Monday, December 17, 2007

MORTGAGE MAYHEM


Liberals Rush To One-Up The President

by George Will

"According to Treasury Secretary Hank Paulson, 93 percent of American mortgages are paid on time. At most, 15 percent of recent "resets" - mortgage-rate increases - have resulted in foreclosures. Alan Reynolds of the Cato Institute says that only about a third of adjustable-rate mortgages are with subprime borrowers and that barely half of subprime mortgages have variable rates.

Clinton perhaps regrets that the plan the president has enabled and endorsed is voluntary. Today's liberalism, combining tolerance and statism, cares less what happens than that it be mandatory. But the plan is not entirely voluntary: Many people who own mortgage-backed securities might lose less because of the plan, but they did not participate in formulating it.

In helping lenders to cooperate with each other in reducing their distress and that of their customers, the government has played only "a convening role," says Paulson, who adds: "This is a private-sector effort, involving no government money." But the second half of that statement does not validate the first. The government is now implicated in the making of arbitrary distinctions.

Clinton says the rate freeze should last "until the mortgages have been converted into affordable, fixed-rate loans." What does "affordable" mean? Paulson says: "Homes in foreclosure can pose costs for whole neighborhoods, as crime goes up and property values decline. Avoiding preventable foreclosures, then, is in the interest of all homeowners." But all foreclosures are "preventable" if all mortgage contracts can be revised.

Speaking ill of lenders began when homo sapiens acquired language; hence it's unsurprising that many people who until recently were criticizing lenders for not making money available to marginally qualified borrowers are now caustic about lenders who complied.

Clinton is fluent in the language of liberalism (a k a Victimspeak), so, denouncing "Wall Street," she says families were "lured into risky mortgages" and "led into bad situations" by those who knew better. So lenders knew their loans wouldn't be fully repaid?

Jesse Jackson speaks of "victims of aggressive mortgage brokers." But, given that foreclosure is usually a net loss for all parties to the transaction, what explains the "aggression"? Who thought it was in their interest to do the luring and leading that Clinton alleges?

While granting that "borrowers share responsibility," her only examples are those "who paid extra fees to avoid documenting their income" and "speculators who were busy buying two, three, four houses to sell for a quick buck." Everyone else has been victimized.

Perhaps Washington's intervention in the subprime problem reveals the tiny tip of an enormous new entitlement: People who voluntarily run a risk, betting that they will escape unscathed, are entitled to government-organized amelioration when they lose their bets. The costs of this entitlement will include new ambiguities in the concepts of contracts and private property."

It has long amazed me that modern society often loses sight of what is NECESSARY, oft times losing it all in the quest for everything. It isn't simply the mortgage snafu but can also encompass that other liberal brass ring, Universal Healthcare, as well. This isn't to suggest that anyone is immune to a financial turn for the worse, but stocking up on all of life's goodies then being penniless to pay for silly things like insurance and health care for the kids, and house payments is a sign that genuine priorities have fallen by the wayside. And the problem with government intervention is that such bad behavior will be rewarded.

Compassion is not weakness, but the last thing we need is yet another sub division of people clamoring to feast at the government trough.

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