Racial Arsonists' New Target: FICO Credit Scoring

[Geee]

Investors Business Daily:

It was bad enough the government pressured banks to rubberstamp home loans for folks with poor credit scores. Now there's a more dangerous push to attack the credit-scoring system itself.

The first shot across the bow was fired last week by the Washington Post. In a front-page story, it warned that "the country is headed toward a kind of financial segregation" from "long-lasting (credit) damage done to the black community."

The Post said civil-rights groups and federal regulators fear blacks will be denied credit for years to come due to subprime foreclosures that have left deep scars on their credit reports.

"Credit scores of black Americans have been systematically damaged, haunting their financial futures," said the Post, quoting the usual anti-bank suspects.

These same Post sources demonized as racist the neutral credit-scoring system banks have used for half a century to measure risk in loans for homes, cars, college tuition and businesses. And they demanded the government review it for fairness, while forcing banks to "repair" the damaged credit of blacks.

What the Post left out of its one-sided story is key history explaining how blacks were put in such jeopardy.

Starting in the 1990s, Washington declared traditional bank rules for approving mortgages racist, after a deeply flawed federal study showed a greater share of blacks were rejected for home loans than whites.

To close the "mortgage gap," regulators demanded Fannie Mae and Freddie Mac, as well as primary lenders, do anything they could to get low-income, high-risk minority borrowers into home loans — including waiving down payments and offering them subprime mortgages and other fringe products.

 

Their affirmative-lending crusade backfired. African-Americans ended up holding a disproportionate share of subprime mortgages, which defaulted at alarming rates. If they had weak credit before the crisis, they have worse credit now.