Jeff Sovern thinks the new CFPB mortgage disclosure forms will help prevent the next housing meltdown:
THIS month the Consumer Financial Protection Bureau proposed new rules to clarify the terms of housing loans for millions of homeowners. This sounds like a minor improvement, but in fact it’s a significant step toward preventing another subprime disaster.
Read Help for the Perplexed Home Buyer at the New York Times.
As evidence of the “suburbanization of poverty,” the Brookings Institution reports that the almost half of housing voucher recipients shifted from cities to suburbs from 2000 to 2008. This major demographic shift is a good indication that the poor have followed the relatively-affluent middle class to the ‘burbs en masse.
The shift has probably grown more dramatic since 2008, according to the Freakonomics blog, since many suburban dwellers wound up underwater on their mortgages as a result of the subprime meltdown—and in need of vouchers to pay for housing.
Housing vouchers are basically just a check that can be used towards rent. Vouchers are available to eligible low-income renters, although there is a waiting list to get into the program.
The subprime mortgage meltdown, it turns out, makes for riveting reading. I was up until 4 a.m. reading The Monster, a page-turning account of the subprime lending binge that precipitated the collapse of the world economy.
The Monster would make a great heist movie, except that, instead of stealing piles of money from a casino, the subprime lending industry, lead by Ameriquest, Lehman Brothers, and countless others, scammed millions of Americans out of their savings.
Over-leveraged landlords are losing their rental properties in droves, and banks have no interest in being landlords. As a result, renters are often innocent victims of the foreclosure epidemic.
Cook County Sheriff Tom Dart has decided to take measures into his own hands. He announced a moratorium on evictions for homes, apartment buildings, and condominiums facing mortgage foreclosure.
Mortgage foreclosure cases filed in Cook County are likely to exceed 43,000 this year, compared to some 18,000 in 2006, the sheriff said.
Among the consequences may be fewer mortgage loans.
“We have to have the ability to take over collateral upon default, and if we don’t have that assurance, or we think evictions won’t be made … we simply won’t make the loan,” Koch said of the moratorium.
For Minnesota renters, HOME Line has some helpful resources on the side effects of foreclosure, including a brochure (PDF link) and more extensive written materials (PDF link)
This American Life has done two excellent shows to help ordinary folks like you and me understand the morass that is the U.S. economy.
A few months ago, in The Giant Pool of Money, Ira Glass and his crew explained the link between the housing crisis, the turmoil on Wall Street, subprime lending, and more. Follow the link for the full show.
Today, TAL returned to the economy, trying to unpack the meltdown and figure out whether the country needs to bail out Wall Street, or not. Some key conclusions:
If all that sounds like gibberish, listen to This American Life’s Another Frightening Show About the Economy. It was all gibberish to me before I listened to that show, too.
The mortgage giants Fannie Mae and Freddie Mac funded more than two-thirds of U.S. home loans. If you are reading this and you own a home, that means there is a 66% chance that Fannie or Freddie wrote a check for your home.
But like everyone else, apparently, Fannie and Freddie were funding a lot of really risky home loans. So many risky loans, in fact, that the two mortgage giants were about to collapse under their own weight. Until yesterday, that is.
As of yesterday, Fannie and Freddie are under federal control. Their CEOs and other top directors have been replaced, and the U.S. Treasury will pump up to $100 billion into the companies to keep them solvent.
In the words of one analyst, this is a “stunning use of federal power”. Time will tell whether this was a wise use of that power, or bad judgment.
For more information and in-depth analysis, check out the Washington Post’s extensive reporting on the takeover.