RICHARD L. CRAVATTS'S July 26 op-ed "Unintended fallout of loan crisis" is disturbingly warped by blaming the Community Reinvestment Act and nonprofits for the egregious and expensive subprime scandals. Overwhelmingly, the blame is to be borne by stealthy, voracious mortgage companies, not banks, which invaded low- and moderate-income, diverse communities and stole their wealth in a Ponzi scheme fueled by Wall Street greed. Nonprofits like the Neighborhood Assistance Corporation of America and the Neighborhood of Affordable Housing, of which I am executive director, counseled people away from those Venus fly trap products, but the scent of instant homeownership was too much to resist for many unsuspecting families.
NOAH used to counsel 250 families per year. We made second and first mortgages and helped hundreds gain homeownership. No product was subprime. When questionable adjustable-rate mortgages hit the streets, we counseled avoidance. But consumers flocked to the mortgage companies that legislators, despite years of warnings, refused to regulate. The "free market" protected the national ripoff we are experiencing.
There is an equal and opposite reaction unfolding. The illusion of effortless wealth creation is being replaced by the hard reality for which taxpayers now bear the burden. CRA protected most banks. Nonprofits protected many consumers. Congress blinked. Wall Street protected the wrong interests. Unfortunately, it was all predictable.
PHILIP GIFFEE
East Boston
RICHARD CRAVATTS lays the blame for today's foreclosure crisis at the feet of housing advocates and the Community Reinvestment Act, which requires banks to meet the credit needs of lower-income consumers and neighborhoods. Notably, Cravatts fails to cite a single statistic to back up this sweeping claim. The lack of facts is not surprising, of course, since the facts would refute his point.
First, bank lenders covered by the CRA make about 20 percent of all mortgage loans in Massachusetts, and account for just 1.6 percent of all subprime mortgages.
Second, housing advocates have been lobbying regulators for years to stop the very subprime loans that have caused this crisis. They have counseled thousands of homebuyers away from such products and into sustainable mortgage products such as the state's successful Soft Second Mortgage Loan Program, which has a foreclosure rate of just 0.047 percent compared to a current subprime foreclosure rate of 11.41 percent.
The solution is to expand CRA to cover mortgage companies and to expand nonprofit counseling services - actions taken recently by the Massachusetts Legislature and Governor Patrick. Thankfully, our political leaders checked their facts before adopting new policies rather than listening to unsubstantiated opinions.
JOE KRIESBERG
Boston
TOM CALLAHAN
Dorchester
Kriesberg is the president and CEO of the Massachusetts Association of Community Development Corporations; Callahan is the executive director of the Massachusetts Affordable Housing Alliance.
