Say what?! The centrist founder of Operation HOPE, a Los Angeles-based financial literacy organization, discusses his rationale: "Bryant and [Bob] Gnaizda, the general counsel for the Black Economic
Council, the Latino Business Chamber of Greater Los Angeles and the
National Asian American Coalition, say the pendulum has swung too far in
the other direction in the wake of the subprime crisis. Enhanced
regulatory scrutiny has made lenders reluctant to offer loans to
borrowers without pristine credit histories and hefty down-payments.
That has had the unintended effect of redlining low- and moderate-income
— and often black and Hispanic — borrowers."
The article continues: "Gnaizda and Bryant are proposing what they call the Dignity Mortgage,
a loan that could be made to non-prime borrowers with built-in
protections and incentives for both borrowers and lenders. Under the proposal, Dignity Mortgages would only be available to
people who complete certain financial literacy training, who have an
income of 120% or less than the regional poverty level, and who are
buying homes at 95% or less than the median price in the region."
More: "In order to adjust for risks, lenders would be able to charge 1.25% above the lowest prime rate for a 30-year fixed-rate mortgage. If,
however, the borrower makes timely payments for the next five years, the
rate would be lowered to the lowest fixed-rate at the time, and the
1.25% premium would be applied to reduce the homeowner's principal. In addition, a borrower could take advantage of a 'reset clause' that
would allow him to suspend payments temporarily during an emergency —
such as job loss or the death of a spouse — provided he has made timely
payments for a certain period of time. And the kicker: if the loan met all of the above terms, Fannie
Mae and Freddie Mac would be required to purchase the loan with limited
or no recourse against the bank."
John Hope Bryant: "It's Time To Bring Back Subprime Lending"
