Monday, October 06, 2008

Inconvenient Truth from Meltdown: Home Ownership Not a Right!

By John W. Lillpop

With American taxpayers on the hook for $700 billion in bailout compassion,an irrefutable truth must be accepted:

Not everyone can afford the American Dream.

In much the same way as that sleek new $200,000 Lamorghini is not within my financial means, so it is that some Americans do not make enough money, or have enough cash saved, to purchase a home.

Others have poor credit, too much debt, insufficient income, or lack satisfactory employment history and stability.

To those who believe that they are entitled to a home, a notion fostered by socialists like Nancy Pelosi and most Democrats, another harsh truth is coming:

Nowhere in the Declaration of Independence, the U.S. Constitution, or the Bill of Rights, are We the People obligated to provide anyone with a 3 bedroom, 2 bath home and attached garage.

Home ownership is not a Constitutional right!

Unfortunately, federal bureaucracies, under pressure from the Democrat Party and liberal Republicans, have taken a greater interest in promoting minority home ownership statistics than in assuring that mortgages written for qualified borrowers are sound and secure.

Once again, "progressive" race pandering has proven disastrous, not only for the general population, but for the minorities it was supposed to serve as well.

Driven by the socialist motto, "Our diversity is our greatest strength," underwriting standards have been deliberately loosened to make home ownership available to minorities and others who would not have qualified in the past.

Strict guidelines and standards were developed in the past to protect both investors and buyers from the risk of default. In many ways, that mandate has been replaced by the need to assure that diversity is served.

As a consequence, the following risk conditions have been become almost common place:

Buyers are approved for loans with little or no down payment. Previously, a down payment of at least twenty- percent of the purchase price was necessary.

Traditional debt-to-income ratios for housing expenses and total expense have been abandoned in favor of much higher, far more risky ratios.

Underwriters used to review each loan application in great detail to assure credit worthiness, capacity to repay, and collateral (confirmed value) of the property. Whatever happened to the three Cs of residential mortgage underwriting?

In some instances, mortgage loans have been knowingly approved for illegal aliens.

"Option Arm" and "Interest only" loans are sold without advising the loan applicants of the inherent dangers involved.

Just about anyone can get a "stated income" loan provided one`s FICO score is high enough.

By lowering the bar enough, Uncle Sam has indeed brought diversity to home ownership. However, at what cost?

By flooding the market with unqualified buyers, government bureaucracies have artificially stimulated housing demand, which caused home prices to explode, leading to the unsustainable housing price bubble that has finally burst.

Republicans are not blameless in the great housing meltdown.

Indeed, who would have expected a conservative president to seize quasi-private enterprises and make them government property, and to bail out other private companies with loans involving billions of dollars of taxpayer money pinched from the U.S. treasury?

Whatever happened to welfare reform, tough love, trusting the free market, and other conservative rallying cries?

A critical question that must be answered by wrong-minded progressives is this:

How have minority homeowners, especially those now going through foreclosure, benefited from America`s insane obsession with diversity?

A question all American may have to face sooner rather than later is: Who will bail out the taxpayers?