Matt Rothschild of The Progressive ("a leading voice for peace and social justice since 1909") takes the sub-prime lenders to task for what he sees as dubious lending practices and perverse incentives that motivate them. His description of the five "criminal" practices of "mortgage vultures" deserves is very nicely done, the article falls short in one crucial degree. It tells what is wrong and what the mortgage industry done wrong but little about what could alternative course of action should have been taken to facilitate " opening up the possibility of homeownership to people with lesser means." True to "progressive" form, Rothschild blames a aggressive lack of government intervention:

Ironically, the Fed all along could have done something about the predatory practices in the subprime market. In 1994, Congress passed the Home Ownership and Equity Protection Act. It gives the Fed the authority to “prohibit acts or practices in connection with—(A) mortgage loans that the Board finds to be unfair, deceptive, or designed to evade the provisions of this section; and (B) refinancing of mortgage loans that the Board finds to be associated with abusive lending practices, or that are otherwise not in the interest of the borrower.”

He also laments the good old days where people got their home loans from local savings and loans, had to pay 20% down, and got a serious credit check, the result of which was the people couldn't get into homes that were above their means. Good points all, but still focussed on the negative. More government intervention might have prevented more bad loans from being made and might have forestalled or lessened the looming wave of foreclosures, but that's not the same thing positive steps taken to get people into homes. What, I wonder, does he and other progressives think the private sector should have done other than what it did?

Tags: sub-prime | mortgage | real estate | loan | mortgage news | mortgages | refinance | foreclosure