment "In times of flat housing values vs. inflation, a 10-year IO in a 10/40 doesn't build real equity. What about "interest-only" don't you understand?" Leaving the insult aside, my question was "How does this prevent a borrower from building equity?" The report you laud specifically states that loan program prevents equity build-up. How? What part of that question do you not understand?
The report specifically states reverse mortgages are predatory. How can this be? Still no answer on that one - will that question also require too much research on your part? Apparently I should simply accept "House of Cards" as the revealed truth - and not a house of lies?
Your "auditor-instinct smell test" failed you on this one. The rank smell comes from a astro-turf organization's report that presents a pre-determined result.
Zheesh
June 30, 2008 - 18:39 ET by Tom BlumerCan't handle strong arguments without getting defensive, I see.
Follow me closely:
- 10/40s were given to people with low credit scores who were barely making ends met already, were likely overleveraged already, and may already have been late on some debt.
- The 10/40s were also provided to people who couldn't pass the ratio tests without including under the table and perhaps fictitious income.
- "prevent" is the wrong word without the qualifier "in the ordinary course of business" (though when the shoe has been on the other foot, the word has frequently been used, and no, I'm not going to do a research project to prove it). But, barring some miraculous increase in income, a lottery prize, on an inheritance, these borrowers aren't in a position to pay anything extra.
- So, as stated, "What about 'interest-only' (in the ordinary course of business) don't you undertsand?"
I have read that many subprimes had pre-payment penalties which if present on these 10/40s wouldn't have "prevented" principal payments, but would have made them financially prohibitive.
Here's your research project: Show me how many of these 10/40 borrowers were making extra principal payments (ROTFLMAO).
Your willingness/eagerness to defend an objectively corrupt organization is astounding.
Mr. Blumer:
June 30, 2008 - 19:11 ET by j. frank wilsonPile up enough assumptions and hypotheticals and you can "prove" just about anything. In the meantime, back here on Earth, the fact remains that the current sub-prime debacle was driven by greedy mortgage brokers and table-funding lenders who originated highly risky loans to make big upfront fees. These loans were packaged and sold in an unregulated international market and a lot of overseas investors got burned. Only the bright boys packaging them up suddenly realized these were great investments and changed their businss model, keeping larger and larger portions of the CDO's. The 2005 & 2006 mortgages imploded due to hefty neg am provisions built into the deals and now we have a greed-driven mess on our hands. You read Michelle Malkin pushing an astro-turf (industry front) organization's report filled with highly questionable "research" and continue to defend it in the face of the obvious facts that the Consumer Rights League is not what you apparently though it to be. Three of the 4 critical points in their initial presentation are wrong and the 4th can certainly be disputed. You hate the idea that illegal aliens are getting home loans. You conflate option ARM/liar loans with 10/40 fixed rates designed for first-time homebuyers. At the very least, the loans convert non-tax deductible rent to tax-deductible mortgage interest. Wouldn't that save the average borrower 30% or so per year on their rent - when that is already their largest single personal expense?
Personally, I don't find your stance to be the least bit surprising. It's what I would expect.
Boy....
June 30, 2008 - 22:42 ET by Tom Blumer.... That's responsive.
CRL is not wrong in any sense relevant to the initial post. Again, the extent to which you are willing to defend an objectively corrupt organization (i.e., defend the indefensible), and to attack the whistleblower, is amazing. At least the media "just" ignores it.
Mr. Blumer:
June 30, 2008 - 15:19 ET by j. frank wilsonYou commented "CRL's work here looks very solid." It isn't.
First of all, the Center for Responsible Lending (CRL) has been working for this field for many years. The astro-turf Consumer Rights League (what a surprise! Also "CRL") is the new-comer in the arena.
Check out the sources for the "House of Cards" report. They are weak, indeed. The New York Times from 1992 and 1995 Congressional testimony. The world of residential mortgage lending has changed just a bit since then.
I read Thomas J. DiLorenzo's article. No facts - just wild claims of a link between ACORN, CRA and the sub-prime debacle. The website, by the way, pushes his two books "debunking" Abraham Lincoln and the "unnecessary" American Civil War. I haven't read those.
San Liebowitz's article "The Real Scandal" was published in the New York Post. The Post? At least it wasn't on page 6. Mr. Liebowitz also testified before Congress. His article and testimony strive to link ACORN, CRA and the sub-prime mess. He offers a bit more in the way of facts - not that that's saying much.
Mr. Liebowitz seriously mis-characterizes the Boston Fed's publication "Closing the Gap." I believe that is the publication he refers to - he doesn't name it (no surprise there). "Closing the Gap" suggests loan minimums should have a business basis, underwriting standards should not be artibrary or unreasonable (there's a stretch!), and if exceptions are granted they should be done so across the board (ie, not just for white folks but also for Blacks or other minorities). Do you have an arguement with that? Obligation ratios should take into account a history of paying (non-tax deductible) rent when considering the applicant's ability to pay (tax deductible) mortgage interest. Alternative credit histories should be considered (remember when FICO dinged a consumer for having a finance company account - even with a perfect payment history - because it was a finance company? What if there wasn't a bank or thift anywhere near?).
Or "Cash-on-hand could also be an acceptable means of payment if borrowers can document the source and demonstrate that they normally pay their bills in cash." Is that wrong?
Mr. Liebowitz seriously mis-characterizes the role of applicant consumer education.
Mr. Liebowitz attempts to link Countrywide's "ACORN" loans with its current financial difficulties. Yet he does not provide any data regarding the default rate of those loans or even what percentage of Countrywide's book they represent. In essence he says "Countrywide made some loans a while ago and now that company is in trouble and it's all ACORN's fault." Wow!
There's plenty more. The bottom line is that "House of Cards" was "researched" with a pre-conceived conclusion and then managed to reach that conclusion. What's missing here is hard evidence - let alone proof - of a direct or even in-direct link between ACORN, CRA and the sub-prime debacle.
Regarding your reference to the problems of some agency executives, do you realize they were accused of understating profits?