Father Edwin Bohula, a Catholic priest who passed away in 2007, and Irene Serwa lived together as virtual "husband and wife" at a home on Crabtree Lane in Des Plaines, according to a lawsuit filed in Cook County Court last month.
Because of changes Bohula made to his will and "deed in trust" agreements on the property, Serwa no longer has clear ownership rights and cannot sell the house. She is suing the estate of her former companion to get those rights back.
Until 1998, Serwa was the sole owner of the home. That year she added Bohula as a co-owner of the home, according to the court complaint and Maine Township Assessor's records.
In 2007 Maine Township records show a change in the "deed and trust" listing Bohula as the primary owner of the property. In 2006 Bohula changed his will to leave the home to the Dominican Sisters of Chicago Rosary Hill Convalescent Home granting Serwa the right to live in the home for the rest of her life. Because of that change Serwa is now unable to sell the house.
Serwa's suit alleges Bohula never told her of changes to the will and that Bohula violated an agreement that co-ownership of the home would revert back to Serwa upon his death.
Bohula's estate lists Serwa, Sister Natalie Pekala, the mother superior of Dominican Sisters of Chicago Rosary Hill Convalescent Home and Bohula's sister, Pauline Bohula, as co-trustees of Fr. Bohula's trust (estate).
According to the suit and the Cook County Clerk's office, Bohula and Serwa were never legally married though Serwa signed the court filing as both Irene Serwa and Irene Bohula.
Serwa's suit says the two met in 1959 in grammar school. Serwa exchanged letters with Fr. Bohula after he joined the Navy in 1964. The two became reacquainted in 1994. That year, after Bohula's mother died the relationship became closer, according the court filing. By 1996 Fr. Bohula was regularly staying at Serwa's home helping her through a difficult period and by 1998 Bohula was living with Serwa in her Des Plaines home full time.
In 1998, the suit says Fr. Bohula convinced Serwa to "place the home (deed) in joint tenancy" to seal their relationship as he could not marry her because of his position as a Catholic priest.
Bohula was the pastor of a Catholic church in Lemont attended by Serwa until shortly before his death.
Serwa did not return several calls for comment. Attorneys for both Serwa and those representing Pauline Bohula and a spokeswoman for the Dominican sisters would not comment on the case.
Source
Saturday, November 28, 2009
Sunday, November 15, 2009
Homeownership made easier
PAID-UP contributors interested in owning a National Housing Trust (NHT) unit will no longer have to struggle to find a deposit, under one of five new initiatives that the institution rolled out yesterday aimed at making homeownership more affordable.
Senior NHT officials, who made the announcement yesterday, said hard-pressed contributors may instead enter into a three-year lease agreement with the Trust under what has been dubbed a Short-Term Lease Facility.
During this period, the contributor will be required to pay 15 per cent of the property cost in monthly lease payments. At the end of three years, the contributor will be converted to a NHT mortgagor, with access to the balance of the property's purchase price.
Managing director Earl Samuels told journalists yesterday that the NHT, like many institutions in Jamaica, had been impacted by the changing economic environment as many persons had either lost jobs or were earning less in real terms as a result of inflation.
"Irrespective of what is happening, people are still in need of shelter, and the Trust has been wrestling with the problem of providing affordable housing for its contributors even in the midst of shrinking incomes and rising construction costs," said Samuels.
"We're not saying these initiatives will be the answer to everyone's problem, but it's our hope that some of our contributors who are hard-pressed to meet our loan requirements will be able to find homeownership opportunities in some of the initiatives introduced."
The other four initiatives announced yesterday at the NHT's corporate offices in Kingston were Shared Equity Loan Arrangement, Combined Loan Programme, Use of NHT contributions to meet loan-funding shortfall and an extension in maximum long-term loans.
. The Shared Equity Loan Arrangement is designed for contributors who cannot afford the full or subsidised price of an NHT scheme unit and allows successful applicants to jointly share ownership of their units with the NHT. Applicants are required to own at least a 60 per cent stake in the property and can purchase the NHT's share at any time.
. The Trust's revised Combined Loan Policy allows spouses who are qualified contributors to access a total combined loan of $7 million.
. By using their NHT contributions to make up loan-funding shortfalls programme, loan applicants can access up to 50 per cent of their contributions to the Trust to bridge funding gaps between the loan amount they can afford from the NHT and the price of the unit or lot they're purchasing.
. The extension in maximum loan term facility has seen the Trust extending its maximum loan repayment period from 30 to 40 years, or upon the contributor reaching age 70, whichever comes first.
Three of the new initiatives - short-term lease arrangement, combined loan programme and the extended loan term facility took effect yesterday, while the contributions for deposit facility will not be accessible until April 10, 2010. The implementation of the fifth initiative - the shared equity facility - will be announced at a later date.
Source
Senior NHT officials, who made the announcement yesterday, said hard-pressed contributors may instead enter into a three-year lease agreement with the Trust under what has been dubbed a Short-Term Lease Facility.
During this period, the contributor will be required to pay 15 per cent of the property cost in monthly lease payments. At the end of three years, the contributor will be converted to a NHT mortgagor, with access to the balance of the property's purchase price.
Managing director Earl Samuels told journalists yesterday that the NHT, like many institutions in Jamaica, had been impacted by the changing economic environment as many persons had either lost jobs or were earning less in real terms as a result of inflation.
"Irrespective of what is happening, people are still in need of shelter, and the Trust has been wrestling with the problem of providing affordable housing for its contributors even in the midst of shrinking incomes and rising construction costs," said Samuels.
"We're not saying these initiatives will be the answer to everyone's problem, but it's our hope that some of our contributors who are hard-pressed to meet our loan requirements will be able to find homeownership opportunities in some of the initiatives introduced."
The other four initiatives announced yesterday at the NHT's corporate offices in Kingston were Shared Equity Loan Arrangement, Combined Loan Programme, Use of NHT contributions to meet loan-funding shortfall and an extension in maximum long-term loans.
. The Shared Equity Loan Arrangement is designed for contributors who cannot afford the full or subsidised price of an NHT scheme unit and allows successful applicants to jointly share ownership of their units with the NHT. Applicants are required to own at least a 60 per cent stake in the property and can purchase the NHT's share at any time.
. The Trust's revised Combined Loan Policy allows spouses who are qualified contributors to access a total combined loan of $7 million.
. By using their NHT contributions to make up loan-funding shortfalls programme, loan applicants can access up to 50 per cent of their contributions to the Trust to bridge funding gaps between the loan amount they can afford from the NHT and the price of the unit or lot they're purchasing.
. The extension in maximum loan term facility has seen the Trust extending its maximum loan repayment period from 30 to 40 years, or upon the contributor reaching age 70, whichever comes first.
Three of the new initiatives - short-term lease arrangement, combined loan programme and the extended loan term facility took effect yesterday, while the contributions for deposit facility will not be accessible until April 10, 2010. The implementation of the fifth initiative - the shared equity facility - will be announced at a later date.
Source
Wednesday, October 28, 2009
A confession from a home ownership advocate
The game of finding someone to pin the blame on for the US housing market collapse has gone on long enough. Are the bankers responsible? The analysts who didn’t see it coming? The McMansion mums who bought homes that they couldn’t afford? No. I did it. It was me. In 2003, I worked for one of those well-meaning organisations that promoted home ownership in low-income communities. Our line – like that of hundreds of non-profit organisations across the US – was that people who bought their own homes could gain increased financial security, freedom from the landlord … the American dream.
But I was not like the people running the organisation. I knew full well that buying a house could be a financial time bomb. I hadn’t drunk the home-ownership-leads-to-prosperity Kool-Aid. But I had drunk enough cola to rot my teeth. I led people down the road to financial collapse – and I did it for the dental insurance.
It all started out innocently enough. In March 2002, fresh out of college, I got a job at the Center for Economic and Policy Research (CEPR) in Washington, DC. Soon after, one of the co-directors, Dean Baker, began looking into soaring housing prices, and, by the end of the summer, he had begun railing against the housing bubble. “I just don’t think there’s any consequence to getting it wrong,” said Baker, during a talk at the New America Foundation in April 2003. He criticised the Fed, fund managers, economists, analysts and reporters for missing the stock-market bubble – and for keeping their jobs so that they could go straight on to miss the housing-market bubble. “I’m not saying I know when the [housing] bubble will end, but it will end. And it’s going to be really, really bad when it does.”
Dean’s argument was compelling: if house prices rose significantly faster than rents, that meant people were buying homes as an investment, not for shelter. As more people saw housing as an investment vehicle, prices would rise, even though the underlying value of the property would not. It was the textbook definition of a bubble – and even if others weren’t taking him seriously, I was. But after more than a year at CEPR, I had itchy feet. I had gone straight from the suburbs of Washington to an Ivy League university to an economic think-tank. For a fist-in-the-air activist, it was all a bit ivory tower. I wanted experience working with the people getting screwed by bad economic policy before – inevitably, I assumed – I spent my life as a policy wonk.
So, like any good leftie from a privileged background, I started my job search on idealist.org, where I ran across a posting for an associate position at an Individual Development Account programme in Los Angeles. IDAs are an anti-poverty measure to encourage low-income individuals to buy “productive assets” – purchases meant to provide financial security for the future and encourage a habit of saving. The programmes encourage savings by providing financial education classes and “match savings”. In the case of the LA programme, for every $1 someone saved, up to $1,000, the person would receive a $4 match. Participants, who had to be referred through government-funded agencies serving low-income residents, could use the money to start a small business, go to school or buy a home. The buy-a-home option should have raised a red flag. But I was eager to get a “grass roots” job, and I reasoned that people who met the programme’s incredibly low-income requirements – no more than about $36,200 per year for a family of four – were in no position to buy a home, $5,000 in savings or not.
So I wiped the problem from my mind, unaware that easing lending standards would make loans accessible to people who would never have qualified for a mortgage before. Besides, the job sounded great. I pictured myself giving financial advice and seeing my work have an impact on real people. I composed a letter declaring my dedication to “reducing persistent and cyclical poverty through asset development”, and applied for the job. After a series of phone interviews, I was hired as a financial counsellor and flew out to LA to get a sense of the place.
The Community Financial Resource Center (CFRC) is located in South Los Angeles – formerly known as South Central, a name that conjures up images of gangs and riots. The almost-windowless building stood across from a windowless food-aid office. Barbed wire protected the parking lot. The McDonald’s on the corner was just a block away from a cheque-cashing store. Cars poured down the street, but no one braved the muggy air: the sidewalks were desolate.
The heavy metal gate was open, so I walked into the centre’s vestibule. My new managers gave me a tour of the office and took me to lunch. By the time we returned, police vans had surrounded a building across the street and a police helicopter circled over it. “Well,” I thought, “I was looking for grass roots, and I found it.” I took the job.
Source
But I was not like the people running the organisation. I knew full well that buying a house could be a financial time bomb. I hadn’t drunk the home-ownership-leads-to-prosperity Kool-Aid. But I had drunk enough cola to rot my teeth. I led people down the road to financial collapse – and I did it for the dental insurance.
It all started out innocently enough. In March 2002, fresh out of college, I got a job at the Center for Economic and Policy Research (CEPR) in Washington, DC. Soon after, one of the co-directors, Dean Baker, began looking into soaring housing prices, and, by the end of the summer, he had begun railing against the housing bubble. “I just don’t think there’s any consequence to getting it wrong,” said Baker, during a talk at the New America Foundation in April 2003. He criticised the Fed, fund managers, economists, analysts and reporters for missing the stock-market bubble – and for keeping their jobs so that they could go straight on to miss the housing-market bubble. “I’m not saying I know when the [housing] bubble will end, but it will end. And it’s going to be really, really bad when it does.”
Dean’s argument was compelling: if house prices rose significantly faster than rents, that meant people were buying homes as an investment, not for shelter. As more people saw housing as an investment vehicle, prices would rise, even though the underlying value of the property would not. It was the textbook definition of a bubble – and even if others weren’t taking him seriously, I was. But after more than a year at CEPR, I had itchy feet. I had gone straight from the suburbs of Washington to an Ivy League university to an economic think-tank. For a fist-in-the-air activist, it was all a bit ivory tower. I wanted experience working with the people getting screwed by bad economic policy before – inevitably, I assumed – I spent my life as a policy wonk.
So, like any good leftie from a privileged background, I started my job search on idealist.org, where I ran across a posting for an associate position at an Individual Development Account programme in Los Angeles. IDAs are an anti-poverty measure to encourage low-income individuals to buy “productive assets” – purchases meant to provide financial security for the future and encourage a habit of saving. The programmes encourage savings by providing financial education classes and “match savings”. In the case of the LA programme, for every $1 someone saved, up to $1,000, the person would receive a $4 match. Participants, who had to be referred through government-funded agencies serving low-income residents, could use the money to start a small business, go to school or buy a home. The buy-a-home option should have raised a red flag. But I was eager to get a “grass roots” job, and I reasoned that people who met the programme’s incredibly low-income requirements – no more than about $36,200 per year for a family of four – were in no position to buy a home, $5,000 in savings or not.
So I wiped the problem from my mind, unaware that easing lending standards would make loans accessible to people who would never have qualified for a mortgage before. Besides, the job sounded great. I pictured myself giving financial advice and seeing my work have an impact on real people. I composed a letter declaring my dedication to “reducing persistent and cyclical poverty through asset development”, and applied for the job. After a series of phone interviews, I was hired as a financial counsellor and flew out to LA to get a sense of the place.
The Community Financial Resource Center (CFRC) is located in South Los Angeles – formerly known as South Central, a name that conjures up images of gangs and riots. The almost-windowless building stood across from a windowless food-aid office. Barbed wire protected the parking lot. The McDonald’s on the corner was just a block away from a cheque-cashing store. Cars poured down the street, but no one braved the muggy air: the sidewalks were desolate.
The heavy metal gate was open, so I walked into the centre’s vestibule. My new managers gave me a tour of the office and took me to lunch. By the time we returned, police vans had surrounded a building across the street and a police helicopter circled over it. “Well,” I thought, “I was looking for grass roots, and I found it.” I took the job.
Source
Thursday, October 15, 2009
Housing more affordable than a year ago, RBC report says
An RBC Economics report on home ownership released Wednesday indicates housing is more affordable than it was a year ago. But the report, which spans the April-to-June second quarter of 2009, may already be dated, as housing prices have edged up during the summer months.
Even the report itself admits its affordability figure may have bottomed out.
"This restorative phase of the affordability cycle is likely running out of steam," the nine-page report stated in its second paragraph. "The two major contributors to the significant improvement during the past year or so -- the decline in mortgage rates and the drift down in prices -- appear to have reached turning points."
In B.C., second-quarter homeownership costs fell in all four areas the survey measures. (RBC Affordability captures the proportion of pre-tax household income required to meet costs of owning a home, including mortgage payments, property taxes and utilities.)
Home ownership costs for a detached bungalow fell 11.3 percentage points from the same period in 2008, to 58.4 per cent. Standard two-storey house costs fell 12.8 points to 64.4 per cent, standard townhouse costs dropped 7.6 points to 45.6 per cent, and standard condominium costs fell 6.2 points to 32.7 per cent.
For the quarter, the drop in B.C. was not as dramatic, falling just 0.7 of a percentage point for detached bungalows, 0.9 point for two-storeys, 1.0 point for townhouses and 0.1 point for condominiums.
"While the cumulative declines in the past five quarters have been the sharpest since 1991, the latest levels are still significantly above long-term averages, suggesting that affordability in the province has yet to be fully restored," the report said.
And with housing prices rising across the province in late summer, it is unlikely we will see further drops in this measurement. Vancouver house prices today are about seven per cent higher than they were at the most affordable time of the three-month study period.
"We've reversed our trend of increasing affordability and we are going the other way," says Tsur Somerville, director of the Centre for Urban Economics and Real Estate at the University of B.C.'s Sauder School of Business.
Throughout the spring and summer, sales of existing homes were up 125 per cent over the low point early this year in the province. In Vancouver, sales of existing homes through to the end of June are three times what they were at the end of 2008, which marked a 19-year low.
The huge increase in home-buying in the Vancouver area is difficult to fathom, Somerville said.
"The craziness doesn't make sense, because that happens either when the economy is going gangbusters or when there is a speculative frenzy, and we're not [experiencing] either of those," he said.
Source
Even the report itself admits its affordability figure may have bottomed out.
"This restorative phase of the affordability cycle is likely running out of steam," the nine-page report stated in its second paragraph. "The two major contributors to the significant improvement during the past year or so -- the decline in mortgage rates and the drift down in prices -- appear to have reached turning points."
In B.C., second-quarter homeownership costs fell in all four areas the survey measures. (RBC Affordability captures the proportion of pre-tax household income required to meet costs of owning a home, including mortgage payments, property taxes and utilities.)
Home ownership costs for a detached bungalow fell 11.3 percentage points from the same period in 2008, to 58.4 per cent. Standard two-storey house costs fell 12.8 points to 64.4 per cent, standard townhouse costs dropped 7.6 points to 45.6 per cent, and standard condominium costs fell 6.2 points to 32.7 per cent.
For the quarter, the drop in B.C. was not as dramatic, falling just 0.7 of a percentage point for detached bungalows, 0.9 point for two-storeys, 1.0 point for townhouses and 0.1 point for condominiums.
"While the cumulative declines in the past five quarters have been the sharpest since 1991, the latest levels are still significantly above long-term averages, suggesting that affordability in the province has yet to be fully restored," the report said.
And with housing prices rising across the province in late summer, it is unlikely we will see further drops in this measurement. Vancouver house prices today are about seven per cent higher than they were at the most affordable time of the three-month study period.
"We've reversed our trend of increasing affordability and we are going the other way," says Tsur Somerville, director of the Centre for Urban Economics and Real Estate at the University of B.C.'s Sauder School of Business.
Throughout the spring and summer, sales of existing homes were up 125 per cent over the low point early this year in the province. In Vancouver, sales of existing homes through to the end of June are three times what they were at the end of 2008, which marked a 19-year low.
The huge increase in home-buying in the Vancouver area is difficult to fathom, Somerville said.
"The craziness doesn't make sense, because that happens either when the economy is going gangbusters or when there is a speculative frenzy, and we're not [experiencing] either of those," he said.
Source
Monday, September 28, 2009
Home ownership more affordable for the fifth straight quarter but costs could creep up again soon, RBC says
VANCOUVER, B.C. — It is becoming even more affordable to own a home across Canada these days but the costs could creep up again soon as the real estate market rebounds, a new report shows.
RBC senior economist Robert Hogue said home ownership became more affordable for the fifth straight quarter in Canada, and has been restored to pre-housing boom levels.
But Hogue warns the trend of increased affordability, driven by low interest rates and falling home prices as a result of the recession, could soon reverse as the real-estate market recovers.
"Overall in the second quarter we are still seeing some improvement in affordability. That being said, We are probably at the tail end of that phase of the market," Hogue said after releasing the quarterly RBC Housing Affordability survey.
Hogue said house prices are firming up in many parts of Canada and mortgage rates are not expected to fall further.
But Hogue said home owners shouldn't expect a steep jump in the cost of home ownership either. That's because of high unemployment and Canada's slow crawl out of the recession.
"That will weigh a bit on consumer confidence," he said.
The RBC index examines the proportion of pre-tax household income needed to service the costs of owning a home, such as a mortgage, property taxes and utilities.
During the second quarter, the national index fell to 39.1 per cent for a detached bungalow, 31.5 per cent for a standard townhouse, 26.9 per cent for a standard condo and 44.4 per cent for a standard two-storey home.
The report found that measures fell nationally by 0.4 percentage points for standard condominiums and 0.6 per cent for two-storey homes, detached bungalows and standard townhouses.
RBC calculates its index numbers based on an estimated average home price and estimated qualifying income that varies by location and type of property.
Vancouver remained the most expensive place to own a home, where 63.4 per cent of average household income went into home ownership costs, Hogue said.
"The cumulative declines in home ownership costs over the past five quarters have been the sharpest since 1991, which has helped revitalize B.C.'s resale housing market," Hogue said.
"Nonetheless, affordability levels are still above long-term averages, which suggests that affordability in B.C. has yet to be fully restored."
In Toronto, Hogue found 46.5 per cent of household income went towards owning a home, followed by 38.6 per cent in Ottawa, 37.3 per cent in Montreal and 35.7 per cent in Calgary.
"The latest figures show property values are still generally languishing in Calgary, but we believe that, as confidence gradually returns in the city, the stage will be set for a turnaround," added Hogue.
While the costs of owing a home are expected to rise again, Hogue doesn't believe that will stop the "impressive resurgence" in the housing market in recent months.
"Supply of properties for sale is dropping as demand bounces back, which is working to heat up prices again in many parts of the country," he said.
More signs of a real estate rebound came Wednesday when the national housing agency said new home construction increased 12 per cent in August compared to the previous month.
Canada Mortgage and Housing Corp. said the annual rate of housing starts increased to 150,400 units in August from 134,200 in July, with improvements in both the single-and multiple-housing segments.
August's annual rate of urban starts increased by 56 per cent in British Columbia, 16.1 per cent in the Prairies, 13.8 per cent in Ontario, 9.6 per cent in Atlantic Canada, and 2.5 per cent in Quebec.
BMO Capital Markets economist Robert Kavcic said the better-than-expected starts show the Canadian housing sector "is fully in recovery mode."
Kavcic said both sectors have now risen in four of the past six months, with singles sitting at the highest level since the end of 2008.
"While residential building permits have rebounded, resurgent existing home sales have been the real show-stopper," Kavcic said.
He said sales tend to lead starts by a few months, and have surged by more than 60 per cent through July from their winter low.
"With early reports pointing to further strength in August, watch for continued improvement in residential construction activity in the months ahead," he said.
Source
RBC senior economist Robert Hogue said home ownership became more affordable for the fifth straight quarter in Canada, and has been restored to pre-housing boom levels.
But Hogue warns the trend of increased affordability, driven by low interest rates and falling home prices as a result of the recession, could soon reverse as the real-estate market recovers.
"Overall in the second quarter we are still seeing some improvement in affordability. That being said, We are probably at the tail end of that phase of the market," Hogue said after releasing the quarterly RBC Housing Affordability survey.
Hogue said house prices are firming up in many parts of Canada and mortgage rates are not expected to fall further.
But Hogue said home owners shouldn't expect a steep jump in the cost of home ownership either. That's because of high unemployment and Canada's slow crawl out of the recession.
"That will weigh a bit on consumer confidence," he said.
The RBC index examines the proportion of pre-tax household income needed to service the costs of owning a home, such as a mortgage, property taxes and utilities.
During the second quarter, the national index fell to 39.1 per cent for a detached bungalow, 31.5 per cent for a standard townhouse, 26.9 per cent for a standard condo and 44.4 per cent for a standard two-storey home.
The report found that measures fell nationally by 0.4 percentage points for standard condominiums and 0.6 per cent for two-storey homes, detached bungalows and standard townhouses.
RBC calculates its index numbers based on an estimated average home price and estimated qualifying income that varies by location and type of property.
Vancouver remained the most expensive place to own a home, where 63.4 per cent of average household income went into home ownership costs, Hogue said.
"The cumulative declines in home ownership costs over the past five quarters have been the sharpest since 1991, which has helped revitalize B.C.'s resale housing market," Hogue said.
"Nonetheless, affordability levels are still above long-term averages, which suggests that affordability in B.C. has yet to be fully restored."
In Toronto, Hogue found 46.5 per cent of household income went towards owning a home, followed by 38.6 per cent in Ottawa, 37.3 per cent in Montreal and 35.7 per cent in Calgary.
"The latest figures show property values are still generally languishing in Calgary, but we believe that, as confidence gradually returns in the city, the stage will be set for a turnaround," added Hogue.
While the costs of owing a home are expected to rise again, Hogue doesn't believe that will stop the "impressive resurgence" in the housing market in recent months.
"Supply of properties for sale is dropping as demand bounces back, which is working to heat up prices again in many parts of the country," he said.
More signs of a real estate rebound came Wednesday when the national housing agency said new home construction increased 12 per cent in August compared to the previous month.
Canada Mortgage and Housing Corp. said the annual rate of housing starts increased to 150,400 units in August from 134,200 in July, with improvements in both the single-and multiple-housing segments.
August's annual rate of urban starts increased by 56 per cent in British Columbia, 16.1 per cent in the Prairies, 13.8 per cent in Ontario, 9.6 per cent in Atlantic Canada, and 2.5 per cent in Quebec.
BMO Capital Markets economist Robert Kavcic said the better-than-expected starts show the Canadian housing sector "is fully in recovery mode."
Kavcic said both sectors have now risen in four of the past six months, with singles sitting at the highest level since the end of 2008.
"While residential building permits have rebounded, resurgent existing home sales have been the real show-stopper," Kavcic said.
He said sales tend to lead starts by a few months, and have surged by more than 60 per cent through July from their winter low.
"With early reports pointing to further strength in August, watch for continued improvement in residential construction activity in the months ahead," he said.
Source
Monday, September 14, 2009
Safe at Home
THE financial crisis has given rise to all sorts of wrongheaded ideas, among which is the notion that we should not subsidize the “losers” who can’t make their mortgage payments. In fact, the solution to our troubles is not to restrict homeownership, but to expand it.
The timing is right. Now that prices have collapsed in many areas, low-income Americans might be able to afford to purchase homes for the first time in years. Sales of new homes in June were down 21 percent from last year. This would seem an ideal time to encourage low-income families to buy homes — if we weren’t haunted by misconceptions about the roots of the subprime mortgage crisis.
This “blame the victim” mentality is hardly new. It goes back to the 1960s, when the anthropologist Oscar Lewis wrote an article whose title took root in the American public consciousness: “The Culture of Poverty.” His basic argument was that poor people adopt certain practices that differ from those of “mainstream” society in order to survive. These might include illegal work, multifamily households or serial relationships in place of marriage. Once these survival strategies are in place, the argument goes, they take on a life of their own and lead to missed opportunities.
The popularity of the “culture of poverty” theory has had ups and downs over the decades; for example, in the 1980s the scholar Charles Murray argued that the poor responded as rationally as everyone else to economic incentives.
But Lewis’s theories seem to have gained new life in the notion that a certain stratum of Americans just aren’t capable of homeownership, and that the increase in homeownership rates contributed to the real estate bust. The “natural” rate should be around 60 percent of American households, some analysts say, not the 70 percent it reached in 2004. That’s an unfortunate argument, because owning a home can be one of the best ways for a poor family to save and accumulate assets: recent history aside, the value of a house does typically rise, and its owner avoids paying rent and gets a tax break.
We could improve the housing market as well as the security of poor families by making homeownership more attainable. Currently, the biggest policy to support homeownership other than the mortgage interest deduction is the Federal Housing Administration’s mortgage program, which works by insuring loans made to buyers through traditional lenders (that is, it decreases risk to lending agencies by underwriting the loan). However, many of the most disadvantaged Americans, and minorities in particular, do not qualify for F.H.A. loans because of their low net worth and other factors.
Into this breach stepped a North Carolina organization called Self-Help. In 1998, Self-Help received a $50 million grant from the Ford Foundation. The money was used to insure the mortgages of low-wealth families that aspired to homeownership, but had trouble getting loans in the private market. More than $2 billion in mortgages were guaranteed over five years, making homeownership possible for 27,000 families that might not have qualified for conventional loans.
This experiment of sorts provided evidence that there was a market failure in mainstream lending that was shutting out deserving borrowers. The foreclosure rate of lenders participating in the program was below the national average. This tells scholars of finance that something is not working in the traditional loan market. Many borrowers who should have been able to qualify for traditional mortgages have been shunted into the subprime market, where higher interest rates and other disadvantageous terms produce a self-fulfilling tendency of loan default.
By expanding the Self-Help program “to scale” — by underwriting mortgages for people who are now excluded from F.H.A. — the government could not only support affordable refinancing of existing mortgages but could also extend the dream of homeownership to households now shut out of the market.
Instead of critiquing low-income buyers who may have made reasonable calculations in an upbeat housing market, we should focus on building a more comprehensive system to aid low-income purchasers and repair the housing market in the process. Otherwise, we are squandering an opportunity to move past ill-formed moral discourse about poverty and its causes.
Source
The timing is right. Now that prices have collapsed in many areas, low-income Americans might be able to afford to purchase homes for the first time in years. Sales of new homes in June were down 21 percent from last year. This would seem an ideal time to encourage low-income families to buy homes — if we weren’t haunted by misconceptions about the roots of the subprime mortgage crisis.
This “blame the victim” mentality is hardly new. It goes back to the 1960s, when the anthropologist Oscar Lewis wrote an article whose title took root in the American public consciousness: “The Culture of Poverty.” His basic argument was that poor people adopt certain practices that differ from those of “mainstream” society in order to survive. These might include illegal work, multifamily households or serial relationships in place of marriage. Once these survival strategies are in place, the argument goes, they take on a life of their own and lead to missed opportunities.
The popularity of the “culture of poverty” theory has had ups and downs over the decades; for example, in the 1980s the scholar Charles Murray argued that the poor responded as rationally as everyone else to economic incentives.
But Lewis’s theories seem to have gained new life in the notion that a certain stratum of Americans just aren’t capable of homeownership, and that the increase in homeownership rates contributed to the real estate bust. The “natural” rate should be around 60 percent of American households, some analysts say, not the 70 percent it reached in 2004. That’s an unfortunate argument, because owning a home can be one of the best ways for a poor family to save and accumulate assets: recent history aside, the value of a house does typically rise, and its owner avoids paying rent and gets a tax break.
We could improve the housing market as well as the security of poor families by making homeownership more attainable. Currently, the biggest policy to support homeownership other than the mortgage interest deduction is the Federal Housing Administration’s mortgage program, which works by insuring loans made to buyers through traditional lenders (that is, it decreases risk to lending agencies by underwriting the loan). However, many of the most disadvantaged Americans, and minorities in particular, do not qualify for F.H.A. loans because of their low net worth and other factors.
Into this breach stepped a North Carolina organization called Self-Help. In 1998, Self-Help received a $50 million grant from the Ford Foundation. The money was used to insure the mortgages of low-wealth families that aspired to homeownership, but had trouble getting loans in the private market. More than $2 billion in mortgages were guaranteed over five years, making homeownership possible for 27,000 families that might not have qualified for conventional loans.
This experiment of sorts provided evidence that there was a market failure in mainstream lending that was shutting out deserving borrowers. The foreclosure rate of lenders participating in the program was below the national average. This tells scholars of finance that something is not working in the traditional loan market. Many borrowers who should have been able to qualify for traditional mortgages have been shunted into the subprime market, where higher interest rates and other disadvantageous terms produce a self-fulfilling tendency of loan default.
By expanding the Self-Help program “to scale” — by underwriting mortgages for people who are now excluded from F.H.A. — the government could not only support affordable refinancing of existing mortgages but could also extend the dream of homeownership to households now shut out of the market.
Instead of critiquing low-income buyers who may have made reasonable calculations in an upbeat housing market, we should focus on building a more comprehensive system to aid low-income purchasers and repair the housing market in the process. Otherwise, we are squandering an opportunity to move past ill-formed moral discourse about poverty and its causes.
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Tuesday, September 1, 2009
Revisiting the American Dream
WASHINGTON - In most towns and cities across the country, owning a little patch of real estate probably embodies the central tenet of the American Dream. It’s been that way for generations, going back to the nation’s agrarian roots.
After World War II, the federal government gave homeownership a huge boost by offering returning veterans assistance with getting a mortgage. When added to the home mortgage-interest deduction, the veterans’ benefit led to the suburbanization of cities around the country.
Many political leaders continue to believe that federal incentives for homeownership are in the national interest. Civic boosters say homeownership leads to greater stability and civic participation; you get your own home, you maintain your property, you register to vote, you care more about your community.
Or so the thinking does.
But the housing meltdown has led some economists to question the federal government’s ongoing mission of encouraging homeownership. Though boosting rates of owner-occupied housing has retained its appeal through a succession of Democratic and Republican presidents, some farsighted thinkers are beginning to wonder whether that idea makes sense in a modern economy of highly mobile workers.
Let’s look beyond the housing bust for a moment. While it has forced the economy into a steep recession, the housing market will eventually recover.
Meanwhile, however, the economy is undergoing a permanent change of seismic proportions. The typical college senior will have several jobs - perhaps several careers - in his or her lifetime. That will require not only a commitment to continuing education and retraining, but also a willingness to relocate whenever the economy requires it.
Homeownership restricts the ability to pick up and go when a new job beckons. Some economists have even argued that the unemployment rate in certain areas - such as Michigan, where the rate now hovers around 15 percent - would be lower if homeownership were not restricting workers’ ability to relocate to a state with more opportunities for employment.
I have a personal interest in the issue of housing and mobility since my move to Washington all but assured that I’d be burdened with a new mortgage up here even as I try to sell a house back there - in a barely thawing market. My circumstances are not as dire as those of some would-be sellers: I’ve owned the house since 1992; I’ve kept my home equity loans manageable; I’ve paid down the principal significantly.
Yet, the experience has left me wondering about the advantages of homeownership. I’m currently a renter in a lovely Washington neighborhood; in fact, because of its transient population of political aides, diplomats and military personnel, Washington offers a network of desirable rental houses. After I sell my Atlanta house, I’m not sure I’ll rejoin the community of homeowners.
Or maybe I will. My parents, who bought their first home in the 1950s as a young married couple, believed in homeownership as the foundation of financial stability. (Of course, they weren’t members of a mobile generation. My father was born and died in the same small town; my mother still lives there.)
Source
After World War II, the federal government gave homeownership a huge boost by offering returning veterans assistance with getting a mortgage. When added to the home mortgage-interest deduction, the veterans’ benefit led to the suburbanization of cities around the country.
Many political leaders continue to believe that federal incentives for homeownership are in the national interest. Civic boosters say homeownership leads to greater stability and civic participation; you get your own home, you maintain your property, you register to vote, you care more about your community.
Or so the thinking does.
But the housing meltdown has led some economists to question the federal government’s ongoing mission of encouraging homeownership. Though boosting rates of owner-occupied housing has retained its appeal through a succession of Democratic and Republican presidents, some farsighted thinkers are beginning to wonder whether that idea makes sense in a modern economy of highly mobile workers.
Let’s look beyond the housing bust for a moment. While it has forced the economy into a steep recession, the housing market will eventually recover.
Meanwhile, however, the economy is undergoing a permanent change of seismic proportions. The typical college senior will have several jobs - perhaps several careers - in his or her lifetime. That will require not only a commitment to continuing education and retraining, but also a willingness to relocate whenever the economy requires it.
Homeownership restricts the ability to pick up and go when a new job beckons. Some economists have even argued that the unemployment rate in certain areas - such as Michigan, where the rate now hovers around 15 percent - would be lower if homeownership were not restricting workers’ ability to relocate to a state with more opportunities for employment.
I have a personal interest in the issue of housing and mobility since my move to Washington all but assured that I’d be burdened with a new mortgage up here even as I try to sell a house back there - in a barely thawing market. My circumstances are not as dire as those of some would-be sellers: I’ve owned the house since 1992; I’ve kept my home equity loans manageable; I’ve paid down the principal significantly.
Yet, the experience has left me wondering about the advantages of homeownership. I’m currently a renter in a lovely Washington neighborhood; in fact, because of its transient population of political aides, diplomats and military personnel, Washington offers a network of desirable rental houses. After I sell my Atlanta house, I’m not sure I’ll rejoin the community of homeowners.
Or maybe I will. My parents, who bought their first home in the 1950s as a young married couple, believed in homeownership as the foundation of financial stability. (Of course, they weren’t members of a mobile generation. My father was born and died in the same small town; my mother still lives there.)
Source
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