A big part of the American Dream is owning a home, but for too many people, the dream is elusive, or badly soured. Either they don't qualify for a loan or a mortgage lender takes unfair advantage of them.
Steps are under way, however, to address these problems, and none too soon.
Fannie Mae, the federally chartered corporation that's a powerhouse in the mortgage business, pledges to invest $2 trillion to expand housing options for lower-income Americans over the next decade. Much of this will finance mortgages for first-time home buyers. Some will underwrite multifamily rental housing.
The company has also loosened down-payment requirements and experimented with reducing interest rates for borrowers who prove they will pay on time.
Fannie Mae also proposed a list of mortgage-borrowers' "rights" to help end unethical practices in the industry. Among them: Access to the lowest-cost mortgage for which the consumer can qualify, and the ability to know the true cost of a mortgage, including all fees and charges.
A relatively small number of companies involved in the rapidly expanding business of "subprime" mortgage and home-equity lending engage in so-called "predatory lending." Changes in federal law have opened this field, allowing companies to offer loans to people - typically minority or elderly - with relatively small incomes or shaky credit histories. Interest rates and fees are jacked up to cover the added risks.
For some borrowers, this has been a boon. For many others, it has meant financial ruin, as they've been suckered into deals that entail much higher monthly payments than they anticipated, usually because huge, poorly explained fees have been lumped into the loan total. The result: escalating rates of foreclosure.
At the heart of the matter is how loans are presented to customers who are either desperate for financial relief, or simply uninformed and unsophisticated. Officials at the state and federal levels are on the trail of the worst perpetrators of predatory practices. As abuses are exposed and eliminated, and the public becomes better informed, Americans should rest easier that the dream of owning a home can be practically realized.
(c) Copyright 2000. The Christian Science Publishing Society