Redlining or Location Discriminatory Mortgages are paid for through higher general interest rates and thus have the effect of reducing housing affordability.
Man walks into a bank. Fills out a mortgage application. Banker says, "Oooh, too bad. If only the house were the one next door we could give you a better rate or more money. As it is you don't qualify." "What?! That's redlining! That's illegal!" "Nope, that's transit math. You see, banks are not private companies, we are required to follow some rules that are contrary to our best financial practices. Not to worry, we are still allowed to make a profit so our mandatory exposure is covered by raising other costs. In fact, if it weren't for our being forced to be overexposed for the house next to yours we could probably afford to loan a fair amount to both houses. You see son, this is a push-pull business. Prices respond to the differences in affordability."
Location Discriminatory Mortgages decrease affordability. Not only that, but LDMs are the tail wagging the dog. There is nothing in any enabling legislation at any level of government that covers preferential treatment for the purpose of assumed transit effectiveness.
LDMs and their cousin, Subsidized Unaffordable Housing (SUH), are attempts by government to do to the American housing environment what they did to American transit. Not too worry, housing is only the next target and it may not be too late to avoid the bullet. Government is currently preoccupied with doing to the education system what was done to transit and housing still has some time before more tentacles come to strangle home ownership.
This is a campaign of resistance to being socially engineered versus the forces of social engineering and is not really one of a contest of equal competing interests.
LEM qualifying locations are generally riskier choices based on historical data. LEMs are in effect rewarding poor choices. Now clearly this is a generalization and some LEM locations are going to prove good investments but if there are such indications then an LEM wouldn't be necessary since the property and purchaser(s) would qualify under the regular rules.
"Location efficient mortgage" is like "smart growth." Who would want a location inefficient mortgage or who would support dumb growth. Meaningless catch phrases, nothing more. Location discriminatory mortgages are the exactly descriptive phrase.
More than any objection to the actual policy I'm distinctly surprised at the willingness of people whose entire premise is supposedly fairness to run to unequal treatment as a first step when they agree with the intentions. I'm also wondering about the unintended consequences shoe that hasn't dropped. We in PAD know that government with good intentions ALWAYS results in unanticipated problems. Speculation; people will buy near transit, use more transit, pay less taxes to local government and eventually get cars. Result, normal traffic in a deliberately under-road served area with higher transit subsidies and lower taxable base.
Funny how the old VA loan policies that inadvertently used to favor new suburban housing were struck down as unfair by the very same people advocating this new version of redlining. (Red Line as in Los Angeles and Boston, etc.)
In case it isn't obvious, I know and I am willing to say out loud that LEMs are evil discriminatory mechanisms.
5 comments:
Interesting post. I hadn't given LEM's much thought before.
It seems to me that a great deal of pricing is location dependent, often driven by risk valuation models of insurers and other financial institutions.
The social implications are certainly interesting to ponder. I'm not ready to apply a blanket condemnation yet though.
If risk dependent financial products are not allowed to use location as a determinant, how would you suggest they go about managing for risk?
It is only discriminatory in that it favors loans for people moving to where transit is available.
Ironically it is favoring the locations that were formerly discriminated against.
It does not discriminate on the racial makeup of the neighborhood. I find it disingenuous at the very least that you compare the two when one was based on a biggoted policy and the other is a planning policy that is attempting to get people out of their cars.
It is only discriminatory in that it favors loans for people moving to where transit is available.
Hey, a little discrimination can't hurt eh darkie/spic/suv driver?
Ironically it is favoring the locations that were formerly discriminated against.
Agreed the policies necessary post WW-II were preferential for new housing. Hey, nothing like a little reverse discrimination 40 years after the fact to "level the playing field."
It does not discriminate on the racial makeup of the neighborhood.
Not to hear the proponents who are proud of the ethnic makeup of TOD areas.
I find it disingenuous at the very least that you compare the two when one was based on a biggoted policy and the other is a planning policy that is attempting to get people out of their cars.
I find it incredible that the similarities so obvious are being ignored.
Government is currently preoccupied with doing to the education system what was done to transit
I take it you paid your own way through college? 'Cause if not, then you were lucky enough to be subsidised by the bank of mom and dad. What is wrong with helping those who aren't born into money educate themselves and become tomorrow's entrepreneurs?
(Look forward to your propagandic response!)
You misunderstand the statement. When transit was a local issue it was reasonably responsive to community needs. Once all capital funding became dependent upon Federal processes quality went down and expenses went up. The same thing is happening in the education area. As local control is diminished quality is declining and expenses are soaring.
BTW I still tremble whenever I write a large check; A holdover from my senior year at WPI where I paid $9670 for tuition only in 1983. You should feel like a 1st class heel about now but I'm lucky enough to have gotten a good education so I know better.
Post a Comment