Steyn

Mark Steyn in his Steynian way bangs on the sub prime loan market.

Excerpt

So now the government has stepped in and said that, if you fall into a particular category of adjustable-rate mortgage (ARMs, in the biz) and you're worried that it's getting way too adjustable, don't worry: The Nanny State is about to readjust it well inside your comfort zone. By fiat of the Treasury secretary, your adjustable-rate mortgage is henceforth an unadjustable adjustable-rate mortgage. These new UNARMs will spread their healing balm across the land until it's safe enough for the housing "market" to once again be exposed to market forces.

The government has, in effect, nullified the terms of legal contracts mutually agreed by both parties – borrower and lender, Mr. and Mrs. Joe Schmoe and the First National Bank of Pleasantville.

This is a pretty remarkable act by a "conservative" administration. The government's general absolution for imprudence by both borrower and lender doesn't seem a smart move – for the U.S. credit markets, for real estate, for responsible borrowers for future homeowners, or for state and municipal taxpayers whose governments are being encouraged by Washington to bail out home "owners" by issuing tax-free debt.

I would like to know how the Bush administration plans on taking care of those families who acted responsibly and "locked in" to 30 year fixed rate even though that rate was higher than a variable rate. Shouldn't they get some kind of a rebate?

Or how about the family who could have used a four bedroom home but instead squeezed into a three bedroom because it was more affordable. When are the feds going to give them some money so they can move into the home they really wanted?

Maybe the feds can come up with a program for people who racked a bunch of credit card debt and instead of rolling it into a mortgage, actually knuckled down and paid off the debt at 28% interest.

I have a client who is an appraiser. He used to do work for some of these sub prime lenders until they started to tell him they needed a certain appraisal to come in at "x" dollars. So he quit doing appraisals for them.

It would be easy to beat on the mortgage brokers in these instances. In fact, they should go to jail for perpetrating frauds. Regardless, many of these brokers are under pressure by the borrower to do the deal. Many of them have racked up credit cards and are trying to refinance that debt into a mortgage without giving up the credit cards.

When will individuals be responsible for their choices in life? When will the government start rewarding those that act responsibly instead of penalizing them with taxes so that they can bail out someone who's a totally irresponsible? When will the feds either do away with the mortgage interest deduction or allow all consumer interest to be deductible so people will be less inclined to roll consumer debt into their homes?

The fact is, many of these subprime loans are a direct result of the mortgage interest deduction which encouraged people to roll all of their consumer debt into mortgages. As people rolled this debt over, many of them never altered their credit spending. Now that the Merry go Round has stopped, the government is trying to clean up a mess which was their creation to begin with.

The federal government, creating problems then solving them since the 16th. amendment