U.S. Sen. Bob Corker, R-Tenn., said today that much of the blame for the market meltdown two years ago stems from reckless loans made to home buyers who had no chance of repaying their mortgages.
Fixing that problem, Sen. Corker said, will require a type of personal responsibility that politicians throughout the world are not eager to talk about.
“We’re in the age of consumerism and to ask any type of personal responsibility is way beyond the call of duty,” Sen. Corker told CNBC today. “That’s sort of the plague of Western Democracy that politicians have to keep giving people what they want without any requirement of discipline or personal responsibility.”
Sen. Corker is sponsoring an amendment to the financial reform bill in the U.S. Senate to require home buyers to make a down payment of at least 5 percent on any mortgage loan from a regulated bank or lending institution. FHA now requires a 3.5 percent down payment on its government-backed loans, but many of the mortgages made over the past decade required no down payment by home buyers.
“At the core of the financial crisis were home loans that should never have been written because the borrowers could not repay them,” Sen. Corker said.
Sen. Corker’s amendment is being co-sponsored by four other Republicans. But the former Chattanooga mayor conceded today that his measure “has no change of passage” in the Democrat-controlled Senate.
U.S. Sen. Judd Gregg, R-N.H., and one of the amendment sponsors, blamed lax underwriting standards for home loans for playing “a huge role in bringing the mortgage market, and ultimately our economy, to its knees.
“Ironically, missing from the (Senate Banking Committee Chairman Chris) Dodd bill is any sort of attempt to strengthen underwriting standards to ensure a similar disaster cannot occur again, ” he said.
Democrats said setting a 5 percent down payment requirement for all mortgages would hurt the residential market and further deflate the value of many properties.