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A letter to the editor featured in the New York Times:

Racism in the Housing Market
April 23, 2018

To the Editor:

In “A ‘Black Tax’ on Housing” (editorial, April 15), you say the reduction of the black homeownership rate to levels not seen since the 1960s when housing discrimination was legal is a reflection of the “persistence of financial racism in America.”

Yes, because racism is still pervasive, invading both the conscious and subconscious thinking that leads to lending decisions against minority home buyers. To ignore this would make us all guilty of perpetuating the injustice that continues to plague our country today.

Lenders have a social responsibility they cannot ignore to turn the tide and stop financial racism in its tracks. We call on the lending industry to eliminate commissions, leverage technology to remove racial bias, and help more home buyers take advantage of affordable lending programs.

If the entire industry can take these same steps, perhaps we can finally start to address and move to eradicate the despicable role that racism is playing in minority homeownership levels, even as we wait for the law to catch up.

VISHAL GARG, NEW YORK

The writer is chief executive of Better, a mortgage lender.

The concept of disinterestedness is lost and gone forever.

This reminds me of lender Angelo Mozilo’s Harvard address of 15 years ago:

The American Dream of Homeownership: From Cliché to Mission

Presentation by Angelo R. Mozilo Chairman, President and Chief Executive Officer, Countrywide Financial Corporation

The Joint Center for Housing Studies of Harvard University

John T. Dunlop Lecture

Sponsored by The National Housing Endowment Washington, DC

February 4, 2003

… However, despite the fact that approximately $2.5 trillion in mortgage loans were made in 2002, the gap between low income and minority homeownership, and what is classified as white homeownership, remains intolerably too wide. Therefore, expanding the American Dream of Homeownership must continue to be our mission, not solely for the purpose of benefiting corporate America, but more importantly, to make our Country a better place. …

As President Bush said last October: “Two thirds of all Americans own their homes, yet we have a problem here in America because fewer than half of the Hispanics and half of the African Americans own their home. That’s a homeownership gap. It’s a gap that we’ve got to work together to close for the good of our Country, for the sake of a more hopeful future. We’ve got to work to knock down the barriers…”

While the number of minority homeowners has advanced recently, climbing from 9.5 million in 1994 to 13.3 million in 2001 – an increase of 40 percent – the fact remains that it is still not at a level equal to that of white homeownership. And as President Bush pointed out, the homeownership rate for African Americans is 47 percent and for Hispanic Americans it is 48 percent, a stark contrast to the homeownership rate of 75 percent for white American households. That means there is currently a homeownership gap of over 25 points when comparing white households with African Americans and Hispanics. My friends, that gap is obviously far too wide. It has been far too wide for far too long. And when adding new factors into the equation – like an influx of new immigrants or continued reduction in the supply of affordable housing – it has the potential to become far worse.

So tonight, I want to discuss why that gap persists and how Countrywide is trying to address it. … If we don’t get a better handle on these issues, as I will discuss, I would argue that the homeownership gap will not only remain, but there is a good chance it will widen and the homeownership rates among low income and minority borrowers will continue to be depressed. …

One of the more obvious resolutions to the Money Gap is the elimination of down payment requirements for low-income and minority borrowers. Current down payment requirements of 10 percent or less add absolutely no value to the quality of the loan. It is the willingness and the ability of a borrower to make monthly payments that are the determinants of loan quality. Over the past 50 years, I have personally interviewed thousands of potential homebuyers and in the vast majority of cases, the barrier standing in between them and the house of their dreams was the down payment. That barrier must be eliminated by offering customized programs to those borrowers who cannot meet the current down payment requirements.

Equally important, we must reduce the documentation required to make any and all loans; we should be able to approve loans in minutes, rather than days, and close loans in days, rather than weeks. …

So I’d like to use this forum this evening to say that Countrywide is once again re-dedicating itself to expanding the dream of homeownership. Tonight, I am announcing the extension and expansion of our current 5-year, $100 billion challenge through the year 2010, with the commitment to fund a total of $600 billion in home loans for previously underserved Americans in this decade.

Countrywide is proud to make this commitment. We’re excited about our new goal. We’re eager to reach that goal. And, I can assure you that we will reach that goal. As we had envisioned in 1992, House America offers unique loan products that have been specifically designed to meet the needs of minority and low- to moderate- income borrowers. But it also does more. It has become not just a lending program, but a more comprehensive effort that devotes considerable intellectual and financial resources to increasing homeownership among minority and low- to moderate-income individuals and families. …

… It is an effort absolutely committed to education and outreach, both in English and Spanish, both online and in local communities, both at local home-buyer fairs and at lending workshops, and with our many partners, like Fannie Mae, Freddie Mac, FHA, the Congressional Black Caucus, the National Council of La Raza, AFL-CIO, and faith-based groups across the Country, just to name a few. I want to specifically and especially recognize Franklin Raines and his entire team at Fannie Mae for providing a great deal of the resources that have made it possible for us to achieve our House America objectives. …

It is an effort that has enabled Countrywide to become the number one lender to Hispanics for the last 6 years and the number one lender to African Americans for the past 3 years. …

… It is time, once and for all, to narrow and ultimately eliminate the homeownership gap.

 
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  1. It looks like Vishal Garg wants to be the next Angelo Mozilo. Good Christ, are we going to do it all over again?

    That speech is a real good look back at a time bomb.

    One wonders, did guys like Mozilo know they were preparing to hand off a pile of horse manure to the taxpayers? Or did they really believe their own bull manure?

    Read More
    • Replies: @Escher

    It looks like Vishal Garg wants to be the next Angelo Mozilo. Good Christ, are we going to do it all over again?
     
    All renters on the sidelines of the housing market can only hope...
    , @David
    They knew. In insurance, it's a common scam to build a stable book over a few years to use as a pitch for, a prototype of, what you can do on a vaster scale, in order to secure capital support like reinsurance or securitization. Once the underwriter isn't on the hook for future results, he grows his portfolio by hundreds of percent by slashing controls and rates for an (easily discernible) guaranteed loss, while collecting a fat override in the commissions.
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  2. Anon[558] • Disclaimer says:

    Is there any data on credit score by race? Do banks exercise discrimination above and beyond that which one’s race’s credit score would predict? (i.e., if you factor in the average black credit score, are blacks discriminated against?)

    When banks loosen their lending standards to blacks in capitulation to being called ‘racist’ and when there’s another housing collapse, will they again be called ‘racist’ predatory lenders for banging up the credit scores of all the minorities who defaulted on their loans?

    Read More
    • Replies: @Steve Sailer
    http://www.unz.com/isteve/topic/mortgage/
    , @Twinkie

    Is there any data on credit score by race?
     
    Asked and ye shall receive:
    https://www.valuepenguin.com/average-credit-score

    Group Average Credit Score of Home Buyer % of Borrowers with Score < 620
    Asian 745 2.60%
    Black or African American 677 21.30%
    Hispanic white 701 11.20%
    Non-Hispanic White 734 5.40%
    All others 732 6.30%
    U.S. Average 728 6.80%
     
    Note that these are averages of home buyers, not the general public.
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  3. Anonymous[264] • Disclaimer says:

    Whose money do mortgage companies lend to homebuyers? Their own?

    Read More
    • Replies: @Citizen of a Silly Country
    Not in the case of Better. The company sells the mortgage to the secondary market, i.e. very large investors.

    Never trust someone who doesn't have a skin in the game. OTOH, buyer beware. The large investors buying these mortgages aren't children; they can analyze investments. If they want to buy mortgages to blacks and Hispanics with low credit scores and scary income-to-debt ratios, that's their business. (The chase for yield is a powerful force and works just fine - until it doesn't. But not chasing that yield can get you fired as well so while the music is playing, you dance.)

    Actually, the concept of the company is similar to other ventures, use technology to eliminate the middleman or, I suppose, replace the middleman with a very cheap algorithm.

    What makes me laugh is that guys like Garg (assuming that he believes what he's saying) think that a neutral algorithm is going to magically improve access to loans (or other opportunities) for black and Hispanics. It never crosses his mind that the algorithm will notice the same patterns as human analysts, that the human analysts weren't being unreasonably racist but, in fact, were being reasonably racist.

    I'd love to be a fly on the wall in the boardrooms when the results of algorithms end up being just as "racist" - if not more so - as human analysts. I'd also love to see how they'll tweak their algorithms to get the results that they want (or feel that they need) without opening themselves up to investor lawsuits when it's discovered that steep loses were the result of them cooking the algorithms.
    , @gunner29

    Whose money do mortgage companies lend to homebuyers? Their own?
     
    .

    They usually get together with somebody that has lots of cash they want to invest in home mortgages. '

    Insurance companies wanting to invest their reserve accounts. A labor union wanting to invest to cover pensions, also the company the union is working for doing the same; to cover their part of the pensions.

    Could be Wall Street types that want to produce a mortgage portfolio they can sell.

    It's the retail banks and savings and loans that are using the depositors money to make loans. And if it's a conforming loan, one that conforms to all the rules Fannie Mae has, then Fannie Mae will buy the loan from the bank or S&L, then the bank or S&L will lend that money out again.

    They actually make their money on all the fees and charges to do the loan, as well as getting a bonus if they can find chumps that will pay above market interest rates; paying 9% with a 800+ credit score, when they should be paying 4% or so.

    Before the 2007 meltdown, there was a world wide crazy demand for US mortgages. They paid 8% or more, in a market that was paying 3% or so on most other investments.

    Plus the perception and reality was these loans were about as safe as buying US treasuries, hardly any ever went into foreclosure. And if they did, usually enough equity to cover the loan.

    That was the world that got screwed by a combination of Wall Street, the Federal gobt, mortgage brokers, and the rating companies. End of 2007 was when everybody figured out at about the same time that the loans produced in the last 5 years were some real crap. So everybody was trying to unload all their crap on somebody else, so everybody quite trading and the markets froze.

    Instant recession. Now the same clowns want to do it again, because they can make tons of money until it falls apart. Then get us taxpayers to bail them out.

    Trump is bright enough to know what is going on, the problem is the bureaucrats and other parts of the gobt aren't, and will go along with the clowns.
    , @Anon
    I believe they get it from the government federal housing agencies, Freddie Mac and Fannie Mae.

    That is they
    1 get it from the taxpayers.
    2 lend it to losers
    3 sell the mortgages to investment funds and other banks at a huge discount

    Thus the lenders are off the hook.

    When the mortgages default and the bankers and investment funds get in trouble, another government agency gives the tax payers money to the banks and investment funds.

    At least I think that’s how it works.

    I might be wrong. Corrections welcome if anyone cares
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  4. Well, perhaps Vishal (good American name, btw) should monetize this billion dollar idea:

    1: Lend money to blacks
    2: ???
    3: Profit!

    BE the change you want to see, buddy-ro.

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    • Replies: @Steve Sailer
    Angelo Mozilo's strategy was that if he could push Countrywide's share of the national mortgage market from 10% to 30%, he could start to cartelize the mortgage industry and garner higher profits. His hope was that Hispanics were a discriminated against group who wouldn't prove as bad at repaying mortgages as the objective evidence suggested. So if he could get Bush's regulators to stop worrying about down payments and income documentation, he could seize a vast new market that more prejudiced lenders wouldn't touch, which would allow him to triple his market share.

    This Mr. Garg sounds pretty similar except that he sounds like he's trying to cash in via the Silicon Valley venture capital market by selling them a pretty story about how he's going to profit via fighting racial prejudice. Considering how few people in America understand how the sacredness of Diversity played into the unfortunate events of 2007-08, this just might work.

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  5. What does the New York Times think about the vastly disproportionate value of real estate owned by Jews, particularly in very high value real estate areas like Manhattan?

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    • Replies: @International Jew
    Is that even true, or are you just hoping that the crowd here will grant you poetic license?
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  6. The Gap is like a colossal electromagnet bending toward it all the i-beams that hold up American culture: banking, education, jurisprudence, corporate policy and practice — you name it.

    And as you say, Steve, ‘disinterestedness’ is dead — or, rather, it carries on as an etymological zombie that has devoured the meaning and content of ‘uninterestedness’, and now slouches about in its ill-fitting skin.

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  7. Anonymous[326] • Disclaimer says:

    OT, but iSteve theme:
    I find it arguable that the “Sailer strategy” won Trump the White House, and probably by direct causality (as opposed to parallel evolution).
    Closely related to the Sailer strategy of having Republicans trying to increase the “white vote” (as opposed to “minority outreach”) is the idea of shifting the impression of the Democrats as the “cool, multicultural” party to the “black party”. As a strategy for Republicans, this hinges on the image of the “black party” being attached to black dysfunction.
    But what if the positive impressions of blacks, as being cool players, able to think on their feet in interpersonal encounters, get attached to the Republicans? I am thinking of a sort of Trump + Kanye party, that embraces a sort of civic nationalism. It would almost be a party reversal, as low status whites align with blacks to support the Republicans.
    I personally don’t find this a solution to the deep cultural problems that I think exist, but I don’t find this at all implausible. It makes things interesting.

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    • Replies: @Steve Sailer
    Personally, I was surprised that the first black President was a Democrat. Being from California, where most of the celebrities are Democrats but most of the celebrities elected to office are Republicans, I had long guessed that the GOP would be the first party to nominate a black candidate for President.
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  8. One of many things subcontinent indians have in common with chosenites is that they are forever wrapping themselves in the mantle of egalitarianism whilst actually using the principle as a cudgel to attack omnipresent ‘white racists’. Hoping that no one will notice the actual degree of privilege they themselves enjoy in this, their adopted country.

    Why do they come here in droves, if this ‘white racism’ is so pervasive and pernicious? Because they know full well how smokescreens work, and they just hate white guys anyway. Can’t do much about that back in Bangalore.

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  9. http://www.dailymail.co.uk/news/article-5648991/Golf-club-apologizes-calling-cops-black-women-members.html

    More amusing than Starbucks

    Recurrent black problem. Expecting others to conform to their whims than conforming to others’ standards.

    Lack of mindfulness.

    Read More
    • Replies: @jim jones
    The DM is making a big push for black readers after their success in attracting women. Their latest story to whip up outrage is about the Windrush immigrants:

    http://www.dailymail.co.uk/news/article-5659465/2013-Government-video-people-deported-Jamaica.html
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  10. Anon[172] • Disclaimer says:

    racism is still pervasive, invading both the conscious and subconscious thinking

    I thought that the current thinking is that the problem is not human bias, but racist algorithms that take stubbornly inflexible numbers as input and run them through uncompromisingly logical equations … to produce credit ratings.

    New York City Takes on Algorithmic Discrimination

    https://www.aclu.org/blog/privacy-technology/surveillance-technologies/new-york-city-takes-algorithmic-discrimination

    when an algorithm disproportionately harms a particular group of New Yorkers — based upon race, religion, gender

    Disparate impact!

    These tools are used to make bail and sentencing decisions, replicating the racism in the criminal justice system under a guise of technological neutrality.

    But even when we know an algorithm is racist, it’s not so easy to understand why. That’s in part because algorithms are usually kept secret.

    Algorithms come up with the same old racist results, perpetuating the stereotype of blacks as committing the most crimes.

    Read More
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  11. The name Vishal Garg sounds like either a Klingon, or a Mickey Spillane villain. (Spillane knew he hated the Commies, but he couldn’t come up with Russian names so he just made ugly sounding names.)

    Vishal Garg?

    This is not America.

    Read More
    • Replies: @PiltdownMan

    The name Vishal Garg sounds like either a Klingon, or a Mickey Spillane villain.
     
    Hindu.
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  12. Anonymous[326] • Disclaimer says:

    Followup:
    I suspect it is going to eventually occur to traditional “African-Americans” that the people who most like them, in the world, are low status American whites. The realization doesn’t remove all conflict, for sure, but I think it will be an embrace of truth. By contrast elitists and globalists portray low status whites as deeply hostile to blacks.

    Read More
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  13. @Buzz Mohawk
    It looks like Vishal Garg wants to be the next Angelo Mozilo. Good Christ, are we going to do it all over again?

    That speech is a real good look back at a time bomb.

    One wonders, did guys like Mozilo know they were preparing to hand off a pile of horse manure to the taxpayers? Or did they really believe their own bull manure?

    It looks like Vishal Garg wants to be the next Angelo Mozilo. Good Christ, are we going to do it all over again?

    All renters on the sidelines of the housing market can only hope…

    Read More
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  14. Vishal Garg appears to be a turn of the century dotcom millionaire, a guy who worked at Morgan Stanley for a year before quitting to start an online student loan company.

    From his LinkedIn profile:

    Co-Founder&President – MRU Holdings / MyRichUncle
    January 2000 – January 2009 (9 years 1 month)
    Starting with $30,000 at the age of 21, over a 7 year period built, took public (NASDAQ 2005) and grew into 4th largest publicly traded student loan company in the United States.

    Analyst, Mergers & Acquisitions Dept
    Morgan Stanley
    1998 – 1999 (1 year)

    New York University – Leonard N. Stern School of Business
    BS, Finance, International Business – 1995 – 1998
    Stuyvesant High School – 1991 – 1995

    I know a couple of guys like that, who picked up on the dotcom thing early, and knowing nothing at all about technology, killed themselves working hard, for a year or so, to build dotcom firms which went public during the earlier part of the boom, just after Netscape went public. Both made tens of millions and were done by the late 1990s. Back then, the IPO market rewarded any business venture that simply had some kind of online front-end presence, even if it was just a couple of demo webpages with clickable forms for data input.

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    • Replies: @Dan Hayes
    PiltdownMan:

    With alumnus Garg, NYC's Stuyvesant High School once again proves its mettle for being a great Incubator of the Vile!

    , @Barnard
    You have to wonder about the quality of borrower taking student loans from an online company called "My Rich Uncle" in the early 2000s. I wonder if there is any data on their default rate. Someone might notice he has played this game before.
    , @anon
    Reminds me of this Chinese saying I once read:

    Those with a full belly like to make trouble for others.

    Profound.
    , @res
    The History of My Rich Uncle – A Failed Student Loan Company
    https://lendedu.com/blog/my-rich-uncle-company-history/

    Having gone public in 2007 with a market capitalization of $200 million, MyRichUncle became very active in the capital finance market, raising even more funds in the open market by issuing securitized bonds or asset-backed securities. The securitized transactions were the first to be issued with an A-rating in the private student loan market which was a testament to the high quality student loan assets in its portfolio.

    But, MyRichUncle’s troubles began. Even with its high quality loan portfolio, MyRichUncle could not fend off the shockwaves created by the biggest financial crisis in history. Liquidity problems in the market caused the supply of capital to evaporate, forcing MyRichUncle to shut down loan originations in 2008. That led to its filing for bankruptcy protection under Chapter 7 in 2009. At the time of its filing, MyRichUncle had four times as many liabilities as it had assets. Its market evaluation had nosedived to less than $10 million.
     
    Barnard asked about default rates. http://studentlendinganalytics.typepad.com/student_lending_analytics/2008/12/mrus-delinquency-rates-violate-loan-covenants-general-counsel-resigns.html

    "...the prime private student loan pool slightly exceeded the annualized default rate for loans in repayment permitted under the terms of the DZ Facility (2.3% actual versus a limit of 2.0%); the 2.3% annualized default rate was caused by the default of 3 loans."
    "...the PrePrime student loan pool exceeded the permitted delinquency ratios (19.7% actual versus a limit of 18.0% for delinquencies greater than 30 days for loans in repayment and 14.85% actual versus a limit of 12.0%, for delinquencies greater than 60 days for loans in repayment).
     
    Why would anyone trust Vishal Garg after this? https://en.wikipedia.org/wiki/MyRichUncle#2007_student_lending_scandal
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  15. @Hunsdon
    The name Vishal Garg sounds like either a Klingon, or a Mickey Spillane villain. (Spillane knew he hated the Commies, but he couldn't come up with Russian names so he just made ugly sounding names.)

    Vishal Garg?

    This is not America.

    The name Vishal Garg sounds like either a Klingon, or a Mickey Spillane villain.

    Hindu.

    Read More
    • Replies: @Hunsdon
    Work with me, man, work with me!
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  16. VISHAL GARG,
    “The Pajeet that can’t be beat”,
    Indians have a nice country, a fantastic country, and they should stay there and make it great.

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  17. The cast of characters:

    The Villain – Angelo Mozilo

    The Dunce – George W Bush

    The Un-indicted Co-conspirator – Franklin Raines

    And proving that white collar crime can pay – Mazilo is presently ensconced near a California golf course!

    Read More
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  18. Vishal Garg’s letter looks to me like a not so thinly disguised appeal for government subsidies to lend to mostly less than creditworthy Black folks.

    OT: There’s a local kerfuffle between an inner suburban school district and a nearby small town school district. The word “segregation” was used publicly by the suburban school superintendent of his mostly Black schools to refer to the consequences of White parents who want to take advantage of open enrollment by sending their kids to the mostly White small town schools.

    Note the Orwellian morphing of “segregation” in the context of race relations. Fifty years ago “segregation” meant the more or less successful efforts of many Whites in authority to contain contacts between Whites and Blacks. De jure and de facto, all that. White folks had the upper hand, and the boundedness of contacts between Blacks and Whites was thought by civil rights types to be unjust.

    White folks have lost that political upper hand. Yet, the inner suburban school superintendent still wishes to use the outmoded “segregation” to refer to the consequences of politically disempowered Whites who want the best for their kids and know they won’t find it in a majority Black school district. Today’s Whites aren’t “segregating”. They’re running like hell, at enormous emotional and sometimes financial cost. They’re America’s new internal refugees.

    (I know Steve covers this ground regularly. But the explicit mention of race in the local fracas had me wanting to comment.)

    Read More
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  19. @PiltdownMan
    Vishal Garg appears to be a turn of the century dotcom millionaire, a guy who worked at Morgan Stanley for a year before quitting to start an online student loan company.

    From his LinkedIn profile:

    Co-Founder&President - MRU Holdings / MyRichUncle
    January 2000 – January 2009 (9 years 1 month)
    Starting with $30,000 at the age of 21, over a 7 year period built, took public (NASDAQ 2005) and grew into 4th largest publicly traded student loan company in the United States.

    Analyst, Mergers & Acquisitions Dept
    Morgan Stanley
    1998 – 1999 (1 year)

    New York University - Leonard N. Stern School of Business
    BS, Finance, International Business - 1995 – 1998
    Stuyvesant High School - 1991 – 1995

    I know a couple of guys like that, who picked up on the dotcom thing early, and knowing nothing at all about technology, killed themselves working hard, for a year or so, to build dotcom firms which went public during the earlier part of the boom, just after Netscape went public. Both made tens of millions and were done by the late 1990s. Back then, the IPO market rewarded any business venture that simply had some kind of online front-end presence, even if it was just a couple of demo webpages with clickable forms for data input.

    PiltdownMan:

    With alumnus Garg, NYC’s Stuyvesant High School once again proves its mettle for being a great Incubator of the Vile!

    Read More
    • Replies: @Twinkie
    Yes, but he did go to a safety school from Stuy, so he was probably held in low esteem there as well.
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  20. Current down payment requirements of 10 percent or less add absolutely no value to the quality of the loan. It is the willingness and the ability of a borrower to make monthly payments that are the determinants of loan quality.

    Holding a job and committing to save for years towards a long-term financial goal holds no value in determining the character of the borrower?

    Soon actuaries will be forced to ignore race and gender, if they haven’t already. In the EU, car insurance was much more expensive for men, since men were statistically more likely to have motor accidents. Fair enough. In 2012 the EU ruled that this was discriminatory, so the price of women’s car insurance simply rose to match that of men, rather than meeting somewhere in the middle. Lose-lose for the consumer. The same will happen for people seeking loans; the interest rate will simply rise to match the higher aggregate risk.

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    • Replies: @Rosie
    To be fair, it can be very difficult to save up a down payment when you're paying rent. Down payment requirements above all are a boon to landlords.
    , @Mishra
    That might be true except for the fact that the government is in the mortgage business now. In fact the government is by far the largest player in the game. This means that the normal rules of finance no longer apply.
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  21. Why is it that these types never put their money where their mouth is?

    This Garg guy, Rob Reiner, heck T. Coates and JayZ.

    They could start up a Savings and Loan, and dump all their money into it. It would operate strictly in areas Roosevelt’s FHA would have not made loans in. I expect them to put in physical branches, so they can service the banking needs of their clientele.

    It’s probably racist in some way, to strictly serve only blacks. Though practically no one ever questions something that does, at least the sort that read the Post and the Times.

    But I don’t mind, really.

    As for how much should they put in? I say all of it. Why everyone talks about the Constitution, when there is some kind of BS talking point, but no one talks about that little section in the Declaration, the one that says “Our lives, our fortunes, our sacred honor.”

    Anyway I figure you can put Brin, the Zuck, Bezos down for a couple billion apiece.

    Duh! Who we talking about? Let’s put them down for tens of billions each.

    After all there is no risk right? Actually there have to be monstrous profits to be made, what with racist bankers having ignored this potential gold mine for close to a century.

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  22. @The King is A Fink

    Current down payment requirements of 10 percent or less add absolutely no value to the quality of the loan. It is the willingness and the ability of a borrower to make monthly payments that are the determinants of loan quality.
     
    Holding a job and committing to save for years towards a long-term financial goal holds no value in determining the character of the borrower?

    Soon actuaries will be forced to ignore race and gender, if they haven't already. In the EU, car insurance was much more expensive for men, since men were statistically more likely to have motor accidents. Fair enough. In 2012 the EU ruled that this was discriminatory, so the price of women's car insurance simply rose to match that of men, rather than meeting somewhere in the middle. Lose-lose for the consumer. The same will happen for people seeking loans; the interest rate will simply rise to match the higher aggregate risk.

    To be fair, it can be very difficult to save up a down payment when you’re paying rent. Down payment requirements above all are a boon to landlords.

    Read More
    • Replies: @Jim Bob Lassiter
    "To be fair, it can be very difficult to save up a down payment when you’re paying rent. Down payment requirements above all are a boon to landlords."

    Let me fix that for you Rosie.

    To be fair, it can be very difficult to save up for a down payment when you're a barista at Starbucks with $100K in student loan debt and a degree in "studies". Career advancement only possible by moving every two years as a Starbucks district manager above all is a boon to landlords.
    , @gunner29

    To be fair, it can be very difficult to save up a down payment when you’re paying rent. Down payment requirements above all are a boon to landlords.
     
    First homes are pretty much couples projects; singles are not going to be able to compete with the couples in the vast majority of scenarios. Unless of course you've got a trust fund or happen to have a degree that's in real demand. But few do. You need to be a DINK.

    Another thing first timers need to do is buy in a lower cost neighborhood, get a small fixer upper, and improve it. Sweat equity. You're not going to get anywhere near what you would consider an acceptable home the first 2 or 3 you own. You work up to it.

    When I was selling homes, I'd love to get couples that had looked at dozens of homes with a couple of other agents. They were finally realistic about what they could afford, and I'd make a point of saying the home they grew up in was probably a second or third home for their parents. And you won't get that right now.
    , @MBlanc46
    Making a mortgage payment every month can be hard, too, but those of us who want to own a house have to do it.
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  23. @Anon
    http://www.dailymail.co.uk/news/article-5648991/Golf-club-apologizes-calling-cops-black-women-members.html

    More amusing than Starbucks

    Recurrent black problem. Expecting others to conform to their whims than conforming to others' standards.

    Lack of mindfulness.

    The DM is making a big push for black readers after their success in attracting women. Their latest story to whip up outrage is about the Windrush immigrants:

    http://www.dailymail.co.uk/news/article-5659465/2013-Government-video-people-deported-Jamaica.html

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  24. @Anonymous
    OT, but iSteve theme:
    I find it arguable that the "Sailer strategy" won Trump the White House, and probably by direct causality (as opposed to parallel evolution).
    Closely related to the Sailer strategy of having Republicans trying to increase the "white vote" (as opposed to "minority outreach") is the idea of shifting the impression of the Democrats as the "cool, multicultural" party to the "black party". As a strategy for Republicans, this hinges on the image of the "black party" being attached to black dysfunction.
    But what if the positive impressions of blacks, as being cool players, able to think on their feet in interpersonal encounters, get attached to the Republicans? I am thinking of a sort of Trump + Kanye party, that embraces a sort of civic nationalism. It would almost be a party reversal, as low status whites align with blacks to support the Republicans.
    I personally don't find this a solution to the deep cultural problems that I think exist, but I don't find this at all implausible. It makes things interesting.

    Personally, I was surprised that the first black President was a Democrat. Being from California, where most of the celebrities are Democrats but most of the celebrities elected to office are Republicans, I had long guessed that the GOP would be the first party to nominate a black candidate for President.

    Read More
    • Replies: @DCThrowback
    Colin Powell would've been that guy had he run against Bill Clinton in 1996.
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  25. @BenKenobi
    Well, perhaps Vishal (good American name, btw) should monetize this billion dollar idea:

    1: Lend money to blacks
    2: ???
    3: Profit!
     
    BE the change you want to see, buddy-ro.

    Angelo Mozilo’s strategy was that if he could push Countrywide’s share of the national mortgage market from 10% to 30%, he could start to cartelize the mortgage industry and garner higher profits. His hope was that Hispanics were a discriminated against group who wouldn’t prove as bad at repaying mortgages as the objective evidence suggested. So if he could get Bush’s regulators to stop worrying about down payments and income documentation, he could seize a vast new market that more prejudiced lenders wouldn’t touch, which would allow him to triple his market share.

    This Mr. Garg sounds pretty similar except that he sounds like he’s trying to cash in via the Silicon Valley venture capital market by selling them a pretty story about how he’s going to profit via fighting racial prejudice. Considering how few people in America understand how the sacredness of Diversity played into the unfortunate events of 2007-08, this just might work.

    Read More
    • Replies: @Apu nahonasomethingorother
    Garg torched investors during the great financial crisis with a public company called MRU Holdings, focused on student loans. https://en.wikipedia.org/wiki/MRU_Holdings

    He took a similar tack of criticizing incumbent lenders in the mid Aughts, so much so that some state attorney general took up an investigation of student lending practices. Guy is pretty smart, think he attended Stuyvesant or one of those super competitive NYC high schools that native New Yorkers have been crowded out of.

    Heard an interesting anecdote at the time about predecessor company to MRU, supposedly they hired unpaid interns at various colleges to pour through alumni earnings data by major, which his company then used to create a sophisticated database that became basis of his student loan algorithm. Labor arbitrage at its finest and most exploitative!
    , @Sunbeam
    "Considering how few people in America understand how the sacredness of Diversity played into the unfortunate events of 2007-08, this just might work."

    Wait just a second. That certainly played a big role in the whole thing, but there were also a lot of other insane loans made.

    I personally observed a single 21 year old with a reasonably good income (for about a year as an HVAC technician) get a loan to buy a house. I told him that 20 years ago the bank would have laughed in his face. Heck he didn't even have a credit history basically.

    Then we had the whole phenomena of being getting Housing equity loans, and a lot of other people besides the black and brown crowd getting loans that any impartial observer would know that if the transmission went out on their car one month, they weren't going to be able to make the mortgage payement.

    And even more cynically they would probably lose the job they had because they couldn't get to their McJob exactly when the boss required a day or two.

    This whole thing was exactly a socialize the risks/privatize the profits kind of thing. Because no one, Mozilo or otherwise would have made those loans if they had to hold on to them and recoup via mortgage payments as opposed to just reselling them to a... bigger fool.

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  26. @Anon
    Is there any data on credit score by race? Do banks exercise discrimination above and beyond that which one's race's credit score would predict? (i.e., if you factor in the average black credit score, are blacks discriminated against?)

    When banks loosen their lending standards to blacks in capitulation to being called 'racist' and when there's another housing collapse, will they again be called 'racist' predatory lenders for banging up the credit scores of all the minorities who defaulted on their loans?
    Read More
    • Replies: @MikeatMikedotMike
    Perhaps you've already made it known and I missed it, but are you not writing for Taki anymore?
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  27. @The King is A Fink

    Current down payment requirements of 10 percent or less add absolutely no value to the quality of the loan. It is the willingness and the ability of a borrower to make monthly payments that are the determinants of loan quality.
     
    Holding a job and committing to save for years towards a long-term financial goal holds no value in determining the character of the borrower?

    Soon actuaries will be forced to ignore race and gender, if they haven't already. In the EU, car insurance was much more expensive for men, since men were statistically more likely to have motor accidents. Fair enough. In 2012 the EU ruled that this was discriminatory, so the price of women's car insurance simply rose to match that of men, rather than meeting somewhere in the middle. Lose-lose for the consumer. The same will happen for people seeking loans; the interest rate will simply rise to match the higher aggregate risk.

    That might be true except for the fact that the government is in the mortgage business now. In fact the government is by far the largest player in the game. This means that the normal rules of finance no longer apply.

    Read More
    • Replies: @Jim Bob Lassiter
    "This means that the normal rules of finance no longer apply."-

    I believe that is precisely the scenario that KingFink has described.
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  28. A meaningful comparison of White verse Black homeowners should include age demographics.
    The average age of whites in America is 49 years-old while the average age of Blacks is 31 years-old.

    Less than 50% of 30 year-old whites own their home , not much different than the Black average. While 20% of whites are over the age of 60 , just 10% of Blacks are elderly. The white demographic most likely to own their own homes are the elderly Boomers while the 30 year-old millennials are more likely to live with their parents than to live with a spouse.

    Read More
    • Replies: @Triumph104
    Age-adjusted data by race/ethnicty is almost nonexistent because it doesn't make the picture any less bleak. The real estate industry needs to perpetuate the lie that homeownership builds wealth for black people.

    The decline in homeownership has been most marked for younger members of the black community. The homeownership rate for black 35- to 44-year-olds fell from 45 percent in 1990 to 33 percent in 2015, half the level for whites of the same age and lower than the black homeownership rate in 1960. Homeownership also fell from 1990 to 2015 for whites, Hispanics, and others in that same age group, but not by nearly as much as for black people. Among 55- to 64-year-olds, black homeownership fell 8.1 percent, while homeownership for white and Hispanic households of the same age fell 3.7 and 2.1 percent, respectively.

    https://www.urban.org/urban-wire/are-gains-black-homeownership-history
     
    Married blacks aren't doing well.

    Married black households—traditionally the most likely to own homes—lost more ground than single-headed black households. These trends will affect retirement prospects for black Americans and their ability to pass wealth to the next generation. ...

    Between 2001 and 2016, however, while black households lagged other races and ethnicities for all family structures, the fall in the homeownership rate for married black households was striking. The homeownership rate for married black households was down 5 percent compared with 3 percent for male- and female-headed single black households.

    Married white households fell 1 percent in this period, while the rates for Hispanic and “other” married households increased.

    https://www.urban.org/urban-wire/closer-look-fifteen-year-drop-black-homeownership

     

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  29. @Steve Sailer
    Angelo Mozilo's strategy was that if he could push Countrywide's share of the national mortgage market from 10% to 30%, he could start to cartelize the mortgage industry and garner higher profits. His hope was that Hispanics were a discriminated against group who wouldn't prove as bad at repaying mortgages as the objective evidence suggested. So if he could get Bush's regulators to stop worrying about down payments and income documentation, he could seize a vast new market that more prejudiced lenders wouldn't touch, which would allow him to triple his market share.

    This Mr. Garg sounds pretty similar except that he sounds like he's trying to cash in via the Silicon Valley venture capital market by selling them a pretty story about how he's going to profit via fighting racial prejudice. Considering how few people in America understand how the sacredness of Diversity played into the unfortunate events of 2007-08, this just might work.

    Garg torched investors during the great financial crisis with a public company called MRU Holdings, focused on student loans. https://en.wikipedia.org/wiki/MRU_Holdings

    He took a similar tack of criticizing incumbent lenders in the mid Aughts, so much so that some state attorney general took up an investigation of student lending practices. Guy is pretty smart, think he attended Stuyvesant or one of those super competitive NYC high schools that native New Yorkers have been crowded out of.

    Heard an interesting anecdote at the time about predecessor company to MRU, supposedly they hired unpaid interns at various colleges to pour through alumni earnings data by major, which his company then used to create a sophisticated database that became basis of his student loan algorithm. Labor arbitrage at its finest and most exploitative!

    Read More
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  30. @Steve Sailer
    http://www.unz.com/isteve/topic/mortgage/

    Perhaps you’ve already made it known and I missed it, but are you not writing for Taki anymore?

    Read More
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  31. @Buzz Mohawk
    It looks like Vishal Garg wants to be the next Angelo Mozilo. Good Christ, are we going to do it all over again?

    That speech is a real good look back at a time bomb.

    One wonders, did guys like Mozilo know they were preparing to hand off a pile of horse manure to the taxpayers? Or did they really believe their own bull manure?

    They knew. In insurance, it’s a common scam to build a stable book over a few years to use as a pitch for, a prototype of, what you can do on a vaster scale, in order to secure capital support like reinsurance or securitization. Once the underwriter isn’t on the hook for future results, he grows his portfolio by hundreds of percent by slashing controls and rates for an (easily discernible) guaranteed loss, while collecting a fat override in the commissions.

    Read More
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  32. @Steve Sailer
    Personally, I was surprised that the first black President was a Democrat. Being from California, where most of the celebrities are Democrats but most of the celebrities elected to office are Republicans, I had long guessed that the GOP would be the first party to nominate a black candidate for President.

    Colin Powell would’ve been that guy had he run against Bill Clinton in 1996.

    Read More
    • Replies: @tyrone
    Powell had a lot of juice twenty-five years ago,he played the politics game very badly .
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  33. @Steve Sailer
    Angelo Mozilo's strategy was that if he could push Countrywide's share of the national mortgage market from 10% to 30%, he could start to cartelize the mortgage industry and garner higher profits. His hope was that Hispanics were a discriminated against group who wouldn't prove as bad at repaying mortgages as the objective evidence suggested. So if he could get Bush's regulators to stop worrying about down payments and income documentation, he could seize a vast new market that more prejudiced lenders wouldn't touch, which would allow him to triple his market share.

    This Mr. Garg sounds pretty similar except that he sounds like he's trying to cash in via the Silicon Valley venture capital market by selling them a pretty story about how he's going to profit via fighting racial prejudice. Considering how few people in America understand how the sacredness of Diversity played into the unfortunate events of 2007-08, this just might work.

    “Considering how few people in America understand how the sacredness of Diversity played into the unfortunate events of 2007-08, this just might work.”

    Wait just a second. That certainly played a big role in the whole thing, but there were also a lot of other insane loans made.

    I personally observed a single 21 year old with a reasonably good income (for about a year as an HVAC technician) get a loan to buy a house. I told him that 20 years ago the bank would have laughed in his face. Heck he didn’t even have a credit history basically.

    Then we had the whole phenomena of being getting Housing equity loans, and a lot of other people besides the black and brown crowd getting loans that any impartial observer would know that if the transmission went out on their car one month, they weren’t going to be able to make the mortgage payement.

    And even more cynically they would probably lose the job they had because they couldn’t get to their McJob exactly when the boss required a day or two.

    This whole thing was exactly a socialize the risks/privatize the profits kind of thing. Because no one, Mozilo or otherwise would have made those loans if they had to hold on to them and recoup via mortgage payments as opposed to just reselling them to a… bigger fool.

    Read More
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  34. @PiltdownMan

    The name Vishal Garg sounds like either a Klingon, or a Mickey Spillane villain.
     
    Hindu.

    Work with me, man, work with me!

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  35. Owning a home is a mixed blessing.

    When I was growing up in England most mortgages were issued by mutually owned “Building societies” and to get a mortgage you generally had to open a savings account and make contributions over a period of time to demonstrate your reliability. So by the time you wanted to apply for a home loan, you were a known quantity.

    This system, now defunct, seemed to work quite well. My parents bought their first home in 1953 for approximately $2000 US dollars, which was a 5-bedroom stone built home with a few acres of land and a barn and outbuildings. Later they built a new home in the 1960′s which last sold for close to a million US dollars. Neither of them ever had a high-paying job. Here is the actual house.

    http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=38459390&sale=27421707&country=england

    This system worked well in an era when home prices were steadily increasing and buying a home gave homeowners a chance to make substantial untaxed capital gains on property appreciation and value added by improvements made by the homeowner.

    However one of the big problems with home ownership in the US is that many lower-cost homes are depreciating assets in depreciating neighborhoods, and with the cost of maintenance and repairs steadily increasing, a point may easily be reached at which it makes economic sense for the mortgagee to default on the loan rather than continue to feed cash into a bottomless money pit.

    Many black families are headed by females who work two jobs to make ends meet, and who are not DIYers, so the situation is fraught with problems.

    My sister and brother in law in England bought their first tiny home, a small, delapidated workman’s cottage with no bathroom for less than $1000 and lived on cornflakes while they renovated it and rebuilt it by hand. They now own more than 20 homes and are considered to be the wealthiest people in the town where they live. But, then again, in the spirit of preservation of capital, they only had one child, and when they owned a Mercedes put 200o miles on the clock over 3 years, saving on gas by hauling groceries uphill on foot.

    But they were not single black women working two jobs and living in the ghetto.

    This home could be had today for $10,000, but even if you were the best DIY person in the world, you could not make much out of it, despite its advantages such as proximity to the Interstate.

    The thing is that it was only built in the 1940′s, but is already demolition-ready. The cottage with no bathroom my sister bought was built in the 1820′s and is today a desirable starter home.

    https://www.redfin.com/FL/Jacksonville/209-Cherokee-St-32254/home/72734793

    When homes are appreciating assets again, default rates will fall in all sectors of the population.

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    • Replies: @Anonymous

    This system worked well in an era when home prices were steadily increasing
     
    Home prices were steadily increasing due to mass immigration.
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  36. @Rosie
    To be fair, it can be very difficult to save up a down payment when you're paying rent. Down payment requirements above all are a boon to landlords.

    “To be fair, it can be very difficult to save up a down payment when you’re paying rent. Down payment requirements above all are a boon to landlords.”

    Let me fix that for you Rosie.

    To be fair, it can be very difficult to save up for a down payment when you’re a barista at Starbucks with $100K in student loan debt and a degree in “studies”. Career advancement only possible by moving every two years as a Starbucks district manager above all is a boon to landlords.

    Read More
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  37. Okay. Klingon. Definitely not Mickey Spillane. Maybe Ian Fleming.

    Read More
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  38. @PiltdownMan
    Vishal Garg appears to be a turn of the century dotcom millionaire, a guy who worked at Morgan Stanley for a year before quitting to start an online student loan company.

    From his LinkedIn profile:

    Co-Founder&President - MRU Holdings / MyRichUncle
    January 2000 – January 2009 (9 years 1 month)
    Starting with $30,000 at the age of 21, over a 7 year period built, took public (NASDAQ 2005) and grew into 4th largest publicly traded student loan company in the United States.

    Analyst, Mergers & Acquisitions Dept
    Morgan Stanley
    1998 – 1999 (1 year)

    New York University - Leonard N. Stern School of Business
    BS, Finance, International Business - 1995 – 1998
    Stuyvesant High School - 1991 – 1995

    I know a couple of guys like that, who picked up on the dotcom thing early, and knowing nothing at all about technology, killed themselves working hard, for a year or so, to build dotcom firms which went public during the earlier part of the boom, just after Netscape went public. Both made tens of millions and were done by the late 1990s. Back then, the IPO market rewarded any business venture that simply had some kind of online front-end presence, even if it was just a couple of demo webpages with clickable forms for data input.

    You have to wonder about the quality of borrower taking student loans from an online company called “My Rich Uncle” in the early 2000s. I wonder if there is any data on their default rate. Someone might notice he has played this game before.

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    • Replies: @Serf162
    MRU Holdings, Inc. filed for chapter 7 in 2009
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  39. @Anonymous
    Whose money do mortgage companies lend to homebuyers? Their own?

    Not in the case of Better. The company sells the mortgage to the secondary market, i.e. very large investors.

    Never trust someone who doesn’t have a skin in the game. OTOH, buyer beware. The large investors buying these mortgages aren’t children; they can analyze investments. If they want to buy mortgages to blacks and Hispanics with low credit scores and scary income-to-debt ratios, that’s their business. (The chase for yield is a powerful force and works just fine – until it doesn’t. But not chasing that yield can get you fired as well so while the music is playing, you dance.)

    Actually, the concept of the company is similar to other ventures, use technology to eliminate the middleman or, I suppose, replace the middleman with a very cheap algorithm.

    What makes me laugh is that guys like Garg (assuming that he believes what he’s saying) think that a neutral algorithm is going to magically improve access to loans (or other opportunities) for black and Hispanics. It never crosses his mind that the algorithm will notice the same patterns as human analysts, that the human analysts weren’t being unreasonably racist but, in fact, were being reasonably racist.

    I’d love to be a fly on the wall in the boardrooms when the results of algorithms end up being just as “racist” – if not more so – as human analysts. I’d also love to see how they’ll tweak their algorithms to get the results that they want (or feel that they need) without opening themselves up to investor lawsuits when it’s discovered that steep loses were the result of them cooking the algorithms.

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    • Replies: @Steve Sailer
    "It never crosses his mind that the algorithm will notice the same patterns as human analysts, that the human analysts weren’t being unreasonably racist but, in fact, were being reasonably racist."

    Or perhaps Garg's algorithm churns out lots and lots of disparate income discrimination against blacks, but now he's on record in the New York Times that he's on the side of the angels in the War on White Racism?

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  40. @DCThrowback
    Colin Powell would've been that guy had he run against Bill Clinton in 1996.

    Powell had a lot of juice twenty-five years ago,he played the politics game very badly .

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  41. Re: VISHAL GARG

    If you think the Ashkenazis crushed you, wait till you see what the Brahmins can do.

    Read More
    • Replies: @Anon
    Seen what they’ve done to the Dalits for several thousand years.

    Interesting that the victims of Indian affirmative action come to America and become affirmative action beneficiaries.
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  42. ” … because racism is still pervasive, invading both the conscious and subconscious thinking … ”

    Neera Tanden and her fellow liberal “blacks with brains” Americans of Indian descent are developing Philip K. Dickian tools to mine the subconscious of whites for badthink.

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  43. Anonymous[352] • Disclaimer says:
    @Jonathan Mason
    Owning a home is a mixed blessing.

    When I was growing up in England most mortgages were issued by mutually owned "Building societies" and to get a mortgage you generally had to open a savings account and make contributions over a period of time to demonstrate your reliability. So by the time you wanted to apply for a home loan, you were a known quantity.

    This system, now defunct, seemed to work quite well. My parents bought their first home in 1953 for approximately $2000 US dollars, which was a 5-bedroom stone built home with a few acres of land and a barn and outbuildings. Later they built a new home in the 1960's which last sold for close to a million US dollars. Neither of them ever had a high-paying job. Here is the actual house.

    http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=38459390&sale=27421707&country=england

    This system worked well in an era when home prices were steadily increasing and buying a home gave homeowners a chance to make substantial untaxed capital gains on property appreciation and value added by improvements made by the homeowner.

    However one of the big problems with home ownership in the US is that many lower-cost homes are depreciating assets in depreciating neighborhoods, and with the cost of maintenance and repairs steadily increasing, a point may easily be reached at which it makes economic sense for the mortgagee to default on the loan rather than continue to feed cash into a bottomless money pit.

    Many black families are headed by females who work two jobs to make ends meet, and who are not DIYers, so the situation is fraught with problems.

    My sister and brother in law in England bought their first tiny home, a small, delapidated workman's cottage with no bathroom for less than $1000 and lived on cornflakes while they renovated it and rebuilt it by hand. They now own more than 20 homes and are considered to be the wealthiest people in the town where they live. But, then again, in the spirit of preservation of capital, they only had one child, and when they owned a Mercedes put 200o miles on the clock over 3 years, saving on gas by hauling groceries uphill on foot.

    But they were not single black women working two jobs and living in the ghetto.

    This home could be had today for $10,000, but even if you were the best DIY person in the world, you could not make much out of it, despite its advantages such as proximity to the Interstate.

    The thing is that it was only built in the 1940's, but is already demolition-ready. The cottage with no bathroom my sister bought was built in the 1820's and is today a desirable starter home.

    https://www.redfin.com/FL/Jacksonville/209-Cherokee-St-32254/home/72734793

    When homes are appreciating assets again, default rates will fall in all sectors of the population.

    This system worked well in an era when home prices were steadily increasing

    Home prices were steadily increasing due to mass immigration.

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  44. @Anonymous
    Whose money do mortgage companies lend to homebuyers? Their own?

    Whose money do mortgage companies lend to homebuyers? Their own?

    .

    They usually get together with somebody that has lots of cash they want to invest in home mortgages. ‘

    Insurance companies wanting to invest their reserve accounts. A labor union wanting to invest to cover pensions, also the company the union is working for doing the same; to cover their part of the pensions.

    Could be Wall Street types that want to produce a mortgage portfolio they can sell.

    It’s the retail banks and savings and loans that are using the depositors money to make loans. And if it’s a conforming loan, one that conforms to all the rules Fannie Mae has, then Fannie Mae will buy the loan from the bank or S&L, then the bank or S&L will lend that money out again.

    They actually make their money on all the fees and charges to do the loan, as well as getting a bonus if they can find chumps that will pay above market interest rates; paying 9% with a 800+ credit score, when they should be paying 4% or so.

    Before the 2007 meltdown, there was a world wide crazy demand for US mortgages. They paid 8% or more, in a market that was paying 3% or so on most other investments.

    Plus the perception and reality was these loans were about as safe as buying US treasuries, hardly any ever went into foreclosure. And if they did, usually enough equity to cover the loan.

    That was the world that got screwed by a combination of Wall Street, the Federal gobt, mortgage brokers, and the rating companies. End of 2007 was when everybody figured out at about the same time that the loans produced in the last 5 years were some real crap. So everybody was trying to unload all their crap on somebody else, so everybody quite trading and the markets froze.

    Instant recession. Now the same clowns want to do it again, because they can make tons of money until it falls apart. Then get us taxpayers to bail them out.

    Trump is bright enough to know what is going on, the problem is the bureaucrats and other parts of the gobt aren’t, and will go along with the clowns.

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  45. Home prices were steadily increasing due to mass immigration.

    True, but home prices were also steadily increasing due to people being convinced that home prices are always increasing. Some called it a bubble. We were right. We are in 2.0 now, for some of the same reasons and some new ones. I’m gonna chime back in later, but gotta go.

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    • Replies: @Anon
    The only reason home prices increase is because of more and more people demanding housing.

    And most of the population increase for the last 60 years has been immigration immigration immigration.

    After the 08 bubble broke home prices bounced right back.

    What I have never understood is all this concern about the value of ones home. The only exception is if the value is steadily decreasing rapidly because the neighborhood is becoming a ghetto.

    Otherwise who cares if the alleged value bounces around a bit. You’ve still got a place to live at the same price *.

    * For many people increase in home value can be ruinous because property taxes rise and rise. Since wages are stagnant the home owner is in trouble. If your monthly mortgage and property tax increase to the point it’s difficult to pay all the imaginary increase in value is just detrimental

    Sell the house and try to find something cheaper? Many municipalities raise property taxes enormously every time a house is bought. Refinance to pay property taxes? That’s just adding to the mortgage.

    I’m a homeowner and a landlord. Every time I read economists blathering in about real estate and rental property and home values I honestly wonder if they have ever owned property or even been a tenant.

    They are so ignorant about the realities of property ownership one would think they are 14 yr olds.

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  46. Anon[257] • Disclaimer says:

    Friend just told me there’s a big demo in Berlin today against anti semitism It’s ethinic Germans wearing kippahs all weeping and wailing Said there was no mention of Muslim anti semitism. And I saw something about anti Britian’s numerous Jewish organizations having a big hootenanny today about anti semitism

    Jews, especially the official narrative have this enduring myth about the heaven in earth that was Muslim Spain where Jews and Muslims working together to create the greatest civilization ever.

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  47. Anon[257] • Disclaimer says:
    @Achmed E. Newman

    Home prices were steadily increasing due to mass immigration.
     
    True, but home prices were also steadily increasing due to people being convinced that home prices are always increasing. Some called it a bubble. We were right. We are in 2.0 now, for some of the same reasons and some new ones. I'm gonna chime back in later, but gotta go.

    The only reason home prices increase is because of more and more people demanding housing.

    And most of the population increase for the last 60 years has been immigration immigration immigration.

    After the 08 bubble broke home prices bounced right back.

    What I have never understood is all this concern about the value of ones home. The only exception is if the value is steadily decreasing rapidly because the neighborhood is becoming a ghetto.

    Otherwise who cares if the alleged value bounces around a bit. You’ve still got a place to live at the same price *.

    * For many people increase in home value can be ruinous because property taxes rise and rise. Since wages are stagnant the home owner is in trouble. If your monthly mortgage and property tax increase to the point it’s difficult to pay all the imaginary increase in value is just detrimental

    Sell the house and try to find something cheaper? Many municipalities raise property taxes enormously every time a house is bought. Refinance to pay property taxes? That’s just adding to the mortgage.

    I’m a homeowner and a landlord. Every time I read economists blathering in about real estate and rental property and home values I honestly wonder if they have ever owned property or even been a tenant.

    They are so ignorant about the realities of property ownership one would think they are 14 yr olds.

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    • Replies: @Achmed E. Newman
    I don't disagree with many of your points, Anon, especially about the fact that an increase in paper value means nothing more than higher taxes, IF you bought it to freakin' live in. Many over the last 2 decades bought much more expensive and bigger houses than they needed or could (long-term) afford due to it becoming an "investment", and no longer just the place you buy to live in. That was definitely part of the housing bubble.

    If a piece of property is going to go up significantly (or so the RE agents and economists told these suckers) for a long time to come, everyone (RE people, owners, and the financiers) felt great making deals for 3% down and payments that were 60% of the couple's net salary. After all, YOU CAN'T LOSE! Even if the couple lost one job, and couldn't pay, they would already have equity on paper. There was nothing to lose by anyone except that last sucker that bought at the top.

    Immigration has NOT been a factor for 60 years. However, it was definitely part of it in certain areas ("Sand States") for the last 2 or 3. Much of the problem was simply that people know that every other investment of types that used to be safe is pretty risky now. The banks pay squat-all in interest due to the FED, so money left in the bank gets eaten away by inflation that is way higher than the US Feral Gov tells us. There is nowhere else to put the money, for your average Joe and Jose.
    , @Anonymous
    What are the realities they are ignorant of?
    , @Jonathan Mason

    The only reason home prices increase is because of more and more people demanding housing.

    And most of the population increase for the last 60 years has been immigration immigration immigration.
     
    No, inflation has a lot to do with it. In an era of high wage inflation, fixed mortgage payments become increasingly less of a burden and therefore the value of land and buildings rapidly increases.

    Over the long run you would expect the price of the average home in a given jurisdiction to bear some relationship to average earnings in that community.
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  48. Anon[257] • Disclaimer says:
    @Anonymous
    Whose money do mortgage companies lend to homebuyers? Their own?

    I believe they get it from the government federal housing agencies, Freddie Mac and Fannie Mae.

    That is they
    1 get it from the taxpayers.
    2 lend it to losers
    3 sell the mortgages to investment funds and other banks at a huge discount

    Thus the lenders are off the hook.

    When the mortgages default and the bankers and investment funds get in trouble, another government agency gives the tax payers money to the banks and investment funds.

    At least I think that’s how it works.

    I might be wrong. Corrections welcome if anyone cares

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  49. @Jambo
    Re: VISHAL GARG

    If you think the Ashkenazis crushed you, wait till you see what the Brahmins can do.

    Seen what they’ve done to the Dalits for several thousand years.

    Interesting that the victims of Indian affirmative action come to America and become affirmative action beneficiaries.

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  50. Vishal Garg, another Indian Jew…

    Very well, make a new law so that Goldman Sachs and all the Wall Street investment banks have to lend at least 25% of their revenues to blacks.

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  51. What do Steve and Bill Cosby have in common?

    Why, they’re Owls. Steve went to Rice, and Coz went to Temple.

    But the most traditional institution sporting the mascot is the Mississippi University for Women.

    And this disturbing language is on their Ody Facts page:

    Q: What type of owl is Ody?
    A: Ody is a Great Horned Owl,
    Bubo virginianus, identifiable by the tufts on the head resembling horns.

    Q: What gender is Ody?
    A: Ody is neither male nor female. Ody is Ody. We don’t worry too much about what gender Ody is. Ody won’t be offended if you use he, she, or they; all are correct.

    Q: How tall is Ody?
    A: Ody stands between 5’6” and 7’ tall; depending on if Ody is slouching.

    Q: What does Ody eat?
    A: Pizza mostly.

    Q: What is Ody’s favorite color?
    A: Blue, of course!

    http://www.muw.edu/ody

    It’s enough to make your head spin.

    Incidentally, MUW took their right to exclude men to the US Supreme Court, which ruled against them. It was one of the first decisions written by Sandra Day O’Connor.

    Martin Ginsburg obtained a copy, brought it to his wife Ruth, and asked, “Did you write this?”

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  52. @PiltdownMan
    Vishal Garg appears to be a turn of the century dotcom millionaire, a guy who worked at Morgan Stanley for a year before quitting to start an online student loan company.

    From his LinkedIn profile:

    Co-Founder&President - MRU Holdings / MyRichUncle
    January 2000 – January 2009 (9 years 1 month)
    Starting with $30,000 at the age of 21, over a 7 year period built, took public (NASDAQ 2005) and grew into 4th largest publicly traded student loan company in the United States.

    Analyst, Mergers & Acquisitions Dept
    Morgan Stanley
    1998 – 1999 (1 year)

    New York University - Leonard N. Stern School of Business
    BS, Finance, International Business - 1995 – 1998
    Stuyvesant High School - 1991 – 1995

    I know a couple of guys like that, who picked up on the dotcom thing early, and knowing nothing at all about technology, killed themselves working hard, for a year or so, to build dotcom firms which went public during the earlier part of the boom, just after Netscape went public. Both made tens of millions and were done by the late 1990s. Back then, the IPO market rewarded any business venture that simply had some kind of online front-end presence, even if it was just a couple of demo webpages with clickable forms for data input.

    Reminds me of this Chinese saying I once read:

    Those with a full belly like to make trouble for others.

    Profound.

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  53. @Barnard
    You have to wonder about the quality of borrower taking student loans from an online company called "My Rich Uncle" in the early 2000s. I wonder if there is any data on their default rate. Someone might notice he has played this game before.

    MRU Holdings, Inc. filed for chapter 7 in 2009

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  54. @Mishra
    That might be true except for the fact that the government is in the mortgage business now. In fact the government is by far the largest player in the game. This means that the normal rules of finance no longer apply.

    “This means that the normal rules of finance no longer apply.”-

    I believe that is precisely the scenario that KingFink has described.

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  55. @Citizen of a Silly Country
    Not in the case of Better. The company sells the mortgage to the secondary market, i.e. very large investors.

    Never trust someone who doesn't have a skin in the game. OTOH, buyer beware. The large investors buying these mortgages aren't children; they can analyze investments. If they want to buy mortgages to blacks and Hispanics with low credit scores and scary income-to-debt ratios, that's their business. (The chase for yield is a powerful force and works just fine - until it doesn't. But not chasing that yield can get you fired as well so while the music is playing, you dance.)

    Actually, the concept of the company is similar to other ventures, use technology to eliminate the middleman or, I suppose, replace the middleman with a very cheap algorithm.

    What makes me laugh is that guys like Garg (assuming that he believes what he's saying) think that a neutral algorithm is going to magically improve access to loans (or other opportunities) for black and Hispanics. It never crosses his mind that the algorithm will notice the same patterns as human analysts, that the human analysts weren't being unreasonably racist but, in fact, were being reasonably racist.

    I'd love to be a fly on the wall in the boardrooms when the results of algorithms end up being just as "racist" - if not more so - as human analysts. I'd also love to see how they'll tweak their algorithms to get the results that they want (or feel that they need) without opening themselves up to investor lawsuits when it's discovered that steep loses were the result of them cooking the algorithms.

    “It never crosses his mind that the algorithm will notice the same patterns as human analysts, that the human analysts weren’t being unreasonably racist but, in fact, were being reasonably racist.”

    Or perhaps Garg’s algorithm churns out lots and lots of disparate income discrimination against blacks, but now he’s on record in the New York Times that he’s on the side of the angels in the War on White Racism?

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    • Replies: @Citizen of a Silly Country
    Well, an algorithm isn't something magical. You can program it to say what you want. It's designed by humans - at least for now - and can manipulated by humans.
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  56. @Dan Hayes
    PiltdownMan:

    With alumnus Garg, NYC's Stuyvesant High School once again proves its mettle for being a great Incubator of the Vile!

    Yes, but he did go to a safety school from Stuy, so he was probably held in low esteem there as well.

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    • Replies: @PiltdownMan
    And a safe major in a safety school, at that.
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  57. @Anon
    Is there any data on credit score by race? Do banks exercise discrimination above and beyond that which one's race's credit score would predict? (i.e., if you factor in the average black credit score, are blacks discriminated against?)

    When banks loosen their lending standards to blacks in capitulation to being called 'racist' and when there's another housing collapse, will they again be called 'racist' predatory lenders for banging up the credit scores of all the minorities who defaulted on their loans?

    Is there any data on credit score by race?

    Asked and ye shall receive:

    https://www.valuepenguin.com/average-credit-score

    Group Average Credit Score of Home Buyer % of Borrowers with Score < 620
    Asian 745 2.60%
    Black or African American 677 21.30%
    Hispanic white 701 11.20%
    Non-Hispanic White 734 5.40%
    All others 732 6.30%
    U.S. Average 728 6.80%

    Note that these are averages of home buyers, not the general public.

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  58. @Travis
    A meaningful comparison of White verse Black homeowners should include age demographics.
    The average age of whites in America is 49 years-old while the average age of Blacks is 31 years-old.

    Less than 50% of 30 year-old whites own their home , not much different than the Black average. While 20% of whites are over the age of 60 , just 10% of Blacks are elderly. The white demographic most likely to own their own homes are the elderly Boomers while the 30 year-old millennials are more likely to live with their parents than to live with a spouse.

    Age-adjusted data by race/ethnicty is almost nonexistent because it doesn’t make the picture any less bleak. The real estate industry needs to perpetuate the lie that homeownership builds wealth for black people.

    The decline in homeownership has been most marked for younger members of the black community. The homeownership rate for black 35- to 44-year-olds fell from 45 percent in 1990 to 33 percent in 2015, half the level for whites of the same age and lower than the black homeownership rate in 1960. Homeownership also fell from 1990 to 2015 for whites, Hispanics, and others in that same age group, but not by nearly as much as for black people. Among 55- to 64-year-olds, black homeownership fell 8.1 percent, while homeownership for white and Hispanic households of the same age fell 3.7 and 2.1 percent, respectively.

    https://www.urban.org/urban-wire/are-gains-black-homeownership-history

    Married blacks aren’t doing well.

    Married black households—traditionally the most likely to own homes—lost more ground than single-headed black households. These trends will affect retirement prospects for black Americans and their ability to pass wealth to the next generation. …

    Between 2001 and 2016, however, while black households lagged other races and ethnicities for all family structures, the fall in the homeownership rate for married black households was striking. The homeownership rate for married black households was down 5 percent compared with 3 percent for male- and female-headed single black households.

    Married white households fell 1 percent in this period, while the rates for Hispanic and “other” married households increased.

    https://www.urban.org/urban-wire/closer-look-fifteen-year-drop-black-homeownership

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    • Replies: @Jim Bob Lassiter
    " The real estate industry needs to perpetuate the lie that homeownership builds wealth for black people."

    Spot on and related to that is perpetuating the myth that property values in white neighborhoods start to decline once black presence reaches around 15% and then the downhill ride steepens from there on out.
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  59. I don’t own a home ans as things stand now I never will……i’m the loser in the 25% bracket…..i can’t afford a $3500 a month house payment for a crap shack.

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  60. @Anon
    The only reason home prices increase is because of more and more people demanding housing.

    And most of the population increase for the last 60 years has been immigration immigration immigration.

    After the 08 bubble broke home prices bounced right back.

    What I have never understood is all this concern about the value of ones home. The only exception is if the value is steadily decreasing rapidly because the neighborhood is becoming a ghetto.

    Otherwise who cares if the alleged value bounces around a bit. You’ve still got a place to live at the same price *.

    * For many people increase in home value can be ruinous because property taxes rise and rise. Since wages are stagnant the home owner is in trouble. If your monthly mortgage and property tax increase to the point it’s difficult to pay all the imaginary increase in value is just detrimental

    Sell the house and try to find something cheaper? Many municipalities raise property taxes enormously every time a house is bought. Refinance to pay property taxes? That’s just adding to the mortgage.

    I’m a homeowner and a landlord. Every time I read economists blathering in about real estate and rental property and home values I honestly wonder if they have ever owned property or even been a tenant.

    They are so ignorant about the realities of property ownership one would think they are 14 yr olds.

    I don’t disagree with many of your points, Anon, especially about the fact that an increase in paper value means nothing more than higher taxes, IF you bought it to freakin’ live in. Many over the last 2 decades bought much more expensive and bigger houses than they needed or could (long-term) afford due to it becoming an “investment”, and no longer just the place you buy to live in. That was definitely part of the housing bubble.

    If a piece of property is going to go up significantly (or so the RE agents and economists told these suckers) for a long time to come, everyone (RE people, owners, and the financiers) felt great making deals for 3% down and payments that were 60% of the couple’s net salary. After all, YOU CAN’T LOSE! Even if the couple lost one job, and couldn’t pay, they would already have equity on paper. There was nothing to lose by anyone except that last sucker that bought at the top.

    Immigration has NOT been a factor for 60 years. However, it was definitely part of it in certain areas (“Sand States”) for the last 2 or 3. Much of the problem was simply that people know that every other investment of types that used to be safe is pretty risky now. The banks pay squat-all in interest due to the FED, so money left in the bank gets eaten away by inflation that is way higher than the US Feral Gov tells us. There is nowhere else to put the money, for your average Joe and Jose.

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  61. @Triumph104
    Age-adjusted data by race/ethnicty is almost nonexistent because it doesn't make the picture any less bleak. The real estate industry needs to perpetuate the lie that homeownership builds wealth for black people.

    The decline in homeownership has been most marked for younger members of the black community. The homeownership rate for black 35- to 44-year-olds fell from 45 percent in 1990 to 33 percent in 2015, half the level for whites of the same age and lower than the black homeownership rate in 1960. Homeownership also fell from 1990 to 2015 for whites, Hispanics, and others in that same age group, but not by nearly as much as for black people. Among 55- to 64-year-olds, black homeownership fell 8.1 percent, while homeownership for white and Hispanic households of the same age fell 3.7 and 2.1 percent, respectively.

    https://www.urban.org/urban-wire/are-gains-black-homeownership-history
     
    Married blacks aren't doing well.

    Married black households—traditionally the most likely to own homes—lost more ground than single-headed black households. These trends will affect retirement prospects for black Americans and their ability to pass wealth to the next generation. ...

    Between 2001 and 2016, however, while black households lagged other races and ethnicities for all family structures, the fall in the homeownership rate for married black households was striking. The homeownership rate for married black households was down 5 percent compared with 3 percent for male- and female-headed single black households.

    Married white households fell 1 percent in this period, while the rates for Hispanic and “other” married households increased.

    https://www.urban.org/urban-wire/closer-look-fifteen-year-drop-black-homeownership

     

    ” The real estate industry needs to perpetuate the lie that homeownership builds wealth for black people.”

    Spot on and related to that is perpetuating the myth that property values in white neighborhoods start to decline once black presence reaches around 15% and then the downhill ride steepens from there on out.

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  62. Go, Vishal!!

    Housing Bubble II is a key part of my plan to move back to California for retirement. The other part is the state splitting, with San Diego staying in the sane part and walling off the moonbats in LA and SF.

    I got out in ’06 with bubbly profits on my little house. Now I just need another bubble to inflate and then pop so I can buy my future home in San Diego, East California on the dip.

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  63. @TheMediumIsTheMassage
    What does the New York Times think about the vastly disproportionate value of real estate owned by Jews, particularly in very high value real estate areas like Manhattan?

    Is that even true, or are you just hoping that the crowd here will grant you poetic license?

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  64. @Twinkie
    Yes, but he did go to a safety school from Stuy, so he was probably held in low esteem there as well.

    And a safe major in a safety school, at that.

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  65. @Steve Sailer
    "It never crosses his mind that the algorithm will notice the same patterns as human analysts, that the human analysts weren’t being unreasonably racist but, in fact, were being reasonably racist."

    Or perhaps Garg's algorithm churns out lots and lots of disparate income discrimination against blacks, but now he's on record in the New York Times that he's on the side of the angels in the War on White Racism?

    Well, an algorithm isn’t something magical. You can program it to say what you want. It’s designed by humans – at least for now – and can manipulated by humans.

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  66. @Rosie
    To be fair, it can be very difficult to save up a down payment when you're paying rent. Down payment requirements above all are a boon to landlords.

    To be fair, it can be very difficult to save up a down payment when you’re paying rent. Down payment requirements above all are a boon to landlords.

    First homes are pretty much couples projects; singles are not going to be able to compete with the couples in the vast majority of scenarios. Unless of course you’ve got a trust fund or happen to have a degree that’s in real demand. But few do. You need to be a DINK.

    Another thing first timers need to do is buy in a lower cost neighborhood, get a small fixer upper, and improve it. Sweat equity. You’re not going to get anywhere near what you would consider an acceptable home the first 2 or 3 you own. You work up to it.

    When I was selling homes, I’d love to get couples that had looked at dozens of homes with a couple of other agents. They were finally realistic about what they could afford, and I’d make a point of saying the home they grew up in was probably a second or third home for their parents. And you won’t get that right now.

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  67. @PiltdownMan
    Vishal Garg appears to be a turn of the century dotcom millionaire, a guy who worked at Morgan Stanley for a year before quitting to start an online student loan company.

    From his LinkedIn profile:

    Co-Founder&President - MRU Holdings / MyRichUncle
    January 2000 – January 2009 (9 years 1 month)
    Starting with $30,000 at the age of 21, over a 7 year period built, took public (NASDAQ 2005) and grew into 4th largest publicly traded student loan company in the United States.

    Analyst, Mergers & Acquisitions Dept
    Morgan Stanley
    1998 – 1999 (1 year)

    New York University - Leonard N. Stern School of Business
    BS, Finance, International Business - 1995 – 1998
    Stuyvesant High School - 1991 – 1995

    I know a couple of guys like that, who picked up on the dotcom thing early, and knowing nothing at all about technology, killed themselves working hard, for a year or so, to build dotcom firms which went public during the earlier part of the boom, just after Netscape went public. Both made tens of millions and were done by the late 1990s. Back then, the IPO market rewarded any business venture that simply had some kind of online front-end presence, even if it was just a couple of demo webpages with clickable forms for data input.

    The History of My Rich Uncle – A Failed Student Loan Company

    https://lendedu.com/blog/my-rich-uncle-company-history/

    Having gone public in 2007 with a market capitalization of $200 million, MyRichUncle became very active in the capital finance market, raising even more funds in the open market by issuing securitized bonds or asset-backed securities. The securitized transactions were the first to be issued with an A-rating in the private student loan market which was a testament to the high quality student loan assets in its portfolio.

    But, MyRichUncle’s troubles began. Even with its high quality loan portfolio, MyRichUncle could not fend off the shockwaves created by the biggest financial crisis in history. Liquidity problems in the market caused the supply of capital to evaporate, forcing MyRichUncle to shut down loan originations in 2008. That led to its filing for bankruptcy protection under Chapter 7 in 2009. At the time of its filing, MyRichUncle had four times as many liabilities as it had assets. Its market evaluation had nosedived to less than $10 million.

    Barnard asked about default rates. http://studentlendinganalytics.typepad.com/student_lending_analytics/2008/12/mrus-delinquency-rates-violate-loan-covenants-general-counsel-resigns.html

    “…the prime private student loan pool slightly exceeded the annualized default rate for loans in repayment permitted under the terms of the DZ Facility (2.3% actual versus a limit of 2.0%); the 2.3% annualized default rate was caused by the default of 3 loans.”
    “…the PrePrime student loan pool exceeded the permitted delinquency ratios (19.7% actual versus a limit of 18.0% for delinquencies greater than 30 days for loans in repayment and 14.85% actual versus a limit of 12.0%, for delinquencies greater than 60 days for loans in repayment).

    Why would anyone trust Vishal Garg after this? https://en.wikipedia.org/wiki/MyRichUncle#2007_student_lending_scandal

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    • Replies: @PiltdownMan

    Why would anyone trust Vishal Garg after this? https://en.wikipedia.org/wiki/MyRichUncle#2007_student_lending_scandal
     
    It look like he and MyRichUncle blew the whistle on crooked practices in the industry. At least, that's what the Wikipedia link seems to say.

    Those percentages don't look out of line for a structure that failed in the GFC of 2008, and are certainly not enough out of line to suspect crooked lending practices or a lack of disclosure to bondholders.
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  68. Anonymous[145] • Disclaimer says:
    @Anon
    The only reason home prices increase is because of more and more people demanding housing.

    And most of the population increase for the last 60 years has been immigration immigration immigration.

    After the 08 bubble broke home prices bounced right back.

    What I have never understood is all this concern about the value of ones home. The only exception is if the value is steadily decreasing rapidly because the neighborhood is becoming a ghetto.

    Otherwise who cares if the alleged value bounces around a bit. You’ve still got a place to live at the same price *.

    * For many people increase in home value can be ruinous because property taxes rise and rise. Since wages are stagnant the home owner is in trouble. If your monthly mortgage and property tax increase to the point it’s difficult to pay all the imaginary increase in value is just detrimental

    Sell the house and try to find something cheaper? Many municipalities raise property taxes enormously every time a house is bought. Refinance to pay property taxes? That’s just adding to the mortgage.

    I’m a homeowner and a landlord. Every time I read economists blathering in about real estate and rental property and home values I honestly wonder if they have ever owned property or even been a tenant.

    They are so ignorant about the realities of property ownership one would think they are 14 yr olds.

    What are the realities they are ignorant of?

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  69. @res
    The History of My Rich Uncle – A Failed Student Loan Company
    https://lendedu.com/blog/my-rich-uncle-company-history/

    Having gone public in 2007 with a market capitalization of $200 million, MyRichUncle became very active in the capital finance market, raising even more funds in the open market by issuing securitized bonds or asset-backed securities. The securitized transactions were the first to be issued with an A-rating in the private student loan market which was a testament to the high quality student loan assets in its portfolio.

    But, MyRichUncle’s troubles began. Even with its high quality loan portfolio, MyRichUncle could not fend off the shockwaves created by the biggest financial crisis in history. Liquidity problems in the market caused the supply of capital to evaporate, forcing MyRichUncle to shut down loan originations in 2008. That led to its filing for bankruptcy protection under Chapter 7 in 2009. At the time of its filing, MyRichUncle had four times as many liabilities as it had assets. Its market evaluation had nosedived to less than $10 million.
     
    Barnard asked about default rates. http://studentlendinganalytics.typepad.com/student_lending_analytics/2008/12/mrus-delinquency-rates-violate-loan-covenants-general-counsel-resigns.html

    "...the prime private student loan pool slightly exceeded the annualized default rate for loans in repayment permitted under the terms of the DZ Facility (2.3% actual versus a limit of 2.0%); the 2.3% annualized default rate was caused by the default of 3 loans."
    "...the PrePrime student loan pool exceeded the permitted delinquency ratios (19.7% actual versus a limit of 18.0% for delinquencies greater than 30 days for loans in repayment and 14.85% actual versus a limit of 12.0%, for delinquencies greater than 60 days for loans in repayment).
     
    Why would anyone trust Vishal Garg after this? https://en.wikipedia.org/wiki/MyRichUncle#2007_student_lending_scandal

    Why would anyone trust Vishal Garg after this? https://en.wikipedia.org/wiki/MyRichUncle#2007_student_lending_scandal

    It look like he and MyRichUncle blew the whistle on crooked practices in the industry. At least, that’s what the Wikipedia link seems to say.

    Those percentages don’t look out of line for a structure that failed in the GFC of 2008, and are certainly not enough out of line to suspect crooked lending practices or a lack of disclosure to bondholders.

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    • Replies: @res
    Good response.

    It look like he and MyRichUncle blew the whistle on crooked practices in the industry. At least, that’s what the Wikipedia link seems to say.
     
    It does read that way on a closer look. Any idea what the reality is? The NYC connection makes me wonder if the Cuomo investigation was motivated as a help to MRU.

    Some links I found interesting (note business practices in the second):
    http://studentlendinganalytics.typepad.com/student_lending_analytics/2009/05/my-rich-uncle-files-chapter-7-bankruptcy-correction.html
    http://studentlendinganalytics.typepad.com/student_lending_analytics/2008/09/clear-and-accurate-information-you-be-the-judge.html

    College financial-aid administrators did not seem to care for the company--which I find suspicious.
    https://www.chronicle.com/article/Lender-Jeered-as-It-Departs/41257

    MyRichUncle, which specializes in direct-to-consumer loans, stopped offering government-backed loans last Friday, and the response from college aid administrators appears to be barely restrained glee.

    “Best news I’ve seen in weeks!” one aid administrator wrote to his colleagues on an electronic bulletin board.

    Many aid administrators are angry with MyRichUncle over its business-building tactics, which include an ad on its Web site that promotes private student loans by depicting a lobotomized college student saying: “I didn’t use my brain. I went straight to the financial-aid office.”

    MyRichUncle also gained a reputation for encouraging the investigation last year by New York’s attorney general, Andrew M. Cuomo, into the close ties between some loan companies and some college financial-aid officials.
     
    Back to you:

    Those percentages don’t look out of line for a structure that failed in the GFC of 2008, and are certainly not enough out of line to suspect crooked lending practices or a lack of disclosure to bondholders.
     
    The 8-K was released 12-19-2008. I assume that means no later than Q3 (September 31, 2008) data. That seems a bit early to have those 30 and 60 day default rates. Later in the GFC, sure.

    I tried finding the 8-K itself, but MRU had a blizzard of them around that time: https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001145202&owner=include&count=40&hidefilings=0
    Too many to sort through. And not a good sign.

    If I read this correctly, Garg and Raza cashed out in a big way at the end of 2007: https://www.sec.gov/cgi-bin/own-disp?action=getissuer&CIK=0001145202

    Here is their 2007 annual report: http://files.shareholder.com/downloads/MHOI/265597939x0x140251/eb8c6dcb-90ed-4f81-8e9a-47c2b177b5e1/2007AR_MRUHoldings.pdf

    It does not seem like they were doing well at the end of 2007:

    We have a history of losses and, because we expect our operating expenses to increase in the future, we may not be profitable in the near term, if ever. The Company has accumulated net operating loss deficits of $53.6 million through June 30, 2007. The fourth quarter of the 2007 fiscal year, in which the Company had net income of $0.8 million, was our first profitable quarter due to the securitization. There can be no assurance that we will generate net income for our stockholders on a consistent basis.
    ...
    Operating Loss The operating loss in fiscal 2007 was $43,388,379 compared to an operating loss of $27,451,007 in fiscal 2006. In fiscal year 2007, operating expenses were $42,536,564 compared to $26,294,144 in fiscal 2006.
     
    Perhaps I am being overly harsh, but I would be very leery of getting involved with a company headed by either Garg or Raza.
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  70. @Anon
    The only reason home prices increase is because of more and more people demanding housing.

    And most of the population increase for the last 60 years has been immigration immigration immigration.

    After the 08 bubble broke home prices bounced right back.

    What I have never understood is all this concern about the value of ones home. The only exception is if the value is steadily decreasing rapidly because the neighborhood is becoming a ghetto.

    Otherwise who cares if the alleged value bounces around a bit. You’ve still got a place to live at the same price *.

    * For many people increase in home value can be ruinous because property taxes rise and rise. Since wages are stagnant the home owner is in trouble. If your monthly mortgage and property tax increase to the point it’s difficult to pay all the imaginary increase in value is just detrimental

    Sell the house and try to find something cheaper? Many municipalities raise property taxes enormously every time a house is bought. Refinance to pay property taxes? That’s just adding to the mortgage.

    I’m a homeowner and a landlord. Every time I read economists blathering in about real estate and rental property and home values I honestly wonder if they have ever owned property or even been a tenant.

    They are so ignorant about the realities of property ownership one would think they are 14 yr olds.

    The only reason home prices increase is because of more and more people demanding housing.

    And most of the population increase for the last 60 years has been immigration immigration immigration.

    No, inflation has a lot to do with it. In an era of high wage inflation, fixed mortgage payments become increasingly less of a burden and therefore the value of land and buildings rapidly increases.

    Over the long run you would expect the price of the average home in a given jurisdiction to bear some relationship to average earnings in that community.

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  71. @PiltdownMan

    Why would anyone trust Vishal Garg after this? https://en.wikipedia.org/wiki/MyRichUncle#2007_student_lending_scandal
     
    It look like he and MyRichUncle blew the whistle on crooked practices in the industry. At least, that's what the Wikipedia link seems to say.

    Those percentages don't look out of line for a structure that failed in the GFC of 2008, and are certainly not enough out of line to suspect crooked lending practices or a lack of disclosure to bondholders.

    Good response.

    It look like he and MyRichUncle blew the whistle on crooked practices in the industry. At least, that’s what the Wikipedia link seems to say.

    It does read that way on a closer look. Any idea what the reality is? The NYC connection makes me wonder if the Cuomo investigation was motivated as a help to MRU.

    Some links I found interesting (note business practices in the second):

    http://studentlendinganalytics.typepad.com/student_lending_analytics/2009/05/my-rich-uncle-files-chapter-7-bankruptcy-correction.html

    http://studentlendinganalytics.typepad.com/student_lending_analytics/2008/09/clear-and-accurate-information-you-be-the-judge.html

    College financial-aid administrators did not seem to care for the company–which I find suspicious.

    https://www.chronicle.com/article/Lender-Jeered-as-It-Departs/41257

    MyRichUncle, which specializes in direct-to-consumer loans, stopped offering government-backed loans last Friday, and the response from college aid administrators appears to be barely restrained glee.

    “Best news I’ve seen in weeks!” one aid administrator wrote to his colleagues on an electronic bulletin board.

    Many aid administrators are angry with MyRichUncle over its business-building tactics, which include an ad on its Web site that promotes private student loans by depicting a lobotomized college student saying: “I didn’t use my brain. I went straight to the financial-aid office.”

    MyRichUncle also gained a reputation for encouraging the investigation last year by New York’s attorney general, Andrew M. Cuomo, into the close ties between some loan companies and some college financial-aid officials.

    Back to you:

    Those percentages don’t look out of line for a structure that failed in the GFC of 2008, and are certainly not enough out of line to suspect crooked lending practices or a lack of disclosure to bondholders.

    The 8-K was released 12-19-2008. I assume that means no later than Q3 (September 31, 2008) data. That seems a bit early to have those 30 and 60 day default rates. Later in the GFC, sure.

    I tried finding the 8-K itself, but MRU had a blizzard of them around that time: https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001145202&owner=include&count=40&hidefilings=0
    Too many to sort through. And not a good sign.

    If I read this correctly, Garg and Raza cashed out in a big way at the end of 2007: https://www.sec.gov/cgi-bin/own-disp?action=getissuer&CIK=0001145202

    Here is their 2007 annual report: http://files.shareholder.com/downloads/MHOI/265597939x0x140251/eb8c6dcb-90ed-4f81-8e9a-47c2b177b5e1/2007AR_MRUHoldings.pdf

    It does not seem like they were doing well at the end of 2007:

    We have a history of losses and, because we expect our operating expenses to increase in the future, we may not be profitable in the near term, if ever. The Company has accumulated net operating loss deficits of $53.6 million through June 30, 2007. The fourth quarter of the 2007 fiscal year, in which the Company had net income of $0.8 million, was our first profitable quarter due to the securitization. There can be no assurance that we will generate net income for our stockholders on a consistent basis.

    Operating Loss The operating loss in fiscal 2007 was $43,388,379 compared to an operating loss of $27,451,007 in fiscal 2006. In fiscal year 2007, operating expenses were $42,536,564 compared to $26,294,144 in fiscal 2006.

    Perhaps I am being overly harsh, but I would be very leery of getting involved with a company headed by either Garg or Raza.

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  72. @Rosie
    To be fair, it can be very difficult to save up a down payment when you're paying rent. Down payment requirements above all are a boon to landlords.

    Making a mortgage payment every month can be hard, too, but those of us who want to own a house have to do it.

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