According to the classes I attended, this loan was put in place by the fed in the 70’s so that banks could not do a practice called “redlining” see http://en.wikipedia.org/wiki/Redlining which in a nutshell means offering low income areas credit for high interest cards, but not credit for things like home loans and cars. Acorn was set up as a social justice organization, and when I went to the classes, I felt like I was at the democratic national convention. Pictures of Ceasar Chavez and others..
When BofA did their presentation at the class, they said that they get credits for doing these loans, and that they would not do them if the Govt. did not limit their growth ability without a certain amount of credits they get from financing a certain number of these. Thus, it is the “lost loser” car dealership pricipal where they lose money, so they can make money.
The loophole has come from the fact that immigrant workers live all over San Diego. Thus, since my area, Encinitas/ Carlsbad if full of low income workers, we qualify as an area for this loan. Since they can’t discriminate because I am white, I have gotten a loan previously unavailable.
You might ask, why would poor people need a loan of 500k? Basically, that is another loophole. The max income ratio of 90k and loan amounts of 500k are based on mathmatical equations that take in the areas medium home value and income level.
One more thing, 50% of the class was caucasian and there were at least 100 people in the class. This showed me that lots of people even back in July wanted in the market. I did not make the system, I only used it.
