Bad... Or Good?
21 October 2006
Editor, The Washington Post
1150 15th St., NW
Washington, DC 20071
Dear Editor:
Alys Cohen wants to ban "'no doc' loans where a borrower simply pays a higher interest rate in exchange for not documenting income. These loans are often used to push unaffordable mortgages on borrowers who have fixed incomes" (Letters, Oct. 21). She calls such loans "predatory."
A different interpretation is that these loans are an innovative way - driven by competition among lenders - to enable persons who otherwise would not qualify for a mortgage to do so. Banning such loans would indeed result in fewer low-income persons suffering mortgage foreclosures, but it would also result in fewer low-income persons owning homes.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Editor, The Washington Post
1150 15th St., NW
Washington, DC 20071
Dear Editor:
Alys Cohen wants to ban "'no doc' loans where a borrower simply pays a higher interest rate in exchange for not documenting income. These loans are often used to push unaffordable mortgages on borrowers who have fixed incomes" (Letters, Oct. 21). She calls such loans "predatory."
A different interpretation is that these loans are an innovative way - driven by competition among lenders - to enable persons who otherwise would not qualify for a mortgage to do so. Banning such loans would indeed result in fewer low-income persons suffering mortgage foreclosures, but it would also result in fewer low-income persons owning homes.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Tuesday June 5, 2007 at 6:36pm