Déjà vu – All Over Again

In the shadow of the healthcare debate, financial reform is picking up steam.  For a capitalist, this is a dangerous time, but the sins of the past must be atoned.  I for one see an opportunity to reign in some of the risky behaviors that serve only the greedy. The big risk now is a government that overreaches and does not learn from the past.

One key element of Chris Dodd’s controversial financial reform legislation is protecting consumers against predatory lending practices.  What a great term! -“Predatory Lending”.  You can actually visualize a tiger lying in wait in the bush for an injured gazelle to stagger by.  I’m all for disclosure of terms, but what this bill is doing goes a little too far.

How will our government protect against predatory lending?  Let’s force lenders to charge the same standard rate for a mortgage regardless of the credit risk of the recipient of the loan.  This way, we can get those who can afford their mortgages to subsidize those who might not be able to. We will eliminate risk based pricing.

Without getting into an economics lecture about risk and price, lets ponder this. Does it seem like subsidizing those who have bad credit, with the mortgage payments of those with sound credit, will reduce risk and introduce stability?  Doesn’t it do the exact opposite?

Does this sound like wealth re-distribution?

Lets put aside the socialist rhetoric for a second, and restate what this is.

By legislation, we are going to make it easier and more affordable for someone who otherwise might not be able to afford a mortgage based on his or her credit rating to get a mortgage anyway.

Does this sound familiar?

I’m in favor of financial reform, but it needs to prevent crisis from happening again, this would encourage it.

Lets look at it in terms of a question we should all answer for ourselves – Are you willing to pay more every month for your home mortgage, so that your neighbor who might not have a job, might not be as fiscally responsible as you, can buy the same house you bought, default on it, then have the house sold in a foreclosure sale dragging down property values in your neighborhood?

If you answered yes to this question, you are a true progressive.  Please pass go, collect your $200, and promptly give $100 to the federal government, $25 to your neighbor to pay his mortgage, $40 to your state to pay for all those who don’t have healthcare, and keep $35 for all of your expenses and kids college education.

Or better yet, don’t pay a dime and let the rich pay for it.

What do you think?

Guest Blogger – Jeff Hine



3 responses to “Déjà vu – All Over Again

  1. Michael Whitbeck

    Wow….i could not have written this any better 1000% correct! As a 15 year veteran of the mortgage business, I can tell you one thing I know….Government has no clue how to run this business…way to many programs that sound like used car schuckters… “$0 down home mortgage”….bad credit don’t worry buy a house that will fix everything! YEA RIGHT! Jeff keep up the great posts!

  2. Mike – I appreciate your comments. Being someone in the mortgage industry, can you elaborate on some of the things you would like to see in reform? I think our readers would love to hear from an expert!

  3. Great post – right on the mark.

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