Just as we’re starting to turn the corner with a housing market recovery, we could already be close making-so to speak-an advance on the next mortgage market debacle.
It’s hard to believe that we can repeat our recent mistakes so quickly. Thousands of homeowners who engaged in “strategic default” away from their mortgages because their homes were worth less than they owe, you have given credit record for years to come. And private investors are afraid of touching mortgage-backed securities, due to all the recent efforts to blame lenders for non-borrowers live up to their obligations.
Yet, in the midst of all this, there is a chorus of protest against the idea of requiring a deposit for new mortgages substance. Surprisingly, we’re talking about letting a new generation of buyers assume the obligations and responsibilities of debt financed property with little or no money down.
This is a case of amnesia, or some self-appointed consumer advocates and their water-carriers in Washington seriously misunderstands the role of the financial system. It is not intended to be a conduit to move money from people who have people who just want to.
The savings and loan crisis of the late 1980s and 1990s, induced by a housing downturn and financial market turbulence, left their legacy in the real estate market. One of the lessons we should have learned was that having the owners Put significant equity in their property is a prerequisite for a stable market. After all, a traditional American mortgage represents a big risk for the lender, that locks in a fixed interest rate of up to 30 years and relies exclusively on power gain of a future individual or couple private, protected only by the value of the mortgaged property (or, ultimately, by the Federal Government’s housing finance agencies). The first person to lose money when a House becomes unbearable, or when it decreases its value, should be the homeowner, not the party that accommodated the desire of the homeowner to borrow money for the purchase.
Easy money advocates ignore this logic. Seem to think the poor have the right to possess the same properties as the wealthiest people. The thing about being poor is that it is not enough as many assets, including property, as other people. I am totally in favor of helping the poor become richer, but not do it alone, paying them large sums of money which they may, or may not, probably never repay. Everything you have accomplished in this case is to transform the poor in deeply indebted people.
Renting a House is a perfectly respectable way to live, while accumulating the capital to buy the late one, if that’s your ultimate goal.
We seem to be learning the same lessons over and over again. Homeownership is not for everyone-and I say this after 30 years of home ownership. A House is able to absorb more money because you’re willing to give. Maintaining a home, and pay taxes on it are important obligations that should not be undertaken lightly. It is not reasonable to expect lenders to put all, or nearly all, money.
Is even less reasonable when law and politics allow mortgage holders feet when their mortgages are unaffordable, or simply inconvenient and encourages the public to blame lenders for losses arising therefrom. The result, as we can now see, is that potential lenders will become extremely reluctant to lend to any but the safest borrowers.
How many times do we have to go through this cycle before the appropriate lessons stick?
With any luck, this time will be the last. If potential mortgage investors see the world like I do, don’t touch the loans which do not have substantial home equity behind them. To attract private capital to this corner of the financial markets, we are going to start respecting and protection, people asked to decorate the capital.