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Columbus
Dispatch Editorial...
Sensible
reform
Proposals would curb risky behavior
that led to housing crisis
9/17/11
The political fight has
begun over
proposed rules to rein in the lending industry and avoid another
mortgage mess like
the one that hobbled the economy and made miserable legions of former
homeowners. Changes are sorely needed.
New
federal rules, to be finalized by
April, would require borrowers to have a sizable down payment to
purchase a
house. Under the proposals, the best loans would go to those with a 20
percent
deposit, minimal debt and a nearly spotless history paying bills on
time.
The
rules don’t ban risky loans but
set conditions that should make lenders think twice. The rules would
eliminate
incentives to push borrowers into higher-interest loans. And buyers,
including
those eager to free themselves from onerous terms, would have the right
to pay
off loans early without penalty.
Real-estate
professionals fear
families might have to save for 20 years to afford a home. But
reformers say
those more invested in a home are less likely to walk away and leave
the bank
holding a worthless note and neighbors suffering from a blighted
property.
Critics
say the rules would increase
mortgage costs, especially for first-time homebuyers, and might price
many out
of the market altogether. The National Association of Realtors
estimated that
as many as 80 percent of new mortgages would be pricier under the
proposed
rules.
The
rules also could make it nearly
impossible for some existing homeowners to refinance, given the slide
in home
values that has evaporated equity and left many underwater on their
mortgages.
The Cincinnati Enquirer reports that “an estimated 1.2 million mortgage
holders
— or 56 percent of all Ohio borrowers — fall below the proposed
standard’s
threshold for refinancing.”
But
precautions that make sure people
can afford to repay a loan make good sense.
Brokers,
lenders, appraisers, housing
advocates and investors will have plenty of time to weigh in and assess
the
impacts as the rules are written. They’ll become law a year after they
are
officially published, and oversight will come from the Federal Reserve
and five
other banking and housing agencies.
No
doubt, some tweaking will be
needed. But Congress should pay close attention during this rule-making
stage,
to counter lobbying from self-serving interests who could make
toothless these
good intentions.
Some
advocates and industry experts
might have good suggestions or valid concerns for rule-makers. But
allowing
people who cannot afford a loan to encumber a huge debt is no kindness;
anyone
who looks at the lives ruined by foreclosure can see this.
Read
it at the Columbus Dispatch
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