By JOHN HOPE BRYANT
Posted 05:23 PM ET
Investor's Business Daily, in its article of Feb. 25, 2013," 'Dignity Mortgages': Welfare By Another Name," is a surprisingly fictitious attack on a concept designed to bolster the economy and help promote a responsible ownership society.
The basic contention of the article is that the Dignity Mortgage "is the left's latest scheme to make amends for its disastrous experiment to socialize mortgages."
Apparently, the authors are unaware that most of the concepts in the Dignity Mortgage have already been adopted by major well-respected financial institutions that believe originating loans to middle-income families who are financially literate is a sound business practice.
For example, one of the top three home originators has a well-performing mortgage product that requires just a 3% down payment, available to low-moderate-income families, or any family residing in a low-moderate-income census track. And, there is no minimum credit score required.
In contrast, the Dignity Mortgage is seemingly far more conservative, since it requires three times as large a minimum down payment (10%) and requires a minimum credit score of 620. It's worth noting that the Dignity Mortgage also evidently meets the new Consumer Financial Protection Bureau's new qualified mortgage rules.
Although IBD appears to believe that the vast majority of the beneficiaries of the Dignity Mortgage would be high-risk minorities, it should be noted that the vast majority of those most vulnerable to predatory practices in the recent past were white families.
Over the next few months, we expect many financial institutions to develop their own versions of the Dignity Mortgage that help promote an ownership society and that could provide up to one million additional well-informed and responsible homeowners per year.
And this is something that the nation has to do. It's not optional, given that today, unless you have an 800 credit score and a 30% down payment, most people today (read mainstream) cannot actually get a loan. It's not about so-called poor people, but all people.
Sadly, many other comments in the IBD piece are equally off the mark or grossly inaccurate.
For example, IBD opposes our 10% minimum down payment (which is also three times higher than the minimum at FHA), saying that "inner-city housing groups could front them the money" at an average down payment of $25,000 and one million families.
To do so would require inner-city housing groups to have $25 billion a year available, every year, for down payments.
Any examination of the very modest budgets of inner-city groups would show the absurdity of such an argument. Twenty-five billion dollars is probably close to a thousand times more than the total net assets of these nonprofits.
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