Looser Lending Had Upside: New Homeowners Subprime loans have put upwards of a million people out of their homes through foreclosures. But looser lending standards for more conventional loans also permitted millions to buy homes in recent years. Some economists see that as a major achievement.

Looser Lending Had Upside: New Homeowners

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Here's NPR's Chris Arnold.

CHRIS ARNOLD: Predatory subprime loans have deservedly been getting a lot of attention lately. But this lending is just the slimy underbelly of much broader changes in the mortgage industry. Over the past decade or so, it's gotten much easier for people with modest incomes to get good loans too.

ESTHER MAYCOCK: My older daughter, she's over here in the front. And my younger daughter, she's in the back, and they...

ARNOLD: Esther Maycock is proudly showing us around her house that she bought a few years ago in the town Brockton, south of Boston. At the time, Maycock had been renting but she kept having to move. Her last landlord was raising her rent by $200 a month. Maycock is an immigrant from Barbados, and as a single mom with two teenage daughters, she wanted more stability.

MAYCOCK: Raising two children by myself - it was challenging and it was hard. But I wanted them to go to school and know that when they come home, nobody is going to meet them at the door saying, well, you know, you guys need to move. You know, I need you out. You make too much noise. Don't step so hard on the porch.

ARNOLD: So Maycock bought a house and did it the right way. She got into a first-time homebuyer class. She got lined up with a good 30-year fixed mortgage at around five percent and found a three-bedroom house she could afford on a $40,000 a year salary. The porch needs some new paint and it's on a busy street, but it's got a nice yard, a good slate roof, the fire station next door makes her feel safe at night. And standing on her front porch, Maycock says, for a long time, she and her daughters would pull into the driveway and just sit in the car.

MAYCOCK: We go out together as family a lot. We would pull in right there and just stop and just back. We would just say wow, look at how big the yard is, look at the lawn, look at the flowers. And we would sit right there just to get the complete view of it all.

ARNOLD: Just looking at your house?



MAYCOCK: Yes. It's just a proud moment. And I can't say enough how much it is just looking at them just being happy.

MARK ZANDI: You know, I think home ownership is the single most important financial achievement of any household.

ARNOLD: Mark Zandi is chief economist of Moody's Economy.com. He says, with all the focus on people hurt by overly aggressive lending lately, we shouldn't lose sight of the fact that there are millions more people like Esther Maycock.

ZANDI: We went from a home ownership rate of 64 percent 10 years ago to a peak of 69 percent about a year ago. And that five point move in home ownership in a 10-year period is a crowning economic achievement. I mean, that's a statistic that moved dramatically, and there are many reasons.

ARNOLD: Zandi attributes roughly half of that increase to easier access to credit; lower interest rates have helped. Esther Maycock was able to buy her $170,000 house with only $4,000 down and still got a very low fixed interest rate. Experts say it would have been almost impossible for her to do that 10 or 20 years ago. Still, housing advocates say that doesn't excuse an epidemic of predatory lending that's been going on in the so-called subprime or riskiest part of the market.

MIKE CALHOUN: Home ownership rates went up primarily due to prime-lending programs.

ARNOLD: Mike Calhoun is the president of the nonprofit Center for Responsible Lending. He says most homebuyers use more mainstream loans. By contrast, he says, the subprime market has been flooded with pretty bizarre adjustable loans with rates that pretty quickly go through the roof. And he says most are refinancings for people who already own a home. So he says when you look just at subprime loans, more people are losing their homes to foreclosure than are buying new homes.

CALHOUN: The subprime market surprisingly, for many people, has been a net drain on home ownership over the last eight years.

ARNOLD: Chris Arnold, NPR News, Boston.

INSKEEP: You're hearing him on MORNING EDITION from NPR News.

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