Mortgage Lending: Can't Anybody Here Play This Game?

Jul 13, 2009

NOTE: This piece was originally posted on the American Solutions Website on July 13, 2009

“Can’t anybody here play this game” is one of Casey Stengel’s best-known profound observations – and he made many of them – when he found himself having to watch the team he managed, the brand-new New York Mets of 1962, attempt to play baseball. What put me in mind of Mr. Stengel’s deathless observation was this headline of a story on the front page of yesterday’s New York Times: “Tight Mortgage Rules Exclude Even Good Risks.”

The story was about all those financially stable and creditworthy people who would love to buy homes in the current buyer’s market, but can’t because their mortgage applications have been turned down. That’s a real shame, but it’s also no great surprise in a nation trying to recover from the torrent of imprudent loans that got us into this pickle in the first place. Even so, the irony is just stunning!

Why do I say that? Well, if you asked a fairly neutral, equal-opportunity cynic which party he would associate with credit approval policies so strict that only the wealthy could qualify for a mortgage on the house of their dreams, the answer would probably be the Republicans. And if you asked him which party he would associate with policies so loose that anyone could own a home, it would probably be the Democrats.

And yet, we recently concluded a period of several years when anyone who could fog a mirror could get a home mortgage, a period that overlapped with eight years of a Republican administration and a Republican majority in Congress. And now, six months into a Democratic administration and even more lopsided Democratic control of Congress, we find ourselves in a lending climate so restrictive that it makes the front page of The New York Times, and would cause even the stodgiest banker to order another scotch. How ironic.

It’s more complicated than that, of course. You could fill hours of entertaining video with pre-2007 sound bites of members of Congress – mostly, but not all, Democrats – stating that they favored any lending practices that increased home ownership and extolling the great job Fannie Mae and Freddie Mac were doing. (I name no names, but you know who they are. Am I right. . . Barney?) You could fill fewer, but still plenty of hours with contemporaneous sound bites – mostly, but not all, from administration officials and Republicans in Congress – expressing concern about an impending catastrophe.

Has this country become allergic to sensible lending practices that strike a reasonable balance between sound financial management and encouraging economic growth? A reasonable lending climate would go a long way toward shortening the current recession. If part of the problem is strictures on lending because of the TARP money and the recent increased regulatory scrutiny of lending institutions, then the cure is worse than the disease. Any way you slice it, this is a great opportunity for a Democratic majority to foster the kind of home ownership – within reason – that they have long stood for.

Get to work, guys! Can’t anybody here play this game?

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