Magazine article Mortgage Banking

Worthy Goals

Magazine article Mortgage Banking

Worthy Goals

Article excerpt

Homeownership is not just a wealth-accumulation strategy. It is not just an alternative to renting. It is a personal milestone. An achievement of noteworthy proportions during a lifetime. It is a source of deep personal pride--and it matters.

Take, for example, when you are filling out those ubiquitous consumer surveys or applications for anything, and they ask you to check the box about whether you own or rent. Who hasn't felt the pang of pride if you can check the box that says "I own." It doesn't matter if you have owned for 50 years or five months. It is a shared badge of accomplishment for the newest Americans and the ones who have been here for years.

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This is one of the reasons why the mortgage industry should not be faulted for launching yet another period of incredible loan product innovation. It should be applauded. This is not the first time the industry has gone to the drawing board for products to solve widespread financing challenges that stood in the way of average Americans being able to buy homes.

In the hyper-inflationary years of the 1980s, many would-be homeowners could not have bought homes without the product innovation of adjustable-rate mortgages (ARMs). Rates were outrageously high at the time, just like prices are today. In both instances, the monthly payment needed to be tamed so that average Americans could buy homes. And it was the industry (actually the thrifts) that came up with the ARM solution. Did the product come out perfectly right out of the box in its first appearance on the market? Not really, but the industry refined it as it worked with private mortgage insurers and others, improving it in response to resulting loan performance. And today we are all better off for the innovation and experimentation that made runaway interest rates tolerable for the housing market going forward, whenever that tool is needed to maintain liquidity in the market. …

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