Our surveys about housing policy seem to draw out the libertarians. Last week, we asked how soon borrowers who have been through a foreclosure or default should get a second chance at homeownership. A foreclosure on a borrower’s credit report within the last five years currently makes a loan to that person ineligible for sale to Fannie Mae or Freddie Mac. Most respondents said this waiting period should not be shortened, as some mortgage executives are lobbying for, either because it would be dangerous for the government to do anything more to promote homeownership (36%) or because it would be unfair, creating a moral hazard (27%).
Some of the comments posted on the blog were equally unsympathetic. “Let them rent!” one reader wrote. “They probably shouldn’t have owned a home in the first place.” Another said, “Hell, why not give them 30 days before they can start buying again. We didn’t make the banks wait to get bailed out, and the banks didn’t have to suffer any consequences like disappearing forever because they are insolvent, right?”
A third commented, “I feel the term should be raised to seven to 10 years and made public. Maybe then people would try a little more to stay in their home. I live in Arizona, and people are leaving their home just because they have negative equity, bringing values down at a dramatic rate. We are already on the cusp of a second wave of foreclosures in the hardest-hit states.”
By comparison, just 20% of respondents to the question said it is only fair to shorten the waiting period, since many people lost their homes due to circumstances beyond their control, and 17% said a shorter waiting period is necessary to support housing prices.
One comment, by a reader who recommended shortening the waiting period to two years, espoused both these views. “Economically we are all affected by the foreclosure crisis. If you paid or not, have a current mortgage or lost your home. Possibly looking at the individuals’ credit prior to the economic downturn could weed out those who just decided not to pay. Most people didn’t want to lose their homes and aren’t deadbeat borrowers.”
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