While the following article isn’t about New Jersey, the same question should be asked. Did we go too far?
In a sense, though a very qualified sense, Central Indiana has been a victim of its own success when it comes to home mortgage foreclosures.
Historically a leader both in the rate of homeownership and the frequency of reliance upon federally insured loans for buyers of modest income, the region also finds itself among the front-runners on the downside.
As the market-watching firm RealtyTrac reported Thursday, Metropolitan Indianapolis dropped from first place to third place nationally in foreclosure rates last year but had nothing to celebrate. Lenders took back 48,000 homes, up nearly 36 percent over 2005.
Who’s at fault? Who isn’t? Illegal loan scams that have made the headlines in recent months and led to multiple arrests certainly have cut a swath of blight as phantom financing led to abandonment and foreclosure.
However, far greater loss results from widespread activity that defies no law but too often defies good sense.
The decline in well-paying blue-collar jobs has been identified as a key culprit, and anyone can experience an unexpected drop in earning power. However, evidence shows that too many eager consumers are taking the plunge without sufficient earnings and reserves.
Lenders, sellers and builders are encouraging the gamblers by demanding too little in the way of resources and credit-worthiness and by offering a mish-mash of poorly-understood inducements such as adjustable rate mortgages whose eventual cost will outpace incomes. When layoffs or medical bills hit, families lose homes, neighborhoods lose value and taxpayers who back the government loans lose as well.
Joel Epstein, president of the Greater Indianapolis Mortgage Bankers Association, cites a nationwide push “to create a culture of homeownership” which has led to excess as well as success. “Did we as a lending industry and a real estate industry, in trying to get people into houses, maybe go too far in some cases? I would say yes. Were some people given the wrong kinds of loans? Yes. Were some people not ready to be in homes? Yes. Was the economy at fault? Yes.”