How To Limit Home Ownership For The Poor
A Scripps News op-ed refers to Professor Marcus G. Cole's article in the Cato Supreme Court Review about the ramifications of laws intended to remedy aspects of the current sub-prime mortgage lending crisis:
..., Professor Marcus Cole of the Stanford University Law School discusses the fallout of lending laws in Illinois.
Cole reports the following: "Instead of protecting hardworking would-be homeowners from predatory lending, the new law protected them from credit. Within just a few months more than 30 mortgage lenders refused to lend on homes purchased in the targeted zip codes. Those lenders determined to service these communities saw a rise in their costs, which translated into higher interest rates on their loans."
The purported cure was worse than the disease. Cole goes on to note that, "home sales in the designated zip codes dropped an average of 45 percent in just one month after the bill took effect. Home prices plummeted, draining relatively poor but hardworking people of what little equity they had in their homes."