Mortgage crisis

Since we have been discussing the role of government, I want to relate to you how government in an attempt to help the poor people got us into the mortgage crisis that has adversely effected the entire world.
Back in the 40’s and 50’s when I was growing up, I lived in a typical Midwestern town in central Illinois about 200 miles south of Chicago. Our town like most was segregated and the blacks lived in one part of town. They were generally economically poor. In those days in order to get a loan to purchase a house you had to have steady employment and money for a down payment. You needed 20% down for a conventional loan and 3.5% down for a FHA loan but with these loans you had to pay a higher interest rate. In addition your mortgage payment plus your taxes and insurance could not exceed 28% of your income. Bankers knew from experience that most blacks could not afford a house so they would draw a red line surrounding the black areas of town and refused to offer loans to anyone living in that area. This was called red-lining.
In 1959 a book was written about this and it became a movie and a play. It was called “A Raison In The Sun”. It is the story of a black family living in the south side of Chicago. The family consists of Mom and Dad and two grown children, a son and a daughter. The father dies and has a $10,000 life insurance policy and the Mom wants to buy a house. In the 50’s there was a great demand for inexpensive houses and they built what are called prefabs. They would lay a concrete slab and each day a truck would come with prebuilt pieces of a house and these would be assembled and a new house went up each day. I purchased one of these houses in 1959 at a cost of $10,000. I was only 22 and single but most of my neighbors were married with children and many of those were WW 2 vets. These were blue collar workers who expected to live in these houses for many years and at retirement have a paid for house. The houses increased in value over time and the owners increased their equity and it became their biggest source of wealth. They were very proud of this and it became known as the American Dream. A man’s home is his castle they would say.
When this black family tried to move into the neighborhood it threatened to cause the value of these houses to decrease and the all-white neighbors did not like this. This was portrayed as racial prejudice but there was another factor involved, something I call economic prejudice. I firmly believe that if a black family moving into the area would have caused the houses to increase in value that they would have been welcomed. For example if a famous black athlete or movie star wanted to move in they would have been welcomed
In any event this brought the problem to the attention of the government and in 1968 the Fair Housing Act was passed which made it illegal for bankers to discriminate on the bases of skin color. Even though it was made illegal the practice continued because the blacks could not qualify for a loan. In 1977 the government passed the Community Reinvestment Act and this forced banks to make loans to people who could not normally qualify, but it was not effective since most blacks didn’t know about the law. That is when groups called community action started up and later Obama became a leader in these groups. They would go into black areas and take black families to the bank and demand a home loan and they would get it by threatening the bank with a law suit.