Wednesday, May 11, 2005

Spitzer's Anti-Poor Stance on Mortgage Practices

Jay Bryant exposes the damage that Spitzer's war against sub-prime mortgage loans has done:
What these lenders do is make mortgage loans -- at relatively high interest -- to people who can't qualify for mortgages at lower rates. "The development of the sub-prime market has made mortgages (and home ownership) available to a segment of the population that otherwise would have been shut out of the market," says Wharton Professor and highly respected mortgage columnist Jack M. Guttentag...

Suppose then (and it is undoubtedly the case) that minority families are disproportionately represented among those unable to qualify for the "A" rating which is the standard for the best rates. They also want to own their own homes. But past credit problems, lack of assets, inability to make substantial down payments and other factors make them a greater risk. Without the sub-prime lending industry, they would be unable to get a mortgage, and forced to continue renting, with all that means for their inability to build equity and otherwise improve their financial situation. Remember, for many who have poor credit, or even no credit, the Federal government even considers the risk too high to guarantee the loan.
And then suggests how Spitzer could actually use his AG office for some good:
If Spitzer wanted to do some good in the process, he could use his office to increase awareness among consumers of the value of comparison shopping, in regard to mortgages or anything else, for that matter, and a healthy skepticism about sales offers that come in over the transom, particularly the virtual transom of email. That would be a consumerist act with significant benefits for the people he supposedly cares about.

The threat Spitzer represents is very real, but its victims are not the ones he pretends to threaten. If the bankers who got Spitzer's letters don't make money by sub-prime lending, you may be sure they will find another way to make it. But whether the low-income family trying to climb the ladder to prosperity through home ownership can find another way to make it -- that is a much less likely proposition.


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