To avert another predatory lending crisis, take lessons from the past. And that includes listening to leaders of the Greenlining Institute and Operation Hope.
Ten years ago, the two non-profit organizations urged major banks to exercise restraint in offering adjustable-rate mortgages and interest-only loans.
Editor’s Note: Retire 10 Years Earlier With These 4 Stocks
We even warned former Federal Reserve Chairman Alan Greenspan of the danger, John Bryant, founder and chair of Operation Hope, and Robert Gnaizda, founder of Greenlining Institute, tell readers in an
American Banker article.
Greenspan endorsed ARMs as a way to save homeowners money. Meanwhile, the financial industry, driven by the desire for quick profits, thrust ARMs on Americans with unrealistic goals, the non-profit leaders recall.
Dangerous alternative mortgages eventually helped create the worst economic crisis since the Great Depression and would wipe many major financial institutions from existence, wrote Bryant and Gnaizda.
Yet, it appears that some financial institutions are heading down a similar path, either considering or already offering potentially dangerous mortgage products again.
In April, ARMs made up 8.4 percent of all home loan applications, up from 8.2 percent in March and well above the 7.7 percent in February, the Associated Press says data from the Mortgage Bankers Association show.
The association says the last time ARMs’ share of mortgage applications has been at least this high was June 2008.
Bryant and Gnaizda point out that many potential homeowners, particularly minorities, remain shut out of the market for 30-year fixed rate mortgages.
To ensure that these individuals can get access to safe mortgages, “as opposed to being dependent upon predatory unregulated institutions,” the non-profit leaders are urging the financial industry, regulators and community groups to join in support of two recommendations: reforming ARMs and creating a new qualified mortgage product.
Reforming ARMs will eliminate the dangers these products presented in the past, say Bryant and Gnaizda.
But restrictions alone are not enough to ensure responsible low- and moderate-income families get secure financing. Fannie Mae's and Freddie Mac's mortgage purchasing requirements need modifying, they say.
Banks typically don’t hold on to loans until they’re paid off by borrowers. Instead they sell them to investors, often Fannie Mae and Freddie Mac, the AP explains.
In the wake of the housing crisis, the government imposed stricter standards, limiting the loans that those agencies can purchase, which discouraged lending to many low- and moderate- income borrowers.
Bryant and Gnaizda say modifications can tip the scales back in the right direction. The new product should not only redefine how Fannie Mae and Freddie Mac define “qualified mortgage,” but eligibility rules should be rewritten and mortgage
insurance requirements should be dropped.
Had our suggestions been adhered to a decade ago, they would have likely prevented the crisis that robbed Americans of substantial portions of their net worth and forced millions into foreclosure, the non-profit leaders wrote.
Editor’s Note: Retire 10 Years Earlier With These 4 Stocks
© 2026 Newsmax Finance. All rights reserved.