NYT: Blame Banks, Not Borrowers

In an editorial this Sunday, The New York Times blasted those who warn of a new foreclosure crisis stemming from the recent loosening of credit standards for cash-strapped borrowers. The editorial board said that the oft-cited misconception that many who lost their homes in the foreclosure crisis were not ready to be homeowners in the first place is harmful to low-income people and the housing market in general.

"The notion that borrowers brought foreclosure on themselves ignores evidence to the contrary," the board wrote. "The notion that low- and moderate-income borrowers cannot sustain homeownership is further undermined by evidence showing that the key to success is not a hefty down payment or even perfect credit, but rather carefully underwritten, 30-year fixed-rate loans that can be paid off in stable monthly increments."

The paper instead blamed predatory lending and rampant unemployment for the foreclosure waves, and credited inadequate foreclosure relief programs with failing to stem the tide. It urged lawmakers to center reforms on banks, rather than borrowers: "For politicians and regulators, the lesson of the housing bust is that curbing financial recklessness, predation and discrimination will create the conditions for sound homeownership. The lesson is not to deny lower- and moderate-income families the tools they need to become successful homeowners."

The editorial also praised home ownership as a way out of financial instability: "Homeownership also proved to be a buffer against financial loss in the downturn. Researchers found that the net worth of owners in the program rose substantially from 2005 to 2012, while comparable renters suffered substantial declines."

Finally, the Times slammed those who caution that the new federal programs to make homeownership more accessible to cash-strapped borrowers could cause another financial crisis, insisting that "the programs incorporate the proven elements of success, including clear lending standards, fixed-rate loans with private mortgage insurance and counseling for borrowers to ensure that they understand their obligations."

Source: "A Home of One's Own," The New York Times (Dec. 13, 2014)