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Consumer Rights League, Obama, ACORN and The SubPrime Mortgage

As a preface to Nancy’s article it might be helpful to offer a refresher for new NoQuarter readers on the deep and long-term relationship between Barak Obama and ACORN, which stands for Association of Community Organizations for Reform Now.

ACORN Housing provides mortgage loan counseling, first-time homebuyer classes, and helps clients obtain affordable mortgages through unique lending partnerships. They even set up their own lending institution as a non-profit mortgage brokerage with CitiMortgage, Bank of America, First American Title Insurance Company, and Fannie Mae to help low- and moderate-income families find safe, affordable mortgages.


This is one of the community organizing groups into which the Democrats tried to funnel billions of dollars in the first draft designed to capture the 700 billion pound gorilla. Read this and understand why that little treat was considered nearly criminal by even the casual observers.

First. Obama claimed he has no ties to “a group he did some legal work for” back in 1995. Let’s look into that claim.

  • In 1995, Illinois Gov. Jim Edgar balked at implementing the federal motor voter law out of concern that letting people register via postcard and blocking the state from pruning voter rolls might invite vote fraud. A young lawyer named Barak Obama, a community organizer himself, sued on behalf of ACORN and won. ACORN later invited Obama to train its staff on voter registration drives.
  • In 1996 Obama ran for Illinois State Senate and ACORN became his precinct organization, identifying and turning out the vote.
  • When Obama served on the board of the Woods Fund for Chicago, the Fund frequently gave ACORN grants to fund its agenda and voter registration activities.
  • In 2004 ACORN operates as Obama’s precinct organization in his run for the U.S. Senate.
  • In 2007 ACORN’s national political arm endorsed Obama for president, and its “nonpartisan” voter registration affiliate starts registering hundreds of thousands of voters for Obama.
  • Obama claims he has no ties to “a group he once did some legal work for.”
  • In July 2008 the Pittsburgh Tribune Review, along with NoQuarter researchers, exposes the lie by uncovering $832,598.29 that the Obama campaign funneled through a front company called Citizens Services, Inc.
  • ACORN, which receives partial taxpayer funding, used those funds to conduct solicitations for contributions to and raised over $800,000 for Obama in Philadelphia alone.

Where does ACORN, the political group get this money? In 2006 Project Vote hired ACORN and CSI as its highest paid contractors, paying ACORN $4,649,037 and CSI $779,016. It has also been well documented that money flows to them from various sources including from the federally chartered non-profit ACORN Housing Corporation, as you will see below.

Now, on to Nancy’s article.


Picture courtesy of Bud White. ACORN protesters, protesting “predatory lending”. How ironic!

acrn.jpgThe Community Reinvestment Act (CRA), with a smattering of Obama and ACORN thrown in to the mix assisted in the creation of the subprime housing saga. The saga led to the governmental take over of Fannie Mae and Freddie Mac.

Obama tries to omit Fannie Mae and Freddie Mac, confuses them and turns grey while discussing the bailout. Obama “obviously” has no idea who Fannie Mae and Freddie Mac are but I digress.

There is still more from another group, Consumer Rights League (CRL), who appeared as supporting evidence in an earlier NoQuarter story, Obama’s Acorn: A Leftist Social Reform Group. Part II who has done extensive research on the ACORN Housing Corporation. Consumer Right’s League’s research is chronicled in the following paper, ACORN’s Hypocritical House of Cards: How One “Community” Group Helped the Housing Crisis Harm Taxpayers. Read about that <a href=”here.

Mr. James Terry recently appeared on Fox News discussing the fact that ACORN will benefit from the current bailout bill. ACORN did not respond to calls from Fox News. Mr. James Terry:

From their report:

This report focuses on the troubling record of the Association of Community Organizations for Reform Now (ACORN) and its tax-exempt offshoot, the ACORN Housing Corporation (AHC). The ACORN/AHC version of consumer advocacy has consisted of a three-decade assault on free enterprise and a history of extracting resources from financial lenders seeking abatement of ACORN’s public relations assaults. Specifically, this report examines ACORN’s impact on the housing problem. Documents provided by internal whistleblowers,
cross-checked with public records and recorded events, expose hypocritical lending recommendations tied to ACORN Housing Corporation’s agreements with major banks—agreements that end up harming consumers.
Media reports, combined with information provided by former ACORN employees, show that:

• ACORN leveraged the Community Reinvestment Act in order to
attack lenders’ reputations and secure financial resources for itself;
it has also endorsed loans offered by companies that fund ACORN
operations
• ACORN’s decades of lobbying and publicity seeking have contributed
to the current housing crisis by lowering lending standards
• Despite raking in a troubling 40 percent of its revenue from taxpayers
over the last three years, ACORN Housing Corporation’s actions
range from controversial to borderline illegal (This summer when Bush signed the current housing bill into law, he effectively gave ACORN and ACORN Housing Corporation a portion of upwards of $600 million dollars. There is no firewall between ACORN and AHC so the money for housing also supports the the political arm….Project Vote. Read more on that here from the Wall Street Journal.)
• AHC has worked to obtain mortgages for undocumented
workers
• AHC relies on undocumented income, “under the table” money
that may not be reported to the Internal Revenue Service
• ACORN’s “financial justice” operations attack lenders for “exotic”
loans, but AHC has recommended ten-year interest-only
loans (which deny equity to the buyer) and reverse mortgages
(which can be detrimental to senior citizens)
• AHC may have violated federal law by failing to maintain a
proper distinction between its tax-exempt housing work and
the aggressive political activities of ACORN

More About ACORN and ACORN Housing Corporation from CRL’s report:

To understand the current subprime credit mess is to glimpse a world in which a politically active organization with a non-profit housing arm reaps millions of dollars through “rent seeking” or manipulation of favorable laws. ACORN and its non-profit housing arm have taken in millions of taxpayer and corporate dollars by abusing a three-decade-old law intended to help the poor obtain housing. For decades, the activist organization known as ACORN has grabbed headlines—and cash—by attacking mortgage lenders in the name of citizens’ rights. Considerably less attention has been paid to the amount of taxpayer money that funds ACORN Housing Corporation (AHC) and to the financial rewards ACORN has amassed

The troubling thing about ACORN,

it does not claim federal tax exemption, therefore it is free to engage in politics and is not required to disclose details of its vast and varied financial operations. Their membership includes more than 350,000 families, in more than half dozen countries.

According to CRL’s report, ACORN has a business model that is repeated over and over again, each time targeting a different company or financial institution. Here is that model:

Issues—–>Target—–>Direct Actions—–>Victory——>Partnership—–>$$$$ For Organizing

This information is provided by Former ACORN Organizer and University of Georgia Professor Fred Brooks.

CRL really did their homework and was able to retrieve information on the funding ACORN receives from financial institutions through whistleblowers (former employees) and public records. Some of the whistleblowers provided CRL with internal e-mails. Here are some of those figures:

In addition to the millions of taxpayer dollars AHC has taken in, one of
the organization’s tax returns shows private donations of more than $4 million
from major banks.6 Whistleblower documents covering AHC’s revenue
sources from July 1, 2004 through June 31, 2005 included:

• ACORN (Citibank Partnership)………………………….$127,500
• ACORN (Citibank Partnership)………………………….$240,000
• ACORN (Freddie Mac)……………………………………….$35,000
• Ameriquest Mortgage…………………………………………$130,000
• Fannie Mae (for Broadband)…………………………………$20,000
• Fannie Mae FYE 2005–2006………………………………$100,000
• JP Morgan Chase 2005–2006…………………………..$1,000,000
• Bank of America 2005–2006……………………………$1,390,000
• Washington Mutual…………………………………………..$175,000
• M & T Bank…………………………………………………….$150,000
• United Way (American Dream)……………………………..$15,000

Why should banks pay without a fight? Banks according to CRL, “look at it as a cost of doing business.” It seems that ACORN forces banks to see it as doing business….according to an internal statement that CRL retrieved.

ACORN does have a historical place in the current home crisis. Here is more on that, ACORN:

…has become both a leading beneficiary and an important advocate of the Community Reinvestment Act (CRA). Three decades ago politicians, spurred by activist groups, found that banks were engaging in “redlining” refusing loans in areas with high concentrations of individuals with low credit scores. Legislators passed a bill that gave community groups significant sway over bank mergers based on the banks’ record of lending to minorities and the poor. The fact that poor credit put such borrowers at higher risk for default was deemed irrelevant. ACORN and AHC have taken advantage of that 1977 bill and have aggressively argued— since at least 1991—for its continuation. Given ACORN’s reliance on AHC to funnel federal funds for “mortgage counseling,” such support is hardly surprising.

It is important that we understand the Community Reinvestment Act, its passage and who it was passed under.

The Community Reinvestment Act or (CRA) was passed in 1977 under President Jimmy Carter. Take the time to watch the following video. It explains Obama, his advisers, foreclosures, the Community Reinvestment Act of 1977 and their connections to the subprime mortgage loans:

The CRA’s purpose is:

to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound banking operations. It was enacted by the Congress in 1977 (12 U.S.C. 2901) and is implemented by Regulations 12 CFR parts 25, 228, 345, and 563e. (See Regulation).

Furthermore there are reports that must be checked periodically:

# The CRA requires that each insured depository institution’s record in helping meet the credit needs of its entire community be evaluated periodically. That record is taken into account in considering an institution’s application for deposit facilities, including mergers and acquisitions. (See CRA Ratings) CRA examinations (see Exam Schedules) are conducted by the federal agencies that are responsible for supervising depository institutions: the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS).

According to Thomas J. DiLorenzo in The Government-Created Subprime Mortgage Meltdown,

The original lobbyists for the CRA were the hardcore leftists who supported the Carter administration and were often rewarded for their support with government grants and programs like the CRA that they benefited from. These included various “neighborhood organizations,” as they like to call themselves, such as “ACORN” (Association of Community Organizations for Reform Now). These organizations claim that over $1 trillion in CRA loans have been made, although no one seems to know the magnitude with much certainty. A U.S. Senate Banking Committee staffer told me about ten years ago that at least $100 billion in such loans had been made in the first twenty years of the Act.

DiLorenzo explains the Catch-22 that these “community” banks find themselves in as a result of this 30 year old law:

Banks have been placed in a Catch 22 situation by the CRA: If they comply, they know they will have to suffer from more loan defaults. If they don’t comply, they face financial penalties and, worse yet, their business plans for mergers, branch expansions, etc. can be blocked by CRA protesters, which can cost a large corporation like Bank of America billions of dollars. Like most businesses, they have largely buckled under and have surrendered to their bureaucratic masters.

Consequently, banks in every community in America have been forced to hold a portfolio of bad loans, euphemistically referred to as “subprime” loans. In order to compensate themselves for the added risk of extending these loans, many lenders have increased the lending fees associated with mortgage loans. This is simply an indirect way of doing what banks always do – and what they must do to remain solvent: charging effectively higher rates of interest on riskier loans.

DiLorenzo has more to say on this “predatory lending”:

Then groups like ACORN call these loans discriminatory forcing the banks into making loans that they ultimately have no protection from. Thus, if one browses the ACORN web site, one can read of their boasts of having “predatory lending laws” passed in numerous states which outlaw such fees, prohibiting banks from protecting themselves from the added risk involved in making forced loans to “subprime” borrowers.

Of course it doesn’t end there. Banks are constantly threatened with fines if they do not comply with the requirements of the CRA. See how the Democrats have been forcing the issue lately. Investors.com wrote about this very subject:

Only, the risk-taking was her idea (Rep. Nancy Pelosi) — and the idea of all the other Democrats, along with a handful of Republicans, who over the past 30 years have demonized lenders as racist and passed regulation after regulation pressuring them to make more loans to unqualified borrowers in the name of diversity.

They were the ones who screamed — “REDLINING!” — and sent banks scurrying for cover in low-income neighborhoods, where they have been forced to lower long-held industry standards for judging creditworthiness to make the subprime loans.

If they don’t comply, they are threatened with stiff penalties under the Community Reinvestment Act, or CRA, a law that forces banks to make home loans to people with poor credit risks.

Banks are required to keep up good ratings or mergers and other transactions can be blocked by the federal government. The CRA grew enormous during the Clinton era, with the many amendments that were added raising the amount of home loans to otherwise unqualified low-income borrowers. There were other problems associated with these amendments. This is exactly where Obama and ACORN enter the scene.

In February 2008, in The New York Post, economics professor Stan Liebowitz of the University of Texas at Dallas suggested:

At the crisis’ core are loans that were made with virtually nonexistent underwriting standards—no verification of income or assets; little consideration of the applicant’s ability to make payments; no down payment … From the current hand-wringing, you’d think that the banks came up with the idea of looser underwriting standards on their own, with regulators just asleep on the job. In fact, it was the regulators who relaxed these standards—at the behest of community groups and “progressive” political forces.

Liebowitz further pointed to ACORN’s role in the current housing “crisis” and to current advertisements ighlighting its role in procuring loans without using credit scores, 100-percent financed loans, and acceptance of undocumented income.

ACORN was responsible for issuing mortgages via CRA with little or no paperwork. They were also known as NINJAs….It stands for No Income, No Job, No Assets. These loans were still available in February of this year.

More from a New York Times, 1992 article, Fading Red Line; A special report; New Hope in Inner Cities: Banks Offering Mortgages:

ACORN’s longtime housing leader, Michael Shea, admitted that banks would not have adopted ultimately harmful policies “if there was no community pressure and the law,” but
that those factors made “a lot of bankers see it’s in their self-interest.”

That self interest— ACORN’s and modern banks’—made possible the extension of cheap credit to risky borrowers and has led directly to the modern subprime mess. It’s important to note, as the Times did, that in this campaign there were “many such voices. But by far the loudest belongs to Acorn…”

Of course not all financing for ACORN comes from financial institutions, a good deal of their financing comes from the American taxpayer in the form of grants and contracts because they are AHC is tax exempt. And CRL says this how AHC’s finances breakdown:

Two out of every five dollars AHC takes in come from taxpayer coffers.

Since so much money they raise comes from taxpayers, don’t you think ACORN should be doing good works? They may have some good work in the past, in recent years, not all of their works have been helpful to their clients or good use of taxpayer money. Here are some things they have been doing:

• Poor service to some of its vulnerable clients
• Potential staff lapses allowing HUD fraud

• Controversial collaborations assisting undocumented
workers in obtaining mortgages

• Assistance to borrowers using “under the table”
undocumented income in loan applications

• Ironic (if not hypocritical) recommendations
for exotic loans

• Possible violations of federal law through
failure to maintain a distinction between
the activities of AHC and those of the very
political ACORN

Consumer Rights League has received many internal e-mails via whistleblowers as I said earlier. CRL has more information about ACORN’s questionable loan documentation. CRL discusses that more:

Of specific concern is ACORN’s agreement to provide letters of “undocumented income” to Bank of America.According to a 2005 internal ACORN e-mail, that bank “pays ¼ of $1,300,000 each quarter.”Another pre-2007 ACORN document instructs its staff:

Undocumented income is a feature that allows ACORN Housing counselors to capture the applicant(s) total household income. Primarily observed in minority and immigrant communities, this type of income is not reported to the IRS and is also known as under-the-table.

As we can see ACORN and ACORN Housing Corporation are both quite closely connected. Not only are they connected to each other but pretty closely related to the current housing crisis. In light of the Washington Mutual collapse and the federal government taking over Freddie Mac and Frannie Mae, it is important to note that ACORN had their fingers in those “honey pots” too. One more mortgage company that ACORN played business with that went down was Ameriquest Mortgage highlighted in the following article, Latest Ameriquest Speculation: Citigroup, Morgan Stanley.

I am left with three questions. How many more financial institutions will suffer at ACORN’s hand? How many companies will be bailed out that are in bed with ACORN? And how much money will ACORN receive in the form of funds from the bailout? See more on the bailout, ACORN-NUTS!- at TheCorner at National Review Online (NRO).

CRL has a very interesting conclusion to their research. I will let CRL conclude my article for me. Here is their conclusion:

ACORN’s long history of abusing the public’s trust seems to have continued through the housing bubble. Its advocacy for loose credit played a role in the current subprime mess. Its advocacy of exotic loans calls into question the wisdom of giving taxpayer money to the organization. And its record of inappropriate ties between a non-profit that receives government funding and a political organization may violate federal laws. Congressional leaders should be wary of donating hard-earned tax dollars to a group with this sordid record. At a minimum, a Congressional investigation is warranted.

  • Guest

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  • Jeep

    What are the allegations against ACORN? Nothing above mentions why ACORN is so bad…

  • dk

    I think it’s illogical to say that the CRA was even a bit responsible for this and my reason for saying this is that lenders not under the CRA were much more irresponsible in their lending practices. If the CRA had the effect that is proposed by people, there would be a clear correlation showing CRA institutions giving a higher percentage of risky loans.
    The goal of the CRA was to create a responsible lending atmosphere to lower-income consumers. This sub-prime mortgage mess is not responsible lending.

    http://www.reuters.com/article…80107

    Another article with a study showing supporting information:
    Traiger & Hinckley LLP Study Shows CRA Banks Were Substantially
    Less Likely Than Other Lenders to Make the High Cost Loans That Helped Fuel the Foreclosure Crisis

    NEW YORK–(Business Wire)–A Traiger & Hinckley LLP study of 2006 mortgage loan data suggests that the Community Reinvestment Act, a federal law that requires banks to help serve the credit needs of their local communities, including low- and moderate-income neighborhoods, deterred banks from engaging in the kinds of risky lending practices that are provoking the foreclosure crisis.

    Compared to other lenders in their communities, banks making loans
    in their CRA assessment areas (CRA Banks) were less likely to make a
    high cost loan, charged less for the high cost loans they did make,
    and were substantially more likely to eschew the secondary market and
    retain high cost and other loans in portfolio. Foreclosure rates were
    also lower in metropolitan areas with proportionately greater numbers
    of bank branches.

    The Traiger & Hinckley LLP study, entitled “The Community
    Reinvestment Act: A Welcome Anomaly in the Foreclosure Crisis,”
    reviewed 2006 home purchase mortgage lending in the nation’s 15
    largest metropolitan areas: Atlanta, Boston, Chicago, Dallas, Detroit,
    Houston, Los Angeles, Miami, New York, Philadelphia, Phoenix,
    Riverside, CA, San Francisco, Seattle, and Washington, DC. The study
    utilized public data filed pursuant to the CRA and Home Mortgage
    Disclosure Act (HMDA).

    “Without the CRA, the foreclosure crisis might have negatively
    impacted even more borrowers and neighborhoods,” stated law firm
    partner Warren Traiger. “Apparently, the CRA’s mandate that banks help
    serve the credit needs of their local communities consistent with safe
    and sound banking practices has resulted in CRA Banks making a greater
    proportion of safe and sound loans than other lenders.”

    Specifically, the Traiger & Hinckley LLP study found that:

    – CRA Banks were 66 percent less likely than other lenders to
    originate a high cost loan;

    – The average high cost loan made by CRA Banks was priced 68
    basis points lower than the average high cost loan originated
    by other lenders;

    – CRA Banks were more than twice as likely as other lenders to
    hold originated loans in their portfolio; and

    – The higher a metropolitan area’s concentration of bank
    branches, the lower its foreclosure rate.

    Conclusion

    To a much greater extent than other lenders, CRA Banks avoided
    making the types of home purchase mortgage loans that provoked the
    foreclosure crisis. Unfortunately, the law’s impact on the subprime
    crisis was limited because in the 15 metropolitan areas analyzed, the
    CRA Banks’ share of the mortgage market was less than 25 percent.

    While some have suggested extending CRA-like obligations to other
    categories of lenders as a way of prospectively limiting the volume of
    high cost loans and the problems associated with them, the study
    speculates that the presence of local brick and mortar branches in a
    community was at least as important a reason for CRA Banks’ better
    performance than fear of a less than satisfactory CRA evaluation.
    Although the CRA still has a vital role to play for banks lending in
    their communities, it is doubtful whether the same benefits can be
    realized for other lenders without a branch nexus.

    The complete study is available at http://www.traigerlaw.com.

    Not only were they less likely to produce sub-prime loans, they also gave lower rates than other sub-prime offerings (triggering less foreclosure), they also kept the mortgages in their own portfolio more often rather than selling them off to companies like F&F as ‘investments’.

    What that last point means is that they were more comfortable with taking on more of the risk from their mortgages, rather than passing on the risk to other companies as ‘investment opportunities’.

  • jimbob

    my God. I had no idea. OMFG. I’m reading this and taking it in. I’m a Republican. I swear I’d have voted for Hillary if I thought it would have stopped Obama and ACORN. OMG Obama is a gd communist! I have been shouting and screaming at my Democrat friends for months: Obama must be stopped! Please, does anyone know Bill Clinton’s number? Call him, appeal to his patriotism. For the love of God, America and all that’s holy … STOP Obama!

  • http://fargoneworld.blogspot.com Glenn Bigsby

    In 2006, Obama requested that Will County receive $1.3 million to support its Flood Studies for Unincorporated Will County.

    In 2006, Obama requested $800,000 for the Will County Sheriff’s Office Wireless Communications Technology Upgrades.

    In 2006, Obama requested $1,953,331 for Will County’s Ridgewood Water and Sewage Project.

    In 2005, Obama requested $2 million for the Lewis University in Romeoville, Illinois, to establish a Center for Academic and Community Learning, which is designed to address the significant educational needs of the less advantaged in the Will County region by providing academic assistance not only for students on campus but also for residents of the surrounding communities.

  • pat

    what happened to the cra video?

  • dk

    Depository institutions aren’t part of this sub-prime mess. From the very same page the you took your CRA information off of:

    Neither the CRA nor its implementing regulation gives specific criteria for rating the performance of depository institutions. Rather, the law indicates that the evaluation process should accommodate an institution’s individual circumstances. Nor does the law require institutions to make high-risk loans that jeopardize their safety. To the contrary, the law makes it clear that an institution’s CRA activities should be undertaken in a safe and sound manner.

    It looks like you purposely left this info out. Deceptive, to say the least.

  • ConcernedCitizenX

    Has anyone ever considered finding a way to use the RICO Act against ACORN?