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Government Fails Home Buyers

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We’ve heard it for the last two weeks – government should make sure that homes don’t get foreclosed on. It’s a right to own a home, and it’s up to the government to make it easier to buy a house. Wrong. If you can’t afford to buy a house, you shouldn’t get a loan that puts you into debt, that you can’t repay. This 1992 study indicates why loaning to bad risks is dangerous.

The Federal Reserve of Boston drew up a Fair Lending Document for mortgage lenders, which was heavily criticized by experts as a derivative of a flawed study–but the objections were ignored. The document stated that: “discrimination may be observed when a lender’s underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower–income minority applicants.”

The new criteria made it essentially “discrimination” to reject obviously unqualified low income or no income people when providing mortgages. This included people on welfare as well as people who didn’t have a penny as a down payment for a home–or even a job. In short, the new rules declared the old rules “Outdated” and lenders were warned that not following new rules would constitute discrimination.

So under the new criteria, what were the criteria that qualified someone to get a mortgage which Fannie Mae and Freddie Mac would embrace and heavily encourage? I hope you are sitting down:

Credit History: Lack of credit history should not be seen as a negative factor…. In reviewing past credit problems, lenders should be willing to consider extenuating circumstances. For lower–income applicants in particular, unforeseen expenses can have a disproportionate effect on an otherwise positive credit record. In these instances, paying off past bad debts or establishing a regular repayment schedule with creditors may demonstrate a willingness and ability to resolve debts….

Down Payment and Closing Costs:Accumulating enough savings to cover the various costs associated with a mortgage loan is often a significant barrier to homeownership by lower-income applicants. Lenders may wish to allow gifts, grants, or loans from relatives, nonprofit organizations, or municipal agencies to cover part of these costs. . . .

Sources of Income: In addition to primary employment income, Fannie Mae and Freddie Mac will accept the following as valid income sources: overtime and part–time work, second jobs (including seasonal work), retirement and Social Security income, alimony, child support, Veterans Administration (VA) benefits, welfare payments, and unemployment benefits.

I just want to ask you if you would loan a couple of hundred thousand dollars to somebody based on the above criteria.

Fannie Mae and Freddie Mac enabled illegal aliens, persons with no jobs, no credit, no responsibility, no vested interest, to get 120% mortgage home loans with no money down. When hard times hit them, they lost their jobs or handled credit poorly, they just walked away from those mortgages because they couldn’t care less. Socialist Democrats were irresponsible in creating these government entities.

The government has no business in the mortgage industry and the only ones who benefitted by this fiscal irresponsibility were Barack Obama, Chris Dodd, Frank Raines, Jim Johnson, and the Democrat party.

What Caused Our Economic Crisis?

Government Takes Over Fannie Mae and Freddie Mac

Foreclosure Scandal-wide Obama Advisor Resigns


One Response

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  1. If the government really wanted to “promote home ownership” it would do everything possible to make sure that kids went to school, stayed in school, and actually learned basic English and math skills.IF parents made sure their kids showed up, paid attention and did their homework, those kids could graduate and hold down jobs that paid enough money to enable them to afford the mortgage on their own homes. Now THAT would be real home ownership promotion–hold the parents and kids responsible from kindergarden through 12th grade instead of letting the whiners come crying to the government for a bail-out.


    October 2, 2008 at 7:04 pm

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