Protecting home buyers from themselves


In a day and age in which we should be hoping for less government involvement in our lives, rather than more, here come the feds trying to protect home buyers from themselves.

It seems that many are under the impression that the "subprime mortgage crisis" is largely due to predatory lending. That is, somehow mortgage lenders are twisting the arms of consumers and getting them to buy too-big houses on too-little budgets.

Today the Federal Reserve will try to protect home buyers from predatory lenders. Although the proposed rules are designed to protect those in the subprime markets, it would apply to all loans made by all mortgage lenders.

Potential features of the rule include restrictions against penalties for subprime borrowers who pay off their loans early, requiring lenders to make buyers escrow money for taxes and insurance, barring or limiting "stated income" loans which don't require borrowers to prove how much money they make, and creating new standards for deciding how big of a mortgage a consumer is eligible for.

I contend that homeowners in mortgage trouble were either irresponsible or were taking a gamble that they could afford their mortgages once their interest rates went up. I don't think these new rules are necessarily bad in and of themselves, but I do think that home buyers need to own up to their (big) part in this mess. They need to be responsible with their money, and shouldn't rely on the government to protect them from themselves.