Friday, March 16

Democrats and Republicans share the blame for the housing debacle

In the midst of talking about her foreclosure story, Aimee Phan notes,
In 1995, President Bill Clinton initiated the National Homeownership Strategy: Partners in the American Dream to create 8 million new homeowners out of working class families, with a special focus on minorities, who historically had been priced out of homeownership.

“You want to reinforce family values in America, encourage two-parent households, get people to stay home?” President Clinton said in 1995. “Make it easy for people to own their own homes and enjoy the rewards of family life and see their work rewarded. This is a big deal. This is about more than money and sticks and boards and windows. This is about the way we live as a people and what kind of society we’re going to have.”

The government alliance with public and private housing industry organizations opened the door for subprime lenders to prey on inexperienced, but eager, first-time homebuyers. The qualifications needed to acquire a home loan sank to incredulous levels. No down payment? Not a problem. No financial documents? That’s fine. Just sign here. Under Clinton’s policy, the national homeownership rate grew to 67 percent.
So it's all the Democrats' fault, right? Not so fast:
One of the few policies President George W. Bush extended from the previous administration was expanding the homeownership market through his Ownership Society initiative. Like Clinton, Bush also argued that homeownership helped eliminate racial disparities.

“All of us here in America should believe, and I think we do, that we should be, as I mentioned, a nation of owners,” President Bush said at the White House Conference on Increasing Minority Homeownership in 2002. “Owning something is freedom, as far as I’m concerned. It’s part of a free society. And ownership of a home helps bring stability to neighborhoods. You own your home in a neighborhood, you have more interest in how your neighborhood feels, looks, whether it’s safe or not. It brings pride to people, it’s a part of an asset-based to society. It helps people build up their own individual portfolio, provides an opportunity, if need be, for a mom or a dad to leave something to their child. It’s a part of—it’s of being a—it’s a part of—an important part of America.”

Bush’s administration created the $412 million American Dream Downpayment Initiative for first-time homebuyers and committed additional funds to housing counseling. In giddy response, mortgage lenders accelerated their subprime loan offers to even more previously excluded homebuyers. Countrywide Financial led the charge, generating nearly $100 billion in subprime loans between 2005 and 2007, more than any other lending company in the country.
She herself mostly blames others for her poor investment decision:
Our realtor and credit union loan officer convinced us to sign a five-year, interest-only ARM loan, since we intended to own the property for less than that time. They made it sound so easy, so simple, to make money on this secure, sound investment. We were plunging into the most sensible financial venture, like every responsible American should.

Yet, every conversation Matt and I had regarding the condo felt mixed and uncertain. We wondered if it was because it just felt new and unfamiliar... We should have realized the aggressive pitch the realtor and loan officer was pushing on us was one that was being pressured on millions of other first-time homebuyers.
She later adds:
Of course, it’s easy to blame someone else, especially if they are anonymous: the banks and lenders of Wall Street who encouraged these millions of impossible subprime mortgages that had to inevitably fall. It was our poor timing to come in just before they did, just as it was serendipity for my parents to enter when the market began to blossom. It is not fair. It is not even cosmic bad luck, as the fortune-teller predicted. It’s just reality.

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