Chicago Sun-Times
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Mitchell column excerpt: State lending rules just another way to box out working class

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Something doesn't feel right about the anti-predatory lending rules that just went into effect. The controversial state regulation changes mortgage lending rules in 10 ZIP codes on Chicago's Southwest Side to require that prospective buyers using mortgage brokers get financial counseling if their credit scores fall below 620. Sounds like a good idea, right?

After all, there's no requirement that the buyer actually takes the advice, and he or she can go ahead and purchase the house using a subprime lender peddling a high interest rate.

But working-class home buyers have enough to deal with. They shouldn't have to unravel more red tape.

Credit counselors would probably hope a high-risk buyer returns to his or her apartment mortified by the bottom-line cost of paying for a house over a period of 30 years. They are banking on that buyer to flee, leaving behind a trail of unsigned loan documents.

Maybe that will happen in a few cases. But I wouldn't count on it happening in most of them.

As long as there are mortgage brokers who are legally able to loan money to people with poor credit, people with poor credit are going to take it. They'll worry about what could happen down the road. That's their right.

No one thinks they are going to end up divorced and responsible for paying the mortgage all by themselves. People don't plan on getting sick or on losing their jobs.

More important, why should buyers looking for homes in those 10 ZIP codes be treated any differently than people who are looking for homes elsewhere?

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6 Comments

You seem to be implying here that credit counselors are somehow the "bad guy," waiting to counsel people back into their apartments rather than own a home. Have you considered that most people who are credit counselors enjoy working with people and want to help them become solvent?

You make a very good point that a regulation that targets only 10 zip codes isn't right -- it should be across the board. But I am guessing that the reason they targeted those 10 zip codes is because a high percentage of folks living in those zip codes have poor credit ratings. Also, I don't get the feeling that the regulation is designed to shut people out, it is to steer them toward expert financial advice that will help them become solvent financially, and then able to buy a home. I honestly think that's what this is all about.

Buying a home is the most serious financial commitment most of us make in our lifetimes. Requiring people who have a bad track record for financial decisions to seek counsel is definitely inconvenient, and another step, but it may be the best step they ever took.

If my credit rating was bad and I really wanted to buy a house, I would just add the appointment with the counselor to the pile of stuff I needed to do to get what I wanted. FYI, I am not a credit counselor.

MITCHELL COMMENT: No, credit counselors aren't the bad guys. My point is working-class people aren't the only people who could benefit from credit counseling.

Normally a person buying a home is out of school and has the insight needed to get into the market of buying a home unless they;d seek other options.

According to your article it is only of the person is using mortgage brokers then they are required to get financial counseling. It sound like there could be a good motive on the part of the state to protect those using mortgage brokers.

After all, I would want to know what advice the mortgage broker is giving me so that I'm not financial cheated by the broker.

On the other had, why require something that a person has an option of choosing to inculcate or not. Is it so that the buyer can't later scream "I didn't know what I was doing. The mortgage broker cheated us!"

It should be across the board. If it's not it's called socioeconomic discrimination; discrimination based upon ones economic or financial status.

"As long as there are mortgage brokers who are legally able to loan money to people with poor credit, people with poor credit are going to take it. They'll worry about what could happen down the road. That's their right."

True, that is their right. However, the bad decisions that those irresponsible and dishonest people make directly affect you and I. When these people default on their loans and mortgages the bank must earn that money back somehow. The bank will only get so much out of the scoundrel, if anything at all. So how will they get their money back? By charging you and I higher interest rates and fees, that's how.

"No one thinks they are going to end up divorced and responsible for paying the mortgage all by themselves. People don't plan on getting sick or on losing their jobs."

Well, you know what? The people who don't think about these things are exactly the kind of people who NEED this kind of help. Unfortunately, the stupid are too stupid to realize that they are stupid. That's where our good friends in the government come in. They are protecting not only the stupid from themselves, but us as well.

Personally, I am tired of subsidizing the stupid. I'm tired of subsidizing those who don't plan children. I'm tired of those who don't have the foresight to get medical insurance. I'm tired of those who choose not to excercise and eat healthily. I'm tired of subsidizing those who didn't plan for retirement. I'm tired of subsidizing bad drivers. I'm tired of subsidizing dishonest people who take out loans that they can't afford. There is nothing being done about most of these people, but I'm glad that someone is doing something about some of them.

"It should be across the board. If it's not it's called socioeconomic discrimination"

Welcome to America pal. We discriminate against groups based on all sorts of criteria. Men are discriminated against in courts and in business. Women are discriminated against in sports. Minorities are discriminated against almost everywhere to some extent. This is the world we live in. There is really nothing that anybody can do about it. Complaining to our legislators only causes them to enact laws that discriminate against other groups while making things "fair" for one particular group. Take a look around.

I've just recently begun closing real estate transactions again after a "break" of several years! I am happy to see the pilot program for HB4050. Over the years I have closed hundreds of transactions where buyers were talked into buying way more house than they could afford. If a mortgage broker could get the deal closed and get his/her check, the more the better. The house next door to my own ended up in foreclosure for exactly the same reason. The credit counseling is a wonderful tool for buyers, whether they are first time buyers or moving up. It helps them understand what is expected of them. It teaches them what they can truly afford. It should only eliminate buyers who need to save more, get their credit straightened out...etc, thus being better prepared to own a home.
The law requires more work for the mortgage broker and title company. Any mortgage broker who decides he/she does not want to work in the pilot areas is someone you probably don't want to work with anyway. It doesn't have anything to with color...just credit, and should probably be extended to all low credit borrowers.

MITCHELL COMMENT:

Thanks Ann. I agree that we could all probably use credit counseling. However, my point is low credit borrowers aren't the only borrowers who buy way more house than they can afford so why should they be singled out for an extra layer of bureaucracy? Also, what happens when lenders balk at the $300 extra cost and pull out?

I feel that this is just another way to keep poor people down. The government does everything it can to help the rich. They get tax cuts, free information on how to best take care of their problems. They get the best of everything.

Poor people on the otherhand get tricked into doing something that they are told by people in authority they trust that a certain program is good for them and then they loose everything they own. You never hear of anything like this happening to any rich family, just the poor poverty stricken people. Whey hurt the poor. Whether you know it or not, some of us are actually working very hard to keep our head above water. There are stumbling blocks where you don't have no way out of the situation and our stuck. There aren't many people that will lend a poor person money even if they have a job.

I feel that if the government is going to do something to help the poor, they first need to ask the poor what they need. This way you won't give them anything they don't need.

Debra A. Dorsey

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This page contains a single entry by Mary Mitchell published on September 27, 2006 7:57 PM.

Was race a motive in abortion kidnapping? was the previous entry in this blog.

Mitchell column excerpt: The only test that matters is the next entry in this blog.

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