Opinion: Zero down! Get a house, a pool and a political consensus, courtesy of our readers

The dialogue between Robert Camerota and Paul Leonard is interesting, even when they argue opposing viewpoints from the same statistics. I have to take issue with Mr. Leonard’s remark that ‘[W]ith minorities being much more likely than whites to get sub-prime loans, the recent boom in sub-prime lending could very likely lead to the greatest loss of minority wealth in our nation’s history.’ The italics are Mr. Leonard’s. I don’t want to downplay the trauma produced by the foreclosure of one’s home, but a major problem with sub-prime loans is that the borrower has little or no initial investment in the property, so it’s hard to understand how a defaulting sub-prime borrower will experience a loss of wealth. If anything, the defaulting borrower will enjoy some months in which to consider alternatives while the foreclosure process plays out. If the home foreclosure sale price is less than the amount owed, some states (such as California) protect the borrower by what is call anti-deficiency protection. In other states, the lender may forgive the debt. This can result in the IRS taxing the ‘phantom income’ produced by the debt forgiveness, but Congress is currently considering legislation to eliminate that possibility. Finally, who will buy the foreclosed-on property that has seen a drop in market value and is now more affordable? It may just be a member of the same minority who had to sit out the market a few years ago but today is in a position to buy. Now is the time to educate those prospective buyers on the burdens as well as benefits of home ownership. This is also the time to make clear that federal guidelines are to be followed by mortgage brokers and lenders. Martha R. Williams, JDCo-author, California Real Estate Principles, 6th edition update, Dearborn Real Estate Education, 2007

Dear Editor, In response to Robert Camerota’s July 17 Local Neighborhood, Global Markets article, I believe we must revisit the reasons for the ‘sub-prime’ collapse. One of the main reasons is that there is no secondary market now for this type of product for the lenders to sell to (remember the junk bonds during the 80’s?). With no market for sub-prime paper, lenders stop offering the product. Those looking to buy a house that fits into the sub-prime category can’t buy, thus there is more inventory and prices could fall. The other effect of the dried up market is the expiration of the “teaser rate” and borrowers facing soaring rates. In the sub-prime arena, that teaser period is typically two years. Before the market dried up (sub-prime secondary), those who had this lower teaser rate would then become “serial refinancers” to take advantage of the two-year low rate ‘clock’ hoping some day to become prime borrowers by way of more equity in their homes or improving their credit profile over time. One major problem is the mortgage originators. They either lack knowledge and experience or are simply lazy, looking for the higher commission rates sub-prime loans offer. If a potential borrower has a 640 credit score, it is easy to place that borrower into a sub-prime loan. Finding an alternative loan program is the correct approach (this would be in the trade known as an ‘Alt-A’ product which has a slightly higher rate than prime loans, but can be sold in the pool of ‘prime loans’). Putting a borrower into the wrong category hurts the market and the borrower. Although it’s more work and less commission dollars for mortgage brokers to put borrowers in appropriate loans, it is the right thing to do and it would eliminate the glut of unsalable sub-prime loans. As a result, we now need to examine the individual loans to see if they actually belong in the sub-prime category. My guess is that 65% of them do not, so they should be refinanced into the proper category (which is either prime of Alt-A loans neither are sub-prime). Borrowers will love the change and so will the marketplace. Respectfully submitted, Richard Maize

Dear Editor: Re: ‘High-risk traps or low-credit tools?’ (July 18, 2007) With hundreds of thousands of homeowners defaulting on their mortgage payments, we are increasingly hearing denunciations of lenders for having loaned money to people who had no means of paying it back. But these denunciations reveal a disturbing double standard. For years, politicians pressured lenders to not discriminate against those with poor credit history and shaky finances. Now we have the despicable spectacle of politicians accusing lenders of not having discriminated enough and of having made too many risky loans. Lenders are damned if they lend--and damned if they don’t. Whatever lenders do, politicians seem to always find their practices objectionable, and will take advantage of any excuse to call for more regulations and increased political power over lending. Politicians should leave lenders alone, and instead of damning them, they should acknowledge their crucial role in making home ownership possible for so many people. David Holcberg Ayn Rand Institute Irvine, CA

My first and last thoughts about Brownstein’s column are the same. We, voters, must pressure our next President and the various committee heads in Congress to follow the lead of the Stanley Foundation (and Abraham Lincoln) by getting people with intelligent and opposing viewpoints into the same room, posing the important questions, and listening to what they have to say. The key word here is ‘Listening.’ That means actually expending the effort to understand what each side is saying and why, then acting on the appropriate meld of the two views. There has been enough partisan debate and law-passing. We voters are sick of the ideologues on both sides of the aisle in Congress. Both sides have appropriate ideas but the other side has steadfastly refused to consider them. And our President? Listen to opposing views? Would probably give him a headache! Regards, Sam

I appreciate Mr. Cavanaugh’s comments regarding the local ‘free’ pool situation. Here is my story. Last year I signed my two seven-year old daughters up for swim lessons at the Westchester public pool. At the first lesson, the instructor, standing on the pool deck, asked each child to perform a variety of swim strokes and floats. He then told me my children needed to be in the pre-beginner’s class, which specialized in getting children comfortable in the water. So we switched to that class, and in that class the instructor, standing on the deck, asked the children to do a variety of bobs in the water, etc. I went over to him and asked him when he was going to get in the water and teach the children how to swim. He replied that he was never going to get in the water, because the LA City pools no longer had the instructors in the water because of liability issues. He intimated that this was due to the specter of allegations of improper touching during swim lessons in which the instructor was in the water demonstrating strokes. So the children would get out and lie on the concrete deck and practice their arms strokes , then get in the water and practice them as he taught them from the deck. As Mr. Cavanaugh mentioned, the pools are now not only prison-like (no white t shirts, no personal belongings, no parents on the deck unless they are in a swim suit, etc.), but they don’t even teach swimming anymore. We ended up going to the YMCA, where I notice the instructors are in the pool at every moment with the kids, helping little ones do ‘big arms’ and ‘big kicks’. Surely, the City could get better insurance rates than the YMCA? Lisa Marlin