Elections Today
- Pennsylvania
Recent Projections
| State | Candidate | Delegates |
|---|---|---|
 Donald Trump | ||
Pennsylvania |  Joe Biden |
The Sky's Not Falling: The Mortgage Truth
The best regulator of economic activity is free competition.
April 23, 2008 — -- "Mortgage Crisis," shouts The New York Times. The Times has used the term "subprime crisis" at least 11 times. Not in opinion columns -- in news stories.
The columns are worse. Paul Krugman writes: "A lot of the financial system looks like it's going to shrivel up and have to be rebuilt."
The "financial crisis," says Fortune's senior editor, "is threatening to bring down the entire system, with dire consequences."
When the current troubles aren't a "crisis," they're a "disaster" . That's what John McCain calls them, while Hillary Clinton prefers "crisis," saying, "This market is clearly broken, and, if we don't fix it, it could threaten our entire housing market."
Wait a second.
Where is this "credit crisis"? Did the supermarket reject your Visa card? I still see Ditech commercials offering fixed-rate mortgages at around 5.5 percent.
Sure, some lenders are skittish while things play out. Some investment banks and brokerage houses are sitting on shaky, mortgage-backed securities. But why call that a "crisis"?
Do we have 25 percent unemployment, as we did during the Depression? Do we even have 7.5 percent unemployment, 12 percent inflation and 20 percent interest rates, as we did during Jimmy Carter's presidency?
There's been a loss of jobs in the last two months, but that comes after years of strong job creation -- 25 million net jobs in the last 15 years. At 5.1 percent, unemployment is low by historical standards.
And are we really experiencing a mortgage-default "crisis"? No. The Mortgage Bankers Association's 2007 fourth-quarter survey reports that foreclosures came to 2.04 percent of all mortgages. Many of those were speculators seeking flip profits rather than homeowners losing a dream house.
During the quarter, only 0.83 percent of homes entered the foreclosure process. It may get worse -- in March, "foreclosure filings, default notices, auction sale notices and bank repossessions rose 5 percent," Reuters reports. But let's keep things in perspective: Ninety-eight percent of borrowers are not in foreclosure. Only a small percentage of them are even late in payments.
