Paternalism in Chicago, working about as well as paternalism usually does:
The South Side neighborhoods affected by a controversial mortgage law designed to protect would-be homeowners from being gouged have seen a 45 percent drop in home sales in the law’s first month. …
Under the law, if a borrower’s credit score is 620 or less, or if there are other triggers, a borrower must get financial counseling from a U.S. Housing and Urban Development-approved counselor to make sure the borrower knows what he’s getting into, though a counselor can’t stop the loan.
The mortgage broker must pay $300 for counseling….
Some lenders have pulled out of the ZIP codes because they don’t want to deal with the accompanying paperwork. Real estate professionals have also complained that the four-year pilot law is discriminatory, because it is limited to just 10 ZIP codes.
Additionally, borrowers working through state or federally chartered banks are exempt from the law.
(Mary Wisniewski, “Mortgage law socks home sales”, Chicago Sun-Times, Oct. 16).
3 Comments
In other words, it’s working.
A lot of people who would otherwise have closed mortgages they really can’t afford from loansharks who would just confiscate the property at the first sign of trouble now decide not to get that mortgage and not to buy that property.
The brokers pulling out of course are those who would give mortgages (with crippling terms) to people with bad credit in the past, something many legitimitate banks and agencies would never do in the first place.
“In other words, it’s working.”
Unless you think 45% of all home sales in the area would have foreclosed (which is COMPLETELY ridiculous), it’s not “working” at all – it’s penalizing people who actually want to sell their own property, and penalizing people even if they could have afforded such a rate (as the lenders have simply left the market).
If that’s “working”, I’m sure communism “works” for you, too.
I’m skeptical about this law, but it’s too early to say that it’s decreased home sales 45%. If counseling is required, that’s going to cause a delay in sales, which means that a month-to-month window isn’t an apples-to-apples comparison — especially since it’s possible a lot of mortgages might have closed in the August rush to beat the deadline before counseling was required.