From my living in US during 2001-2005, I had some exposure to this debate, but must admit that I have not kept up on the subject since, except for the crisis in 2008 that was largely blamed on poor housing lending practices. Your brief analysis shows the double edginess of credit as a right. For Banks, damn if you do and damn if you don’t. And yet, millions are excluded from capital access because of risk perception or prejudice, or both.
May be the experience of US with ‘equal opportunity’ act (and other places where such acts may exist) would be worth studying further; as we encourage policies shift in other countries. Would AFI be a good custodian to look into this?
Please do share if you can, anything else that may be available from US experience.
Regards,
Anuj
p.s. in my brief read of recent reports that showed up on google search; those reports suggest two important points. a. proportion of current risk on high-end real-estate defaults is very substantial in US market (63%!), and b. most of the defaults on housing loans have shifted from sub-prime to prime borrowers (which means, those with high credit rating are higher percentage of defaulters) after 2009 due to rising unemployment. I would search for papers that show, what percentage of defaults came from lower–end housing market in 2006-2008; to know the ‘poverty-default’ correlation. This reading is certainly interesting because otherwise, the image that pops-up around sub-prime crisis is those poor black communities or migrant Latino population ; which unfortunately perhaps shows my own prejudice. The reality perhaps was very different and more complex.
http://economistsview.typepad.com/economistsview/2012/03/the-changing-face-of-foreclosures.html
http://t.www.na-businesspress.com/JAF/GeanF_Web13_6_.pdf
From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com] On Behalf Of Meyer, Richard
Sent: Monday, February 17, 2014 10:22 PM
To: MicrofinancePractice@yahoogroups.com
Subject: [MFP] RE: The Equal Credit Opportunity Act / USA
You probably know that there has been a large debate over the years in the US about redlining, the practice of outlining geographic areas of housing (may be poor, deteriorated, occupied by minorities) and make fewer or no loans within those areas. There have been many attempts to measure the phenomena, and reduce the problem through various means when it is found. I do not know about the current state of the research regarding the issue. It is argued that government policies to stimulate home ownership, including relaxed credit underwriting, is one of the causes behind the financial collapse a few years ago. There are allegations that minorities were charged higher rates and given tougher terms for loans made during this period. Dick
From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com] On Behalf Of Anuj Jain
Sent: Monday, February 17, 2014 10:59 AM
To: MicrofinancePractice@yahoogroups.com
Subject: [MFP] The Equal Credit Opportunity Act / USA
We in the sector have often talked and debated about ‘right to capital or a loan’, and if that is indeed a right, or is rather a privilege that one must earn by building one’s credit worthiness. Some years ago, Prof. Yunus had created quite a debate by saying that it can be considered as a fundamental right.
Regardless of that debate, here is this example, from USA, of this Equal Credit Opportunity Act; which does not give a right to borrow, but at the same time, stops the lending institutions from discriminating against any group of people or individual for accessing credit.
Federal Fair Lending Regulations and Statutes
Equal Credit Opportunity
The Equal Credit Opportunity Act (ECOA) of 1974, which is implemented by the Board’s Regulation B, applies to all creditors. The statute requires financial institutions and other firms engaged in the extension of credit to ‘‘make credit equally available to all creditworthy customers without regard to sex or marital status.’’ Moreover, the statute makes it unlawful for ‘‘any creditor to discriminate against any applicant with respect to any aspect of a credit transaction (1) on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract); (2) because all or part of the applicant’s income derives from any public assistance program; or (3) because the applicant has in good faith exercised any right under the Consumer Credit Protection Act.’’
Read on for more details…
http://www.federalreserve.gov/boarddocs/supmanual/cch/fair_lend_reg_b.pdf
I wonder if such / similar laws exist in other countries; and what have been practical implications of this Act in USA? Will look forward to hear back.
Best,
anuj
Anuj K. Jain
Sr. Coady Fellow| Microfinance and Development| COADY International Institute
St. Francis Xavier University, Antigonish, Nova Scotia, B2G 2W5| Ph: 902-872-0521
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