Why Curtailed Mortgage Lending Is Bad For The Economy

Why Curtailed Mortgage Lending Is Bad For The Economy

When the subprime mortgage lending bubble burst, home loans went into default and foreclosure at an alarming rate; mortgage loans which were easy to get one day, were no longer available the next and home loan approval took on a whole new meaning. Even as home loan applications are still steadily coming in, their approval is no longer such a certainty as it was previously.

Decreased Mortgage Lending Leads To Decreased Property Tax Revenues

The problem with such a decrease in residential lending has had a most serious fiscal impact in the United States. Under a severe budget crisis, the failing mortgage industry is leading to home loans which are written off, properties that stay empty, and a lack of mortgage loans that prevent consumers from buying homes and paying property taxes. Without the property tax income, schools are grossly underfunded and a number of bond measures voted in a not too long ago now threaten to look at fiscal doom.

Should Lending Be Relaxed Once More?

Community activists are clamoring for a relaxation of the much more stringent mortgage lending rules. They claim that the difficulty in obtain home loans is harming minorities and also neighborhoods commonly associated with minority residency. On the other hand, those in charge of home loan approval cite the recent bank failures as justification for their decision to cast a much more scrutinizing eye on home loan applications.

There is no good answer to the dilemma and instead those in the lending industry are caught in the middle. Wishing they could grant loans, but forbidden to do so, they are protecting consumers from themselves while also preserving the investments of countless thousands who rely on the banks liquidity.