Mortgage Crisis Calls American Dream Into Question

For years, political leaders touted rising homeownership rates as a telling sign that the “American Dream” was being fulfilled. Now, more than a million foreclosures looming have called the dream into question.

We no longer have a problem with home loan availability … but a lot of our homeowners are one crisis away from losing their home,” said Hope Wilson, a housing counselor at Working in Neighborhoods, a non-profit organization trying to boost homeownership in inner-city Cincinnati.

There is no shortage these days of tragic stories of homeowners caught in America’s subprime mortgage meltdown, as risky borrowing, reckless lending and a slump in the housing market drives millions into foreclosure.

But while statistics show that minorities and immigrants are bearing the brunt of the crisis, the belief that every American can or should own their own home remains so pervasive that few politicians admit that it just might not be true.

“The more people who own their home, the better off America is,” George W. Bush said in 2004. “See, we want more people owning something. When somebody owns something, they have a vital stake in the future of the country.”

After stagnating at about 65 percent for much of the 1960s, ’70s and ’80s, the U.S. homeownership rate has risen slowly in the past 15 years to nearly 69 percent - a point of pride for Democrats and Republicans alike.

But with an estimated 1.5 million homeowners facing home mortgage foreclosure this year, Congress is now looking at tighter lending standards to protect unwary Americans from taking on loans they cannot afford.

Despite the crisis, Massachusetts Democratic Rep. Barney Frank, who heads the House Financial Services Committee that likely will set new lending rules, is one of the few willing to admit that homeownership is not for everyone.

“Not everyone is ready ever. A lot are not economically ready now,” Frank said. “This administration is acting as if the only important program to help people with housing issues is to get them into homeownership. I think that overemphasis has contributed to the subprime mortgage crisis. People were put into homeownership who just economically should not have been there.”

Across the U.S., racial minorities are more likely to get a high-cost, subprime [bad credit mortgage] loan when buying a home than whites, according to a study released last month by fair housing agencies.

But it is not just poor and minority Americans who are losing their homes - many debt-ridden consumers simply were unwise in their loan choices. The suggestion that more regulation is needed to protect Americans from risky, but still willing mortgage lender offers is controversial.

Housing advocates do not want to see a return of the days when many low-income or minority Americans were shunned by lenders. But credit counselors facing a tidal wave of panicked homeowners say many should not have taken out - or qualified for - a mortgage loan in the first place.

John Taylor, president of the National Community Reinvestment Coalition, said politicians should not pretend that growth in minority homeownership is anything more than a fleeting increase.

“We shouldn’t make believe we’re helping people into homeownership by giving them a predatory product that creates a temporary homeownership,” he said. “Two years down the road they are on the street and … in a much worse position.

“Is it paternalistic? Call it what you want. I don’t care, I’m not running for office. I just want to keep people in homes they can really afford.”

SOURCE: Reuters via Yahoo! News