Thursday, January 21, 2016

That Idea Is So Stupid We Just Have To Do It Again!

Once upon a time the Good Ole USofA (actually it was our 9% pproval Rated Congress) decided all breathing Americans “deserved” to have a Home of Their Own, regardless of whether or not they could afford to pay for a Home of Their Own.

The end result was the Financial Crisis of 2008 which led to The Great Recession of 2008. The passing of time has proven we are truly stupid because we are setting ourselves up for what could turn out to be The Great Recession-Part 2.

Why is it we think, if we change the terms we use to describe Silly, it is no longer Silliness?

If we decided that the word “Murder” had too negative a connotation & we changed the Act of Murdering to the Act of Flower Sniffing is the dead person not still dead?

Community Reinvestment Act was a Federal Law passed to “encourage” commercial banks and saving associations to help meet the needs of borrowers in all segments of their communities. Congress passed the Act in 1977 to reduce discriminatory credit practices against low-income neighborhoods, a practice known as Redlining.

The term "Redlining" was coined in the late 1960s by John McKnight, a sociologist and community activist. It refers to the practice of marking a red line on a map to delineate the area where banks would not invest; later the term was applied to discrimination against a particular group of people (usually by race or sex) irrespective of geography.

I certainly agree that it ought to be against the law to deny a mortgage to a person who has worked hard, saved money & accumulated the financial where-with-all to afford to buy a particular house simply because that hard working, money saving & financially sound person is a minority or is of a certain race or is of a certain sex.

I would, however, contend that it is the height of foolishness to give a mortgage to a person who has demonstrated that he cannot afford to pay for that mortgage. This is not helping the going-to-default-for-sure person. This is actually doing a disservice to that person. I am not swayed in this belief by an apologist who says, after the bankruptcy, “Yea but he really enjoyed living in that nice house for 14 months before he went bankrupt”.

Changing Things For The Sake Of Changing Things...

  • The Community Reinvestment Act has evolved into the HomeReady Program.
  • “Subprime” is a word that we all know to be a bad thing (actually most of us only know it is a bad thing but do not know what it means). The Word Changing Department of the Federal Government is changing “Subprime” to “Alternative” Mortgages.

Changing Things In Order To Trick the Folks Back Home (that’s us) Into Thinking That Congress Is Really Doing Something That Is Not Silly...

  • Community Reinvestment was directed at Minorities but HomeReady (aks: DefaultReady) is going to be directed at High-Risk Immigrants.
  • In order to qualify for the mortgage, instead of counting only the income of the person who is signing on the mortgage the HomeReady Program counts the incomes of all persons living in the house (non-borrowers).
  • The Fella wonders if there is going to be an expansion of this law that prevents the non-borrowers from moving out of the house until the mortgage is paid off.
  • To add stupidity to crazy, it is also going to be permissible to count the income of people not living in the house, like the borrower’s parents.
  • What mental midget up in D.C. really thinks that non-borrowers are legally required to pay or will pay anything toward the mortgage?


What me worry?

Fannie Mae & Freddie Mac are not going to pay when this all comes tumbling down. They benefited from the Community Reinvestment Act & they are now pushing the HomeReady Program...

CNNMoney reported in 2011, "Mortgage finance giants Fannie Mae and Freddie Mac received the biggest federal bailout of the financial crisis. And nearly $100 million of those tax dollars went to lucrative pay packages for top executives, filings show."

Wasn’t this the type on silliness that led to the last housing market collapse? Could it happen again? Sure it could. Do politicians care? It doesn't appear so.

Would politicians kid u?


Lagniappe: Much of the research for this posting was done by Cal Thomas...