Helped lead effort of promoting no-money-down home ownership as the bubble kept inflating
LAKE JACKSON, Texas – Here’s one for the history books, and you don’t need to speak as a historian to appreciate it.
On the campaign trail, Republican Presidential candidate Rick Santorum often touts a rigid disdain for government interference in the economy and federal bailouts for the wealthy few at the expense of our most vulnerable citizens. But as U.S. Senator from Pennsylvania Santorum actively supported the junk lending that put minority families underwater and the subsequent bailouts that shielded unscrupulous non- and for-profit lenders, while leaving middle class minorities and the nation’s entire middle class holding the bag.
It remains to be seen whether the nation will have Santorum to thank for the coming inflation tax that erodes purchasing power for low- and fixed-income Americans, since taxpayers have yet to see the full bill for these bailouts.
In Bid to Boost Black Homeownership, Rick Santorum Fueled Housing Bubble That Led to Financial Crisis
By Charles C. Johnson
One of the consistent refrains from the Rick Santorum campaign is that he opposes government bailouts, but as a senator, he supported the something-for-nothing policy most responsible for the housing bubble. Like George W. Bush and other “compassionate conservatives,” he was naively obsessed with affordable housing for low-income potential home buyers, a mismanaged cause that led to billions in loan defaults and which the IRS called a “scam.”
In his book It Takes A Family (2005), Santorum wrote at length and approvingly of the Nehemiah Project, a Sacramento faith-based nonprofit that helped mostly black low-income buyers get access to home ownership through its down-payment assistance program. (The name Nehemiah, who rebuilt Jerusalem, comes from the Bible.)
But as Jeff Horwitz and Dave Jamieson report from the Huffington Post’s Investigative Fund, down-payment aid programs like Nehemiah effectively “pav[ed] the way for even riskier subprime loans by private lenders.” How did this happen? Horwitz and Jamieson explained in 2009.
A home builder would agree to make a “gift” to the nonprofit in an amount equal to the down payment. The nonprofit would give the cash to the buyer, often earning a generous fee for its role as middleman. In less than a decade, nonprofits had arranged more than a million no-money-down house sales around the country. By 2008, they represented more than a third of all loans backed by the Federal Housing Administration (FHA).
The Santorum-endorsed Nehemiah Project and its nearest competitor, AmeriDream, according to Horwitz and Jamieson, helped set up 392,000 mortgages worth $54 billion, earning tens of millions in fees for itself—and nearly a billion dollars each for Centex, D.R. Horton, and Dominion Homes, the builders who made the donations that made the shaky mortgages possible. The loans to the buyers, which ended up with triple the default rate of other FHA loans, often required no down payment at all from them, something of which Rick Santorum specifically approved. Indeed, Santorum proudly worked with Senator Dianne Feinstein (recipient of $1000 from Nehemiah’s CEO in 2006) and other Democrats to protect the Nehemiah Project from oversight from the IRS and HUD…
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