At 6:24 PM 12/11/1996, E. Allen Smith wrote:

From: IN%"mjmiski@execpc.com" "Matthew J. Miszewski" 11-DEC-1996 16:21:56.21

...

Actually, my assertion was that the basic motivation was racism and ignorance. My example of student loan default rates should clear that up. College graduates generally live outside of redlines and yet are regularly offered credit. And yet default rates on student loans are outrageous (the government backing of these loans is irrelevant to individual creditworthiness).

That some groups not within redlines have high default rates is not an argument against groups within redlines having high default rates. The market distortion caused by government sponsorship is certainly relevant to whether individuals are offered credit; I would suggest that in many cases the students in question would not be offered credit, as per their high default rates, if it were not for government sponsorship removing the risk from the lender.

I have personal experience with cases where the lender (actually the company which bought the loan) misrepresented a loan default apparently in order to get reimbursed by the government. The government requires the lenders to make a certain number of contacts with the borrower before declaring a default. In this case, the lender simply lied about the contacts. Payments had been interrupted as a consequence of confusion relating to the change in procedure when the loan was sold. One presumes that this was not accidental and that somebody had a roaring little business going. I have no trouble believing that the student loan market would quickly dry up were the government to get out of the business. Red Rackham