understanding the origins and impacts of the economic crisis
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Understanding the Origins and Understanding the Origins and Impacts of the Economic Impacts of the Economic Crisis…and Moving Forward Crisis…and Moving Forward with Justicewith Justice
2009 Washington StateAccess to Justice ConferenceJustice: Hope and Help in Hard Times
john a. powellExecutive Director, The Kirwan Institute for the Study of Race & Ethnicity and Williams Chair in Civil Rights & Civil Liberties, Moritz College of Law
ORIGINSORIGINSjohn a. powell
The Foreclosure CrisisThe Foreclosure CrisisDeregulation: In the 1980s, federal
deregulation removed state caps and limits on mortgage lending, preempting, in many cases, state laws
Rise in Real Estate Values: The rise in real estate values in the 1980s created much new wealth. This led to “asset-based” lending, loans based on the value of the security rather than the borrower’s ability to repay. This was a crucial change that led to the subprime market
The Foreclosure CrisisThe Foreclosure CrisisRise in the secondary market: In the
1980s, mortgage companies began bundling mortgage loans into large portfolios and selling them on a secondary mortgage market
This let mortgage companies specialize in home equity lending and make a lot more money. They could make loans and quickly resell the loan into the secondary market
The Foreclosure CrisisThe Foreclosure CrisisSecuritization and Capital Markets: Because
mortgages were viewed as safe collateral and increasingly profitable, Investment Bankers became hungry for mortgages for use as collateral in the sale of mortgage backed securities to investors
Wall Street’s hunger for mortgages led to asset-based lending, which fueled the subprime market.
This phenomenon took off in 1994 when $10 billion worth of subprime home equity loans were securitized◦ By the end of 2005, the volume of securitized loans
leaped to $507 billion
The Post Depression FHA Era: The Three Party Mortgage Market
Pre Depression: The Two Party Housing Market
Based on research by Chris Peterson, University of Utah Law School
Evolution of the Housing Evolution of the Housing MarketMarket
Created by Chris Peterson, University of Utah Law School
Today: The web of actors and institutions involved in the
sub prime lending and mortgage securitization
market
The Foreclosure CrisisThe Foreclosure CrisisCommunities of
color and low-income communities were physically, socially and economically segregated from prime credit markets
People in these communities were subject to sub-par lending from rent-to-own to payday lenders to check cashing places that all charged exorbitant interest rates◦ And finally…
subprime home loans
LEGAL ADVOCACYLEGAL ADVOCACYjohn a. powell
Systems ThinkingSystems ThinkingThe typical legal advocate thinks of
problems from a individual perspective rather than a systems perspective.
The legal framing of a claim has the potential to restrict inquiry into the nature and depth of a problem as well as a proper solution.
Legal AdvocacyLegal AdvocacyTraditional non-discrimination models
encourage lawyers and organizations to see issues as potential legal claims rather than as problems in need of systemic resolution.
Lawyers must think and act globally to produce community-wide change. The consequences of the crisis are not limited to a client or even a family, but wash over entire cities.
Legal AdvocacyLegal AdvocacyLawyers building a case tell a story.
Lawyers can use media to shine a light on the plight within their community. Lawyers must create and sustain good working relationships with media by being honest, accurate, and timely.
Lawyers must looking beyond the legal community, and work with housing counselors, neighborhood organizations, and local government. Building coalitions is key.
MOVING FORWARDMOVING FORWARDjohn a. powell
Equitable RecoveryEquitable RecoveryMoving Beyond Reactionary
Recovery◦Recognizing our linked fate◦Developing equitable systems ◦Ensuring sustainable investment and
recovery
Equitable RecoveryEquitable RecoveryTowards an Equitable Recovery
◦Transparency and Accountability◦Help Those Most in Need◦Equity and Opportunity for All
Communities of OpportunityCommunities of Opportunity
Everyone should have fair access to the critical opportunity structures needed to succeed in life
Low-opportunity neighborhoods limit the development of people and neighborhoods
A Community of Opportunity approach can develop pathways that result in increased social and economic health, benefiting everyone
Thompson v. HUDThompson v. HUD: : Proposed remedyProposed remedy
◦ Submitted expert reports in both the liability and the remedy phases of the litigation, on behalf of plaintiffs
◦ Used GIS to analyze current conditions of segregated public housing (liability phase) and frame solutions for desegregation (remedy phase) in a regional context
Thank you! Thank you!
Please visit www.kirwaninstitute.org
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