Lending laws unenforced in housing crisis: Jackson
NEW YORK (Reuters) - A U.S. mortgage meltdown has its roots in lending discrimination against African-American and Hispanic communities and requires federal intervention to prevent it from crippling municipal services, civil rights activist Rev. Jesse Jackson said on Wednesday.
Jackson told the Reuters Housing Summit in New York that nearly 40 percent of subprime loans went to black and Hispanic families, many of them in districts once shunned by discriminatory "redlining" lenders who later devised a way to profit there by selling a flawed financial product.
"They began to stereotype and target and cluster whole communities. It's kind of like reverse redlining," Jackson said.
Jackson estimates that nearly half of those borrowers could have been eligible for regular loan packages, but instead were locked into mortgages that threaten to balloon out of their ability to pay when the adjustable interest rates reset.
"It suggests that if fair lending laws had been enforced ... we would not have had this global economic crisis," Jackson said. "But while it started by unenforced civil rights laws, the bleeding has not stopped there. It's now engulfing the budgets of cities and counties and states."
Jackson also said that the U.S. Department of Justice was slow to respond, if at all, to concerns of lending discrimination.
An estimated 1.5 million subprime mortgages, traditionally targeted at borrowers with poor credit histories, will reset to higher interest rates this year, putting many owners at risk of losing their homes. Another 500,000 will reset in 2009, according to Federal Reserve estimates.
Jackson said the federal government should institute a halt to foreclosure proceedings and authorize the Federal Housing Administration or another body to start a major restructuring of subprime loans, with lower interest rates and payments spread out over a longer period.
He also called on state attorneys general to subpoena the major lenders on their loan practices and impose penalties on those who have violated the law.
He described President George W. Bush's plan to offer $152 billion in tax rebates this year to fend off a possible recession as irrelevant to the needs of home owners facing foreclosure and ignoring the cause of the crisis.
(Editing by Gary Hill)
(For summit blog: summitnotebook.reuters.com/)
