Posted on 07/09/2019 7:25:12 AM PDT by Kaslin
Sen. Kamala Harris (D-CA) rolled out a plan to offer grants up to $25,000 to low-income black individuals to help with a down payment and closing costs on home purchases.
At first glance, to the economically uninformed, this seems like it's a good idea. We want as many people as possible to own homes for many obvious reasons.
Why not subsidize low-income buyers with a $25,000 grant? This would mean that it would be easier to buy a house in a low-income area. The more houses that are bought, the higher the demand, and prices will rise, benefitting everyone.
But as with all government programs, there's an unintended consequence.
I’ll illustrate using an example. The numbers I'm using are more for simplicity, and a bit higher than what might be used, but the concept behind them doesn't change.
Suppose a buyer wants to buy a $200,000 house. They put down the required $40,000 down payment, consisting of $15,000 of their own cash and the $25,000 grant. A 4% mortgage results in a $763 monthly mortgage payment.
If the grant were not available, in order to afford the house, the situation would instead be:
A buyer can instead afford only a $75,000 house. They put down the required $15,000 down payment. A 4% mortgage is a $287 monthly mortgage payment.
By giving that grant, it may seem like a terrific move that the buyer can now afford a more expensive house.
Right? Wrong.
That grant pushes the buyer into a more expensive mortgage, as well, costing $485 extra per month, plus additional property taxes on the higher value, plus additional cost to insure the home.
It could mean they have to earn an additional $7,000 per year in costs.
Do they have that money? If not, that grant has just pushed them into a house they may not be able to afford to stay in.
That could cause them to have to default, or sell the house. If that happens to a lot of other grant recipients, and they all have to sell their houses, and suddenly we might have another mortgage crisis.
A critic might say, "The bank won't let the buyer into the more expensive house unless their mortgage application would permit it".
Don't be so sure. Banks want to make loans. That's how they make money.
Further, loans that are less than $484,000, which these would be, are insured by the federal government. So the banks are not on the hook.
Who knows who is on the hook? Fannie Mae and Freddie Mac.
Sound familiar? It should.
This is exactly what happened in the mortgage crisis. Harris’ plan sets a terrible example for people of all economic backgrounds. A good life lesson is:
IF YOU CAN'T AFFORD IT, DON'T BUY IT.
It sets a terrible example to tell someone, "If you can't afford it, the government will help you buy it...but we can't help you KEEP it"
Kamala Harris' plan seems like a good idea, but it’s no different than the first domino that was set back in 1977, which would begin the mortgage crisis 30 years later.
It was called the Community Reinvestment Act which "requires the Federal Reserve and other federal banking regulators to encourage financial institutions to help meet the credit needs of the communities in which they do business, including low- and moderate-income (LMI) neighborhoods."
This legislation had the unintended effect of banks loosening underwriting standards, because they would be rated on how well they serviced these communities.
If banks got a bad rating, well, the CRA legislation requires regulatory agencies to evaluate a bank’s "record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of such institution,” within a given assessment area — or geographic location in which a bank’s operations are conducted. According to the Congressional Research Service, banks receive points for engaging in CRA-qualifying activities, like lending to LMI communities, in their assessment areas and are issued CRA performance ratings by the regulatory agencies based on these points. As a means of enforcement, these agencies then factor in banks’ CRA performance ratings when determining whether to approve new bank initiatives, like new branches, mergers, or acquisitions."
So the banks were effectively forced to loosen underwriting standards, and mortgages were given to buyers who had less margin for error on default.
This was not the only reason for the crisis, but was the first piece of it.
And Kamala Harris wants to start it all over again.
So as a voter, your job is to ask:
1) WHY is Harris making this policy suggestion?
2) Does she understand its problems? If not, that should be a concern.
3) Does she understand the link to the mortgage crisis? If not, that should be a concern.
4) Is she simply pandering to the target audience? If so, does that matter to you?
Educated readers know the answer.
She isn’t a natural born citizen. She cannot run for president. Someone please tell them that. We don’t want anchor babies for presidents.
The taxpayers will reimburse the banks. What’s the problem?
So as a voter, your job is to ask:
1) WHY is Harris making this policy suggestion? Because she is coming from a false mindset that black folks don’t have the opportunity to buy a house.
2) Does she understand its problems? If not, that should be a concern. She has no clue about housing or mortgage policy, or the implications of what some advisor told her to do with this proposal.
3) Does she understand the link to the mortgage crisis? If not, that should be a concern. Again, she is clueless about what caused the mortgage crisis, and is clueless about the long term impacts of her own policy.
4) Is she simply pandering to the target audience? If so, does that matter to you? Yes she is pandering to blacks and liberal types who think that American is a racist/sexist/bigoted nation.
She is a vulgar whore of a woman, clearly willing to say or do anything for power. Manipulative, deceitful, and amoral, she is the perfect democrat.
She can’t remember the last one she had her head buried someplace
Since their “New” home is more costly than they can afford they must let maintenance and upkeep slide so in effect the government will be subsidizing the building of more slums, fostering more crime and voila..another Detroit or Chicago catastrophe. Expanding the socialist plantation.
For a "poor" person, that's a big monthly payment, even if it includes insurance and taxes (does it?). A lot of poor folk qualify for the no-down-payment/closing costs from some HUD program (my sister did that).
I can see why one would want as expensive a house as they can get, but people really need to be realistic as to what they can afford going forward.
Let’s see. The last time the Democrats in power gave houses to people that couldn’t even afford down payments the result was a financial crisis (Fannie Mae and Freddie Mac). Guess they haven’t learned from history (which they are trying to destroy) have they?
To paraphrase Elton John, "The Next Bitch Is Back".
Kamaltoe is no different from any other clueless, dangerous leftist.
They learn nothing from the past, and continue to follow the same failed playbook.
She remembers well. After the last crash, the USA turned to socialism.
It’s not the the Dems haven’t learned from history, it’s that they hope everyone else hasn’t learned from history. Normally, we simply call this dishonesty. In NewSpeak, we call this “fairness”.
You’re paraphrasing another ‘bitch’.
They are all seeking the perfect storm of circumstances and Santa Claus promises that will draw enough of their voters off the couch and out to the polls to overwhelm us.
Perish the thought. There is no appetite from the elites and power brokers to challenge a non-white who wants to run for POTUS.
That was made quite clear in two terms for the ‘ineligible one’.
Bad housing loans so the poor could afford a house, that did it. They were called “liar loans”. It looked like mortgage appraisers were corrupt. One entered my home and said simply”How much do you want to borrow? (We sent her away.)
Real estate inflation doesn't help everyone. Why would you want to give the municipality a free raise for paving the same number of streets? If you change houses, the one you're buying will have appreciated by the same amount so the inflation doesn't help or hurt you, but the inflated commission still has to be paid in real money. People don't want cars to get more expensive just because they own one.
Not everyone is meant to be a homeowner. How about addressing regulations that have caused the rental market to be priced out of range for many? And the answer to the problem is not more Section 8 units.
And I believe that lousy hostile disgusting living conditions drive up rent rates. Why because the only people who want to be in such places are those who know they can go to their “fortresses” and escape that day to day horror. The ultra rich. The poor can’t leave. When they can the middle class flees. That means those that are left drive up the price of available rentals and sales. JMHO.
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