Friday, September 19, 2008

Current mortgage meltdown due to Clinton pressure for home ownership?

Who older than 45 years old didn't see this mortgage crisis coming? Many of us remember the housing crunch of the early 1980s. My Midlothian neighborhood that was made up mostly of young working couples saw a turnover of houses at that time because owners could not meet balloon payments that "ballooned" when interest rates rose. When we purchased our house in that neighborhood, we had a higher interest rate because we chose not to go for a "balloon" mortgage which offered a lower initial interest but could raise if interest rates rose, which is what happened.

After years of pressure from the government for mortgage companies to make housing affordable for everyone -- a socialist mentality -- risky loans were made ... and now they are coming home to roost.

I by no means understand all the ins and outs of the mortgage industry, but I do understand borrowing beyond my means and taking personal responsibility to make sure that doesn't happen.

When we moved to the Shenandoah Valley 12 years ago, the housing market was already percolating and properties were higher than comparable properties where we moved from. We were assured by the lenders, however, that we could afford "x" amount of house.

We were a one-income family. I was home schooling our children who were 8 and 12 at the time so I still had another 10 years left. We did not want to be house-poor so we figured out what we felt comfortable with for a mortgage and then looked at houses in that price range.

Today our monthly house payments are less than some people's car payments. At the same time, others are losing their homes because they cannot keep up with payments for a variety of reasons.

A good recap of the current crisis can be found in a post by Hans Bader at where he begins:
The current mortgage crisis came about in large part because of Clinton-era government pressure on lenders to make risky loans in order to “make home ownership more affordable for lower-income Americans and those with a poor credit history,” the DC Examiner notes today. “Those steps encouraged riskier mortgage lending by minimizing the role of credit histories in lending decisions, loosening required debt-to-equity ratios to allow borrowers to make small or even no down payments at all, and encouraging lenders the use of floating or adjustable interest-rate mortgages, including those with low ‘teasers.’”

The liberal Village Voice previously chronicled how Clinton Administration housing secretary Andrew Cuomo helped spawn the mortgage crisis through his pressure on lenders to promote affordable housing and diversity. “Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis. He took actions that—in combination with many other factors—helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments.
Be sure to read his entire post complete with links to referenced articles.

1 comment:

Anonymous said...

Actually, it's been the democratic push and mantra for many, many years - home ownership is the great American dream. Talk about entitlement! Sure everyone wants a home of their own, but at what cost? Now we see the cost and it's huge.