Mortgage reform may hurt poor people … Broomfield Real Estate News
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Ronald Reagan said one of the most feared statements had to be “I’m from the government and I’m here to help.”
This applies to many things, including over-reaching mortgage-related reform.
In it Kittle points out that:
“…more than 50% of borrowers with subprime ARMs scheduled to reset in the first months of 2007 refinanced or otherwise paid off their loans prior to reset.”
Roughly translated: the claims by the media, and groups that are pushing for extensive government intervention in the mortgage market, may be way overstated.
“2 million” is a number commonly thrown about as the number of mortgages that are expected to reset. Unfortunately many who report on this, report as if 2 million homes are expected to go into foreclosure as a result.
By assuming this, one falsely assumes that the banks won’t help their borrowers work out a single one of these loans,
into easier to manage conditions, or that FHA won’t help borrowers refinance a single one of these into fixed rate loans, or that the owners won’t sell a single one of these homes before the mortgage resets and so on.
This is obviously just not true, as evidenced by the fact 50% of borrowers with subprime loans managed to work out some sort of solution in 2007.
This also doesn’t account for the majority of subprime borrowers who are paying their mortgages on time and will continue to pay them on time even after reset.
Extensive government intervention in the mortgage markets will drive up the cost of obtaining a mortgage in the long run.
THERE’S NO SUCH THING AS A FREE LUNCH!
And when the cost to obtaining a mortgage rises, the number of home buyers will decrease. Will it freeze “rich” people out of the market? No. They will absorb the cost increases.
It will freeze out first time home buyers and poorer people.
The very set of people that some of these organizations claim to be advocating for.
With friends like that…
Beth Skinner is a real estate professional who actually returns phone calls and emails! Click here to search the MLS for your dream home.
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