Fair Housing News

• Hang Tight — It Can’t Be This Bad ForeverI’ll admit it: When home prices were soaring in my neighborhood, it made me feel really smart. Like so many millions of homeowners, we concluded that we chose the right house in the right neighborhood at the right time. And as the years went by, and all of us on the block could count our home appreciation month by month, all this paper equity made us feel financially secure — as in “Now we know how we’re going to pay our college tuition bills down the road.” But as they say, easy come, easy go. Home prices in our neck of the woods have been falling just as they’ve been falling around the country. May 12, 2008
• A New System to Prepare for the Next CrisisLast week, I discussed what I see as a serious weakness in the way the mortgage system deals with default risk. Essentially, interest rate risk premiums collected from borrowers that are not needed to meet current losses are paid as income to investors and not reserved to meet future losses. Because major default episodes occur infrequently, perhaps every 12 to 15 years, the system is never adequately prepared for one when it happens. It certainly was not prepared for the one we are now in.The remedy is to reserve a much larger portion of the risk-based dollars paid by borrowers. May 12, 2008