“Fannie Mae Eases Credit To Aid Mortgage Lending,” New York Times, September 1999.
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
Hmm, making loans easier to get eventually led to higher demand and higher home prices which hurt “minorities and low-income consumers.” All in all, home ownnership went from the mid 60% to the high 60% range but that was enough to let housing prices to take off.
The current housing “correction” is doing more for housing affordability for minorities and low income consumers than any government program, even the best intentioned ones.
{ 3 comments… read them below or add one }
Jeff 09.23.08 at 4:07 pm
Very well said.
Jim Zirbes 09.23.08 at 10:23 pm
The truth is that homeownership rates among low income households and most minorities remained relatively stagnant during the housing price boom and when their rates did increase, they did so no more than the general population.
Since the homeownership rates among minorities (especially for Blacks and Hispanics) were already low to begin with and still are scandalously pathetic when compared to the population as a whole, in the end where we now are, for all of the talk of this, there was very little outcome to support it.
For example, the homeownership rate of African-Americans dropped 3.4 % (about the same as the rest of the population) over the last three years to a 46.3% total in the second quarter of this year, vs. 66.9% for the population as a whole (source: U.S. Census Bureau).
I for one am tired of the drivel about “people who bought homes who never should have been allowed to” style of verbal nonsense.
The problem was not in trying to increase access by lowering barriers to homeownership for ALL (including ethnic and racial minorities), but HOW it was done.
Instead of looking to increase the number of homeowners by excessively relaxing lending standards with reduced (or eliminated) down payments, accepting lower credit scores and sometimes in conjunction with low or no documentation loans, it should have been instead been done through (and now can be) saner approaches, such as the increased availability, promotion and use of sweat equity arrangements, as well as GSE matching dollar programs administered through local banks and credit unions (who would make and be required to not sell loans for participants in these offerings for at least a few years after origination) and/or through employers (who would receive tax credits or other benefits for doing so) to their employees with (and other equitable comparable offerings for the self-employed too) that would consist of dollars allocated for down payments and closing costs…and ALL with mandated financial literacy and homeownership training before and after obtaining homeownership, PLUS a partial recapture fee (or shared equity if you will) upon an eventual profitable sale or at the very least on those who do not comply with the requirements.
These things will accomplish the objectives of increased home ownership where previous attempts have mostly failed.
Jim
http://www.RealtyBlogger.info
Director of Agent Development for HomeSmart & Dan Schwartz Realty
RE Investor 09.24.08 at 11:31 am
God it is refreshing to hear a sane commentary on the problem. I have grown so tired of the “giving loans to people that could not afford them” and “let’s let the whole nation go in to depression so we don’t save housing gamblers”
I wish that the cooler heads, and sane people had more of a voice, because the radicals seem to be in charge. I just don’t get the moral hazard argument when I just saw Bill Gross do the math on what the government would earn on yield per year. Bill is probably one of the most intelligent folks out there on how bonds work. It is just north of 15%. That would certainly go a long way towards paying down the national debt. Do you think we would be able to pay down the debt if we have a recession or depression? But that is exactly what the “moral hazard” nuts are saying. No bailout, and just let the country fail, or buy assets cheap and make a profit over time with sane modifications and working with borrowers. Hmmm. But alas, this is an election year, so up is down, right is wrong, and common sense is dead.