Thursday, August 30, 2007
Students often come to KU in eager anticipation of becoming adults and enjoying the responsibilities that come with that. By graduation, some dread the “real world” burdens they expect and long for the carefree days of mom, dad and a dean. Although some state and local governments are eager to step into the role of a benevolent protector, this paternalism is belittling and unjust and true adults would do well to resist.
Buying a house has always been a large responsibility and, as housing prices rose through the last decade, it has also become an increasingly expensive one. Many have found themselves priced out of mortgages with traditional rates and terms since their more modest incomes cast doubt on their abilities to make climbing mortgage payments. Because of this risk, lenders require more of a return on lending to them. Thus the proliferation of sub-prime lending and the subsequent widespread defaulting as risky borrowers live up to their label.
In true American fashion, though, government agencies are rushing to save borrowers from themselves. One state in particular, Illinois, has attempted to institute a program requiring borrower education before signing on for a sub-prime loan. As outlined in the Wall Street Journal, people in particular areas will need to meet with a credit counselor before agreeing to a loan with nonstandard features.
The justifications politicians give all smack of arrogance. “People aren’t sure what they’re signing up for,” President Bush said.
Illinois House Speaker Michael Madigan said, “Our goal is to stop the abuse of unsophisticated people.” The “solution” involves creating a monopoly for a few government-approved counselors who have expressed fear they can’t accommodate the expected number of potential clients.
Illinois already has laws restricting unfair credit practices from lenders. If there are new schemes being used, these laws can be updated to include them. Giving the consumer the impression that government is looking out for him will ultimately make the market more risky as lenders feel no need to monitor something that is supposedly already being managed.
Few students are in the real estate market while in school, but as any recent graduate will testify, it will happen sooner than you think. With such a large purchase comes a large responsibility to know and understand the issues. A house should not be an impulse buy, and no one should be surprised that it requires research. For nearly all Americans, their homes are the most expensive items they will ever buy. As we graduate and move into the dreaded “real world,” we should accept this responsibility instead of looking for a government agency to manage it for us.
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