Transparency, not regulation

Area has high number of subprime mortgages

Never mind that this article is using data from 2004 to talk about the effect a large percentage of subprime loans has on the current market. The larger problem is that they’re ignoring the other details.

First, the DC housing market has a bit of a crutch that other areas don’t have, and that’s the federal government. There will always be federal jobs here, and so there will always be demand for housing. I think if you look at the numbers, you’ll see that the DC area is less susceptible to recessions and things like that because the government never goes away. Second, the housing market generally picks up with the warm weather. January was probably as bad as it’s going to get for a while (NB: I am not in the mortgage industry. I worked at Fannie Mae for a year in 2002-3, but that hardly qualifies me as an expert.).

That doesn’t mean that people with bad credit who have taken on loans that they can’t really afford aren’t going to get hurt. But the real issue there is not the housing market at all. A strong market does help people get out from under their homes if they can no longer afford them. But it doesn’t address the root of the issue, which is that these loans never should have been made. I know there has been a push for more regulation on subprime lending, and I know it’s a fight to balance between allowing people with little credit or bad credit to buy homes and protecting the uninformed from bad decisions.

I hesitate to push for more regulation, to force lenders to teach potential homebuyers about what they’re getting into. But I wouldn’t mind seeing a push for more transparency. I just bought a home, and with a degree in math and a year in the secondary mortgage industry, I still had trouble deciphering all the paperwork they threw at me. Even my wife, a lawyer, had trouble wading through all the paperwork. It doesn’t need to be that complicated. It SHOULDN’T be that complicated. I think that’s where we have to make some changes. If everything is out in the open, in plain and simple English, we will reduce the problem because people will better understand what they’re getting themselves into.

We’ll still have people who take on mortgages they can’t afford. But we can’t protect everyone from their own stupidity all the time.

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