Not Just Voter Fraud:  ACORN, the Center for Responsible Lending and the Housing Crisis

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Economists will be debating the roots of the subprime credit meltdown for years to come. But as global financial chaos continues to unfold, it becomes increasingly important to root out the cause of the problem in order to learn from our mistakes.  

Long before the credit crunch, the seeds which helped create this situation were planted.  Since the enactment of the Community Reinvestment Act in 1977, the Association of Community Organizers for Reform Now (ACORN) has fought to relax lending standards for individuals with poor credit histories and few or no assets.  As the Wall Street Journal said recently, it was ACORN and the CRA that “laid the foundation for the house of cards built out of subprime loans.”

Originally intended to outlaw the discriminatory lending practice of “redlining,” the 1977 CRA required banks to increase lending in low-income neighborhoods. Its terms, however, were vague. And a decade later, a Wall Street boondoggle provided the occasion ACORN needed to use this ambiguity to its advantage.

The savings and loan bailout of the 1980’s resulted in legislation that required lenders to compile public records of their borrowers by income, race, and gender.  This allowed Self Help Inc., a predecessor and current affiliate of the Center for Responsible Lending (CRL), to compile statistics to support ACORN’s charges of racism and discrimination in lending.  With further CRA revisions in the early 1990s, ACORN mastered the ability of pressuring banks into lending to borrowers who wouldn’t normally qualify by using the CRA to block applications for new bank branches and mergers and acquisitions.

By the mid-90’s newspapers and financial advisors were encouraging bad credit customers with low wages to apply for loans with the help of ACORN and Self Help.  Earlier this year Martin Eakes, founder of Self Help and Center for Responsible Lending President, explained, “By offering mortgages to borrowers with battered or bad credit, Self-Help was, in fact, ‘one of the earliest subprime lenders in the nation.”

Today, ACORN and Self Help—through the Center for Responsible Lending—are at it again.  Even though the burden from loans to high-risk, low-income borrowers bankrupted Fannie Mae and Freddie Mac, ACORN and CRL joined forces in an effort to obtain a piece of the $700 billion bailout pie.

Over the past two decades ACORN and the Center for Responsible Lending have been in aggressive pursuit of the same goal: obtaining mortgages for individuals regardless of their ability to carry the debt.  Now taxpayers are the ones footing the bill.  Given this track record and ACORN’s pattern of fraudulent behavior, one can only hope that Congress won’t make the same mistake again.