Unfortunately, this is another of those issues that is not what it appears to be.
Were some companies involved in racially targeted home loans? Most likely yes. There are unfortunately people out there that will take advantage of any opportunity to rip off the weak and helpless.
The real problem however was that the Congress of the United States mandated that the traditional standards for home loans had to be significantly loosened, allowing a large number of low income people to qualify for home loans that they previously had been denied. The Congress specifically targeted those people of "color" for these loosened rules, but applied them to everyone.
This caused an explosion in home loans, the sale of homes went off the charts and prices rose like crazy (supply and demand). People were approved for massive mortgages that they had no realistic chance of paying (in some cases, people were approved for loans where 50% of their income was required to pay the payments).
Congress also loosened the requirements for refinancing of home loans. They also eliminated previous laws that required full and complete disclosure of ALL of the terms of a home loan. This allowed a lot of loans to be made, on a variable interest loan that increased its percentage each year. BUT, the loan companies or mortgage brokers were NOT required to disclose exactly how the monthly payments would increase from one year to the next.
My sister in law, who is not financially astute, got one of those loans. the initial monthly payment was well within her budget, because it was set at 1% interest. But, over the next 7 years, the interest rate went to 10%, which she could never have afforded. Thankfully, in her case, we were able to get her a conventional mortgage before she lost her house.
Every time the government steps in and makes it a lot easier for poor people to purchase homes, they end up hurting more people than they help. "TANSTAFL - There ain't no such thing as a free lunch".
