Perhaps the American dream of homeownership is not for everyone.
That may sound at odds with a bedrock notion of society promoted by presidents for decades. But many experts say it is a message that can be drawn from the rising troubles with mortgages provided to home buyers with weak credit.
Several large mortgage companies have stopped making new loans, and others have tightened lending standards.
Hundreds of thousands of families who bought houses in the last two years — using loans with low teaser interest rates and no down payments — are now losing them.
Their short tenure as homeowners calls into question whether the nation’s long drive to increase homeownership — pushed by both public policy and financial innovations — has overstepped some boundary of demographic and economic sense.
“Clearly we went too far,” said Joseph E. Gyourko, a professor of real estate and finance at the Wharton School of the University of Pennsylvania. “It’s not the case that high homeownership is always good.”
Consider Nathaniel Shields, who expects to lose his four-bedroom Cape Cod house in southwest Chicago to a foreclosure in May.
He cannot afford his mortgage payment, which jumped to $1,300 a month from about $1,000 after his loan reset to a higher interest rate last summer. A divorce and the loss of his county government clerical job, which paid $14.80 an hour, have also hurt.
In 2004, Mr. Shields took out a popular hybrid mortgage that carried a fixed interest rate for two years before becoming an adjustable-rate loan for the remaining 28 years. In August, his loan’s interest rate rose from 6.6 percent to 8.1 percent, and to 9.6 percent now. “I love the house,” said Mr. Shields, 47, who now works in a custodial job with the Chicago school district that pays $10.40 an hour. “I put a lot of money in the house — a deck and a new garage — and they are just going to take the house.”
By EDUARDO PORTER and VIKAS BAJAJ
No comments:
Post a Comment