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 OpenMarket.org 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.’”Be sure to read his entire post complete with links to referenced articles.
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.