The quagmire that is 4050
Today we choose our mortgages from 150 different products vs. a handful a decade ago. Today you can buy a house with $500 down -- for better or for worse.
I'm not a fan of trying to legislate personal action. That's how we get into quagmires like HB4050. The fact is each of us is obligated to understand the exact terms of our mortgage.
That's why here at the Sun-Times Real Estate section, we'll try to stay out of the fray, and instead do what we do best: provide information and tools that are useful to you as a homebuyer, homeseller and homeowner.
Among those tools is this: The Right Place, our blog that will bring you information as quickly as it comes to us, and in an unfiltered form. If you go there today, you'll be able to read statements from the mortgage brokers, homebuilders and Realtors, and reach your own conclusion or not -- about the usefulness of the law. We're watching how this one rolls out.
Real estate is an industry that is evolving quickly on the internet. With our blog and other features we'll soon preview, we plan to keep up with it, and in turn, help you keep up on the relevant news and tools of the day.
That's what a newspaper is for.
Headline:The big picture on the quagmire that is HB4050
Byline: Sally Duros
Credit: The Chicago Sun-Times -COPYRIGHT- © 2006 Chicago Sun-Times. All rights reserved. Reproduction prohibited.
Everybody seems angry about HB 4050: the mortgage brokers, the Realtors, the home builders, the community groups.
Some homeowners in the zip codes have trouble with it. The federally chartered banks are staying quiet for now, perhaps they have good reason to lay low. We'll likely hear from them later.
The law had a simple intention and a complex implementation.
- The stated intention: educate potential homeowners about the financial realities before they sign the mortgage papers.
- The complex implementation: The real estate industry is pretty much boycotting those processing mortgages in the 10 zip codes where the law is applied.
Now, the opposition has come together, and filed a federal law suit charging that HB4050 amounts to redlining. The discontented from the real estate industry have converged in Springfield to state their cases in the veto session of the General Assembly which concludes in December.
It's times like these that the vested interests of all parties involved in a complex transaction like buying real estate emerge.
Some suspect that Illinois House Speaker Mike Madigan applied politics more than policy in choosing zip codes from his district, while other zips with high occurrence of mortgage foreclosures -- like Rogers Park -- are not included.
The Illinois Association of Mortgage Brokers does not like the fact that brokers are required to pay the $300 required for credit counseling of buyers. They really resent that the law does not apply to federally chartered banks because they are governed by fair lending rules.
The Chicago Association of Homebuilders argues that among other things, HB4050 targets and stigmatizes primarily African American neighborhoods.
But, actually 4050 is the small story. The big story is that everyone is pointing fingers and looking for somewhere to assign the blame as the numbers of foreclosures rise.
Between $750 billion to $1.5 trillion in ARMs are in the process of maturing right now. Those mortgage-holders will either adjust to paying the uptick, refinance at a lower rate or, often with confounding events like unemployment or illness, enter a financial crisis that could lead to foreclosure.
HB4050 was enacted to reduce the number of boarded-up homes lost to foreclosure in certain areas of the city and suburbs. It seeks to do that by counseling people so they understand what exactly it is that they are signing when they sign a mortgage.
In the areas affected by HB4050 and everywhere, we have a growing sector that is willing to provide loans with little or no documentation to people with unstable incomes, to people who have had credit problems in the past, and to people who are willing to make the bet that 5 to 10 years down the road, they will be able to meet the requirements of a higher monthly payment -- not that there is something evil in that.
Today we choose our mortgages from 150 different products vs. a handful a decade ago. Today you can buy a house with $500 down -- for better or for worse.
I'm not a fan of trying to legislate personal action. That's how we get into quagmires like HB4050. The fact is each of us is obligated to understand the exact terms of our mortgage.
That's why here at the Sun-Times Real Estate section, we'll try to stay out of the fray, and instead do what we do best: provide information and tools that are useful to you as a homebuyer, homeseller and homeowner.
Among those tools is this: The Right Place, our blog that will bring you information as quickly as it comes to us, and in an unfiltered form. If you go there today, you'll be able to read statements from the mortgage brokers, homebuilders and Realtors, and reach your own conclusion or not -- about the usefulness of the law. We're watching how this one rolls out.
Real estate is an industry that is evolving quickly on the internet. With our blog and other features we'll soon preview, we plan to keep up with it, and in turn, help you keep up on the relevant news and tools of the day.
That's what a newspaper is for.
sduros@suntimes.com
