Jul 16, 2007
The lead story in the Morning Call sunday dealt with a growing number of foreclosures, especially in the sub-prime category. The article and those quoted in it concurred the problem rested primarily with unregulated brokers, who paired people with mortgages they would not be able to afford down the road. The reporters briefly mentioned two other factors, whose significance they vastly underplayed. One is the notion by the government and many low-income advocates that becoming a homeowner will make people more responsible members of their community. Here in Allentown the community block grants are given to several agencies which specialize in making the low-income homeowners. These agencies minimize their default rate by having an on-going bail-out fund, although they refer to this as after-market counseling. The second real culprit was the government insurers , Fannie Mae and Freddie Mac, relaxing their standards. Several years ago the activists blamed predator lenders for rash of default, actually jailing a number of people. Now the same activists are blaming greedy mortgage brokers. The government and the low-income advocates must stop promoting home-ownership as a constitutional right. Houses are expensive, things break, murphy's law is truly in effect. Twenty-five years ago nobody considered buying a home with less than 10% down. Nobody considered spending more than 25% of their income on a fixed mortgage. Now we encourage people to buy a lottery ticket and hope their adjustable rate mortgage doesn't go up.