Service of a Well-Meaning Initiative That Creates More Problems than it Solves

April 27th, 2023

Categories: Home Ownership, Renting


Image by Stanly8853 from Pixabay

As a person blessed with many advantages, I’m all for leveling the playing field. I have for years supported college scholarship initiatives for example and charities best I can.

Yet so many negative thoughts or images came to mind when I heard about the Federal Housing Finance Agency’s changes that kick in May 1 that will impact mortgages. I think that while the agency attempts to help some, it will result in creating resentment and more divisiveness between people of different income levels than already exists. I struggled with economics in college. If the finest financial minds came up with this initiative, it’s clear I’d have similar problems were I to take the course today. It’s counterintuitive.

What am I rambling on about? “A new federal rule could raise the monthly mortgage payments of buyers with good credit scores by over $60 a month, while riskier borrowers will get more favorable terms because their fees will be reduced,” Katherine Fung wrote in Newsweek.

The parable of the prodigal son came to mind and while I know I should root for him, I have always empathized with the hard-working older brother who wasn’t celebrated. Next, I envisioned the child who gobbles his ice cream cone while a parent demands the other kids give him a few licks from their treats that remain only because they have taken their time to make theirs last.

Fung reported: “Only about 25 percent of homebuyers with Federal Housing Administration loans are people of color, according to the White House. Black and Hispanic people, on average, have fewer savings to use as a down payment on a home and tend to have lower credit scores, according to David Stevens, former CEO of the Mortgage Bankers Association (MBA) and a former FHA commissioner during the Obama administration. The current policy is being rolled out by the FHFA.”

She wrote: “The effort to get more low-income Americans and Americans of color into homeownership is essentially being subsidized by borrowers who have better credit scores and can contribute more to their down payment, Michael Borodinsky, a vice president at Caliber Home Loans, told Newsweek.”

I want to know: Why is home ownership the Holy Grail? To maintain a home costs a lot of money. The down payment and mortgage are only the beginning. If the furnace, roof, washing machine and dryer hold together one year, the plumbing, lawnmower, chimney, or deck can give out the next. Like a fur coat or printer, the initial cost is just the start: One needs to pay for cold storage for the former while the latter devours costly cartridges.

I am an anomaly. I’ve been equally happy in the home and apartments I’ve owned or rented. I’ve maintained and respected each one. After a wonderful superintendent left my first Brooklyn apartment—a rental—he was replaced by a slob. Before my dinner company came I’d shine the brass elevator doorknob in the lobby and on my floor.

The only answer I can come up with to level the mortgage playing field is to endorse an initiative that removes the stigma about renting an apartment or home and stop glorifying home/apartment ownership. Owning a home is not necessary as is a chicken in every pot. And we have hardly solved the hunger problems here.

The government is putting out mixed signals by punishing those who have worked hard to maintain their credit ratings and have saved to accumulate a substantial down payment.

Is it mean to wonder whether a family that’s unable to save a substantial downpayment and pay bills on time will be able to maintain their home and pay their mortgage?

What ideas do you have that might give a leg up to some while not penalizing those who did things according to Hoyle?


Image by Hans Benn from Pixabay 

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8 Responses to “Service of a Well-Meaning Initiative That Creates More Problems than it Solves”

  1. Linda Levi Said:

    Linda on Facebook: I hate this! It penalizes those who have “done right” all along. Worse, it creates two classes of citizens, so to speak.

    Perhaps as an incentive there could be a “reward” for consistent, timely payments. But I always thought the reward was outright ownership and mortgage freedom.

    Lastly, I’ve never heard any negativity toward renting versus owning. Makes sense to rent if you have a good deal (maybe rent-stabilized), lots of room, inherited a lease, using mortgage money to pay school tuitions, don’t want owners’ responsibility, etc. Most buy homes/coops as an investment hoping to double, triple, quadruple value and build up retirement funds, generational wealth, estates, etc. Also, ownership allows one to decorate and renovate as they please, whereas renting doesn’t.

    But I agree this new practice is a bad, unfair idea.

  2. TC Said:

    HERE, HERE, MY PARENTS NEVER OWNED A HOME UNTIL THE END OF THEIR MARRIAGE ( WHEN IT COST A LOT TO RESTORE IT AND IT SOLD AT A LOSS). CANNOT COUNT THE NUMBER OF APARTMENTS AND HOMES WE RENTED OVER THE 30’s AND 40’s. OR THE PRIVATE SCHOOLS WE THREE KIDS ATTENDED (THE TUITIONS FOR WHICH MUST HAVE COST THEM DEARLY).

  3. Jeanne Byington Said:

    Linda,

    I lived with a person who had to own a home or apartment and there are many like that. There must be something to it or the government wouldn’t come up with a scheme to widen the doors to ownership.

    One of my ancestors who could well afford it didn’t believe in owning real estate in NYC. If you are forced to sell at the wrong time—-in any market–you can lose a bundle.

    We added cabinetry to the kitchen of a rental. The super didn’t report it when we left and we were not charged for altering the place plus he, I’m sure, moved it to his apartment.

    There are exceptions to the rental stigma. I knew a well-to-do woman who had owned the most magnificent homes who chose to rent what she figured would be her last residence to simplify it for her busy offspring when she died. There would be no property for them to prep and sell.

  4. Jeanne Byington Said:

    TC,

    Your parents, like mine, were selfless and lived their priorities which was to spend their money to educate their children rather than to buy a home and I am certain that my mother never wanted one.

    For some reason there are folks who feel they are entitled to own a home. Having seen the financial drain it can be and recognizing that none of my talents run in the remodeling/repair side of homeownership I would be more than reluctant to own one today even if I won a lottery unless it came with a talented, honest, hardworking, loyal, clever caretaker who handled all things about the maintenance of the place.

  5. Linda Levi Said:

    Linda on Facebook: No doubt pros and cons to both renting and owning. Bottom line, do what makes one most comfortable and live with the consequences, good or bad.

  6. lucrezia Said:

    Appears as if our legislators are bending over backwards to be unrealistic and unfair. This policy may also backfire, leading to multiple bankruptcies, evictions, shattered lives and eventual failure of a senseless program. The need to have a home monster was probably created by the advertising world. The dismal results will undoubtedly hit the most vulnerable in society…..as usual.

  7. Jeanne Byington Said:

    Lucrezia,

    The creators of this counterintuitive idea can’t have already forgotten 2008 and the banking crisis that occurred when bundles of loans to those who couldn’t afford them were tossed around like sticky dustballs in a game of hot potato that grew increasingly big until they were dropped, plopped and crashed apart. And as you described, with the foreclosures and lost investments went the dreams and lives of innocent people.

  8. lucrezia Said:

    Don’t remember, eh? Wanna bet? It’s more fun blaming “O” for the mess they created, and are hell bent to bring it back again. This time it will be “Biden’s fault!”

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