Friday, March 23, 2007
It’s time to strengthen our nation’s mortgage loan disclosure laws. The boom in foreclosures –- perhaps as high as one in five loans made in Cleveland in 2005 –- shows that many Americans have taken on mortgages that they should not have.
When I was a credit journalist back in the ‘80s, it seemed that laws such as the Fair Credit Reporting Act adequately informed consumers of simple facts such as the difference between the interest rate and the annual percentage rate. But the rise of complicated loan deals, which is in large part to blame for the foreclosure problem, shows that too many Americans do not realize the full implications of the loans that they agree to. If anyone has perused the cable TV “deals” they get in the mail, loan-term payment contracts can be very complicated, and that “teaser” deals can be very tempting. It takes some sophistication to figure out what all the details mean in the future.
Have lenders been making “sub-prime” loans with the expectation (or even hope?) that many borrowers will lose their mortgaged homes through foreclosure? Back when I was a journalist, lending representatives convinced me that the hassles and costs of dealing with foreclosure and repossession were so great that no sensible lender would make a loan that it expected to have a great risk of default. With today’s stories, however, I am no longer so convinced.
Should the fact that some unsophisticated borrowers didn’t understand what they were agreeing to justify changing the disclosure laws to make matters more cumbersome for everyone? There is no easy answer to this question. The matter is also complicated by anecdotal evidence from places such as Cleveland and its suburbs that a large percentage of the foreclosures are occurring to homebuyers who are African American.
From the complexity of the loan agreements that I hear about, however, I am convinced that the federal credit laws need to be strengthened. In appropriate instances, government should play the role of acting paternally to slow Americans down and make sure they do not rush into deals that they do not fully understand.
The New York Times reports today that in the Cleveland suburb of Euclid, whose ordinances back in the 1920s led to the courts’ green light to land use regulation, there are hundreds of houses being foreclosed and hundreds more that are vacant. The problem of empty houses is so acute that local governments are acting to prevent vandalism and local panic.
It’s time for the federal government to respond, perhaps with a new law requiring much greater and plainer disclosure of terms, and perhaps with some outright bans on certain loan terms.
Thursday, March 22, 2007
As globalization advances, variances in the world’s land use laws converge to a global mean. It's another example of the idea of "best practices" changing behavior across the planet. Here are two interesting stories from different parts of the globe.
First, China is becoming less communist, as it is changing its laws to allow for more protections of what is in effect private property. Included among the new rights are powers granted to homeowners associations to work collectively to enforce common private interests.
Second, the European Union is beginning to pressure Germany to impose speed limits on its famously unregulated autobahns. Slowing down cars would cut gas consumption and cut the emission of greenhouse gasses. Many Germans are vigorously opposed, of course, to taking away their special privilege.
Wednesday, March 21, 2007
One of the sidebars of the great 1995-2006 housing price boom is that rental units also experienced a sharp increase in costs. According to a stat-filled article in Apartment Finance Today magazine, an astonishing 44 percent of renters now pay more than half of their income on housing. In addition to higher prices, one reason for this phenomenon may be that so many upwardly striving people in recent years made the jump to homeownership; the homeownership rate in the United States is now nearly 69 percent, up from 64 percent in 1994 -- partial proof of the theory that the housing price boom was largely demand-driven.
With all the ominous news about a boom in defaults on mortgages loans granted to people who perhaps shouldn't have qualified, we may soon see a return to more Americans accepting renting as a long-term housing choice.
What implications does this have for land use policy? The message is straightforward -- governments should do more to permit the construction of apartment buildings, especially in built-up sections of metro areas. Why should law allow more apartments? The reasons are numerous, but here are some: (1) With more than 300 million Americans (more than double the number of 1950), more than half of whom live in large metro areas, we have to accept the idea of denser housing. (2) With growing concern over environmental protection, denser housing is the best solution to "sprawl." (3) With much of America's population growth today arising from immigration, the new Americans are perhaps more likely to accept an apartment as their "American Dream" than did previous generations. (4) With fewer children in most families, and with those children more likely to spend their free time typing on a laptop than playing in the back yard, apartment-living increasingly fits with today's culture.
One of the first ways to start a return to apartments is for governments -- cities and suburbs, perhaps with prodding from state governments -- to loosen outmoded zoning laws to allow for more apartment construction. Let's get with the 21st century …
Tuesday, March 20, 2007
A good test our nation's supposed commitment to public transportation is how we facilitate -- or rather don't facilitate -- its use by our most protected members of society.
This spring break I'm visiting my parents in my hometown of Silver Spring, Md. Every school day at about 3 p.m. some fascinating phenomena occur. The first is that an enormous number of vehicles head out to pick up kids from the local public schools, in numbers far greater than the handful of parents who helped kids home way back when I was in school. This phenomenon -- which leads to gridlock around many schools these days -- is attributable in part to the paranoia surrounding today's kids.
Across the street from the high school, however, another phenomenon appears -- and this one flies in the face of our child-coddling culture. Across the major highway from the school stands a bus stop. Because my home county now holds some school choice, a large number of kids line up for the bus every afternoon. The bus stop is wedged on a narrow sidewalk between the busy highway, on one side, and the parking lot of an office complex, on the other. There is no shelter, and there are no seats for the kids waiting for their bus to take them home. The contrast couldn't be more striking between the students being picked up by their SUV-driving parents and the group of bus-riding kids (largely but not exclusively black and Latino kids), squeezing themselves onto the narrow sidewalk space, enduring rain (these are high school kids, so of course no one has an umbrella), snow, heat, and cold. Why doesn't our kid-protecting society do something to make their waits safer and more comfortable? The answer says volumes both our social segregation and our supposed commitment to public transportation.
Monday, March 19, 2007
It used to be the case that the standard assumption about rural land use planning was that unsophisticated governments were typically within the control of powerful business interests. But times are a-changing all across the nation, even in the rural South. It's been nearly 20 years since Robert Bullard wrote in "Dumping in Dixie" about the excessive amount of environmentally risky land uses in the rural South, especially in African American communities.
In South Carolina, counties are successively changing their zoning and planning laws to try to stop the creation of new waste landfills, even as the state environmental authority grants permits. Lawsuits have followed. An optimistic way to look at these legal battles is as local communities standing up to being "dumped" on. A less savory way to view them is as more communities realizing the potential ability to push unwanted land uses to other, less-organized counties, or perhaps even to other states.