Tuesday, October 14, 2008

Blame Game

"There is no evidence that the Community Reinvestment Act was responsible for enouraging the subprime lending boom and subsequent housing bust."

Luci Ellis, Bank for International Settlements, quoted in Michelle Singeltary, "Blame Game Gets Nasty When It Targets the Poor," Washington Post, October 12, 2008

The blame game is not a pretty thing. But scapegoating aspiring homeowners and a piece of financial sector regulation that has proven effective is down right unpatriotic, especially since there is no evidence for the claim.

I also find somewhat unreal the reasoned call for more financial literacy when none of us really understand many of the financial products we're offered. I like Michael Barr's idea of banks providing opt-out 30 year fixed rate mortgages for all home purchases. That is, the homebuyer has to opt-out from taking the best product. We need financial counseling to help people get out of the mess.

I learned the rudiments of real estate research over thirty years ago during the FHA foreclosure debacle. Homeowners were blamed for that catrastrophe as well. But in fact a corrupt system with unregulated mortgage bankers at the core lured people into becoming homeowners and then made money off of the speedy process of foreclosure. Neighborhoods were devastated.

Responsibility for much of today's foreclosure crisis lands on the shoulders of some of the same unregulated crowd who are in the business for the quick buck. CRA, effective homeownership counseling, and fair, affordable mortgage products have together shown how to encourage and sustain homeownership

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