Thursday, August 02, 2012

Mortgage Follies Circa 1994

I was browsing the web and came across this video about NACA, an Acorn-type organization that seems manaically focused on lowering mortgage costs to poor people. Mission accomplished! Making houses 'affordable' created the no-doc, no-downpayment debacle, yet their take is clearly that anything that lowers the borrower cost of mortgages is good.

Yet even within their puff-piece video, they boast about fighting predatory lending by forcing a bank to allocate $8B towards 'affordable loans' back in 1994. They seem totally unaware this might have contributed to the problem (it's just a 12 second clip):

When these loans eventually couldn't be paid because the collateral value stopped rising, their solution was to get the banks to write down the mortgages. Now, it's only the government giving mortgages to such people, a solution that isn't helping the housing industry. The key to creating persistent dysfunctional redistribution plans is to make them so big alternative narratives for its inevitable failure are defensible.

No comments: