"A recent Federal Trade Commission study revealed a third of mortgage borrowers didn't know what interest rate they were paying, while half didn't know how much they borrowed. Tougher disclosure standards may well make sense. But, in the end, it simply isn't the government's job to convince people that some financial risks aren't worth taking, or that housing prices can go down as well as up."
Unfortunately, legislation and government intervention will not stop stupid people from being stupid. The same type of raw deal is occurring every few minutes at your local car dealership lots.
All of us know someone who buys that expensive SUV that he/she shouldn't buy, only got talked into it because of an attractively low "monthly payment of $199." At the end of loan length, some 5+ years from now, the buyer ends up paying twice the sticker price for that car. Shouldn't government regulate how people buy their cars too?! In fact, the most effective way of educating people about financial risks is to cut them off from taking out loans all together.
For that matter, people these days finance anything and everything. From vacations, wedding, home renovation, to major appliances, LASIK and child adoption. It's only a matter of time until we hear those who failed at assessing associated loan risk on CNN: "oh, I didn't think financing that $50k Vera Wang wedding gown was going to come back and bite me in the ass later on!"
Of course, home ownership is inseparable from the "American Dream". Many are considered losers in our American society if they are not owning a home by the time they are 40.
However, the efficiency increase resulting from poor people moving from apartments into homes does not counter the added cost of intervening with the free market. This cost has a snowball effect and is an externality imposed on others who can assess the financial risks.
From my personal experience shopping for a home, I do admit looking at the mortgage numbers can get confusing. However, as consumers in a free market, we all need to be thinking about those numbers long and hard before jumping onto the homeowners' bandwagon. Markets afford convenience, efficiency and possibility, but there is a cost.
Bad stuff is down the road if the government gets its tentacles wrapped around the mortgage loans now. And to be honest, it'll hardly alleviate the sub-prime burden from the ordinary consumers' shoulders. Sorry, no support of government intervention in the mortgage industry from me.
