Obama Underwrites Irresponsibility — Again


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Many Americans are confused about why the housing market collapsed.  The answer is quite simple:  the government required lending institutions to engage in irresponsible behavior. They were required to make mortgages available to people manifestly unqualified to afford them.  The Community Reinvestment Act (CRA) of 1977 was the hammer.  The CRA was originally designed to make sure lending institutions did not discriminate with regard to making mortgages available in minority and low-income neighborhoods.

But, like many government programs, it mutated. In 1995, Bill Clinton ordered the Treasury Department to rewrite the CRA’s guidelines. Lending institutions with low CRA ratings could now be prevented from opening new branches, engaging in mergers, expanding their lending business, or be fined, if they failed to fulfill loan “quotas” in minority neighborhoods.

In other words, housing became a de facto extension of affirmative action programs.

After that, the lending institutions themselves “one-upped” the government.  Why limit risky loans to the sub-prime market?  Why not make them available in the primary loan market as well? Why not expand irresponsible behavior to its upper limits?   The possibility of failure?  Let’s “collateralize” failure and “spread it around.”

The rest is history.

Lessons learned?  Of course not.  Fannie Mae and Freddie Mac, the two biggest lenders in America, are still holding hundreds of billions of dollars of bad paper on their balance sheets.  Yet they continue to make loans–and they astonishingly remain exempt from any regulations in the newly-passed Dodd-Frank financial “reform” bill.

To get an idea of how unsavory this latest program is, substitute the word “car” for the word “home.”  Should American taxpayers be on the hook for someone’s car payments if they bought “more car than they could afford?”  How about peoples’ credit card bills?

Aside from its embrace of irresponsible behavior, progressivism is also about the triumph of ideology over history.  Very recent history. The Obama administration gave Americans tax breaks for buying automobiles.  When they ended, car sales tanked.  They gave Americans a tax credit of $8000 to buy a home.  When those credits ended, home sales cratered to the lowest levels ever recorded.

Even with this program, some government officials believe one-in-five participants will default.  That estimate is based on the track record of the Obama administration’s Home Affordable Modification Program (HAMP) which fell well short of its goal to assist 3 million homeowners. 1.3 million Americans enrolled in temporary modification programs. Half of them failed to qualify.  Only one-in-three have gotten permanent, modified loans.

Americans with integrity are seething.  It is an anger fired up by a federal government underwriting people with little or no integrity to the point of obscenity.  It can be reduced to a single question asked millions of times:  why am I being forced to pay someone else’s mortgage along with my own?   It is an anger that will not be mollified until the ideology which refuses to recognize the necessity of allowing people to fail is relegated to the dustbin of history.  Most Americans have no problem being “their brother’s keeper.”

Being “their brother’s enabler?” Immoral, plain and simple.

Arnold Ahlert is a contributing columnist to the politically conservative news and opinion site JewishWorldReview.com.

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  • Don from Canada

    Do I need to say it again?

    Go John Galt! If you can't do it today, get yourself into a position where you can. Starve leviathan by denying it the tax revenues it desperately needs.

  • Diane from CT

    Excellent article. I had to pay my own mortgage and nobody gave me any handouts, but I bought a house I knew I could afford.

  • coyote3

    We have had government guaranteed loans, with "some" relaxed standards for a long, long time, i.e., VA and FHA. However, when that was done, after WWII, "universal" home ownership was not the goal. There are people, for one reason or another, who are just meant to own a home. It's not just the cost of the home, although that is a significant factor. A home is a substantial expense, running, it, maintaining/repairing it,even if there is no mortgage payment. Qualifying people for mortgages that they obviously can't pay does everyone a disservice.

  • coyote3

    We have had government guaranteed loans, with "some" relaxed standards for a long, long time, i.e., VA and FHA. However, when that was done, after WWII, "universal" home ownership was not the goal. There are people, for one reason or another, who are just meant to own a home. It's not just the cost of the home, although that is a significant factor. A home is a substantial expense, running, it, maintaining/repairing it,even if there is no mortgage payment. Qualifying people for mortgages that they obviously can't pay does everyone a disservice.

  • Sprinklerman

    "Let’s be clear here: there are two types of homeowners who are defaulting on their loans". I suggest there is a third.

    The first you suggest is the one who has fallen on hard times due to no fault of their own. However the federal government is not in the business of charity and was never intended to be. When the government gets involved in that type of business, the charity organizations that have do such a good job of it for years dry up.

    The second you suggest is the person who decides not to pay because his property isn't worth the cost. I agree with you that it's just immoral for us to pay for this persons stupidity and arrogance.

    I suggest that there is a third. Those who were given mortgages by banks and mortgage companies forced into providing them to those who had no reason to be given loans in the first place. Again, the federal government doing what isn't Constitutionally empowered in the first place.

    Like the Dept. of Education, there is no Constitutional authority for Housing and Urban Development. These departments should be eliminated or not funded by Congress.