From Card Fees to Mortgages, a New Day for Consumers

New York Times article "From Card Fees to Mortgages, a New Day for Consumers" (June 25th, 2010) points to new legislation on mortgage payments. The article is wrong to claim that consumers are helped by some of the new rules. In fact, it is lenders who are helped.

The bill offers a number of new protections, many of which are a bit like closing the barn door after all of the animals escaped. Lenders, for instance, will have to check borrowers’ income and assets. Most lenders have learned that lesson by now or have ceased to exist.

A poor person renting a small apartment, living paycheck by paycheck was allowed temporary access to a nice home on which he paid almost nothing monthly and made no down payments. He knew that he couldn't possibly afford a home, and enjoyed the free-ride while it lasted. Eventually the home would be foreclosed upon and he (without any assets to worry about) would return to life just as it was before his free ride.

The lender--or whomever the debt had been sold to--was the one who lost big time by giving homes to poor people with no income or assets. As the article notes, these lenders have ceased to exist. One would presume that if they were making profits (rather than losses) by acting as they did that this legislation would not be so moot. Fortunately, the market has a way of correcting this absurd behavior and lenders stopped giving almost free homes to people years ago.