Binyamin Appelbaum brings us the story of Bruce Marks, the man who wants to bring subprime mortgage lending back.* He leads a nonprofit called the Neighborhood Assistance Corporation of America that has $10 billion in funding from Bank of America to, well, you know make loans to people who can’t make a down payment and can’t withstand a credit check.
It has enough money to mint about 50,000 homeowners, but Mr. Marks has a larger goal. He wants to show that it is possible to lend to lower-income borrowers on terms that are profitable and sustainable. He wants to expand homeownership. He wants to redeem the original idea behind subprime lending.
“I think that everybody should have an opportunity to own a home,” he said in a recent interview. “We’ve got to rekindle hope in people, especially minorities who threw everything into the dream of homeownership and lost it.”
To my mind, this just highlights the cost of all the public policy that goes into “encouraging” homeownership in the United States. Having started down the road of funneling massive subsidies to people who go into debt to buy houses, we create a situation in which people who can’t go into debt to buy houses are being disadvantaged in a meaningful way. So then it seems to make sense to push the envelop in terms of what kind of lending strategies are facilitated by bank regulation. After all, it really is a problem to be locked out of homeownership in America.
But the right way to address this would be on the other side. Curb subsidies for mortgage debt. Curtail restrictions on multifamily construction. Focus on boosting incomes, not credit access. Make a life of renting a more viable one.
*Correction, Feb. 26, 2014: A previous version of this post misspelled the last name of Binyamin Appelbaum.