Don't blame the victims for foreclosure crisis

Most social and economic problems are so complex that it is impossible to name any one factor as the "cause," so analyzing them is usually best done through a wide lens.

The foreclosure crisis is a good example of how difficult it is to sort through the stew of contributing factors: inadequate regulation and financial complexity, low-cost foreign capital at the national level and easy access to low-cost home loans at the local level, investors chasing higher interest rates and everyone else chasing the American Dream of homeownership, and then the economic meltdown followed by staggering unemployment.

But acknowledging a problem's complexity isn't the same as giving all factors equal weight.

For example, Alan Jenkins, Executive Director of The Opportunity Agenda, recently took issue with President Obama's analysis of the foreclosure crisis. The President's State of the Union message cast equal blame on "lenders who made loans to people they knew couldn't afford the mortgages and buyers who bought homes they knew they couldn't afford..."

Writing for the National Housing Institute's "Rooflines" blog,Jenkins observed that, "According to the President's narrative, large numbers of Americans who are struggling beneath unsustainable mortgages willfully chose that fate and deserve to share equally in responsibility for the result of the unscrupulous behavior at the heart of the crisis." The implication is that there's not only blame enough to go around, but that everyone is equally to blame.

Jenkins strongly disagrees with that analysis, reminding readers that it was "financial institutions who cooked up the subprime scheme, targeted vulnerable (minority) communities, engaged in deceptive and discriminatory practices and chopped up and then distributed faulty loans..."

It's also important to note that contrary to the endlessly repeated assertion that government regulation forced mortgage issuers to market their products to unqualified customers, the overwhelming number of foreclosed mortgages were made by institutions that were not subject to the Community Reinvestment Act.

In fact, foreclosure rates at community banks subject to CRA were substantially lower than foreclosure rates at unregulated institutions. The same was true for nonprofit lenders like the Community Loan Fund that actually paid attention to borrowers' ability to carry their mortgages.

I'm not saying that many homeowners didn't know or weren't willfully ignorant of what was happening. And I think it's a shame that federal foreclosure mitigation programs will unavoidably extend the same help to them in order to reach the vastly larger number of innocent homeowners. But equating millions of duped homeowners with the financial behemoths that duped them only adds insult to injury.

By the New Hampshire Community Loan Fund's Multi-Family Housing office.