Many of us like the idea of “easy credit.” But it can be dangerous.
If we needed more proof that our government should never again pressure lenders to make home loans to risky borrowers, who are likely to struggle with repayment, now we have it.
From January through March of this year, 10 percent of all U.S. homeowners missed at least one monthly mortgage payment. Not only is that up from 9.5 percent who missed one or more payments in the October-to-December quarter of 2009, but it is a record.
If you live in a neighborhood where most of the homes are owned rather than leased, just imagine that on average one in 10 of your neighbors (perhaps including you!) is struggling to pay the mortgage.
In even worse trouble are the record 4.6 percent of homeowners who are in foreclosure.
There are many reasons for the housing meltdown. Some borrowers who took out reasonable loans subsequently lost their jobs, could not find new jobs and thus were unable to pay. But many got loans that stricter income requirements would never have permitted, and some who could have afforded moderate-size loans borrowed much more than they should have.
The government pushed for looser lending standards under the guise of “fairness” to low-income Americans who otherwise might not qualify for loans. When Congress was warned that a crisis was coming as adjustable interest rates “adjusted” upward, lawmakers criticized those issuing the warnings as being opposed to policies promoting “affordable housing.”
We can only wonder how “fair” those policies now seem to people who have lost their supposedly “affordable” homes, or who soon may.