As I have noted previously, I am among an oh-so-super-lucky group of punditerati that gets an email preview a couple times a week of what Milwaukee Journal Sentinel calumnist Patrick McIlheran gets up to in print. So no surprise when my inbox dinged this morning with a McIlheran missive:
Don’t worry, says the state agency that’s running radio ads about how you can get a home with (almost) no cash. This time, they’ve got it all figured out.McIlheran is referring to the WHEDA Fannie Mae Advantage program, run by the Wisconsin Housing and Economic and Development Authority, and apparently he doesn't like it.
Sure about that?
The money window’s back open, no place sooner than in Wisconsin. . . . The federal Treasury gave federal mortgage reseller Fannie Mae billions, so Fannie lent $325 million to WHEDA, which is passing it through banks to you if you haven’t owned a house in three years and have managed to save up pretty much nothing. All you need is $1,000 for closing costs and a middling credit score. No mortgage insurance needed, either.
I am certain a lot of that has to do with the continued insistence by those on the right that the present economic crisis is the result of abuses by Fannie Mae and ACORN intimidation of banks to lend to poor people and the Carter-era Community Reinvestment Act. It grates on many conservatives (though not all) that the wealthy and successful could possibly be responsible for messing up anything. After all, their success is the market's success, and the market is infallible.
That is pretty clearly wrong, and WHEDA's own track record proves it. WHEDA ran for many years a similar Zero Down program, and--
You know what? I'm going to turn this over to Marquette Professor John McAdams--make note of this, as I will never say it again--who is right about WHEDA and actually took this on two weeks ago*:
[R]easonable concessions to allow people with modest assets to buy a home make good public policy sense.On that last point, WHEDA offers McAdams some specific stats in an email (pdf):
But what concessions are reasonable?
Letting people with poor credit get a mortgage? Certainly not. But the WHEDA program requires a 680 credit score to qualify, and the average credit score of people who get mortgages is 732. That’s credit worthy.
How about employment and income? Under the WHEDA program, employment and income are checked. Too low an income or a spotty employment record can get you rejected. [. . .] WHEDA claims that historically its default rates have been low.
WHEDA and other Housing Finance Agencies around the country were never part of the sub prime mortgage problem thatplagued the housing industry in recent years. Quite the opposite--our 35-year track record of safe, responsible lending is what has resulted in a foreclosure rate of only 1.25%--far lower than the state's average of 1.82% for similar "prime" fixed-rate loans, according to the latest data reported by the Mortgage Bankers Association. During the height of the foreclosureepidemic, WHEDA's rate remained at less than one percent for several months. Moreover, the WHEDA foreclosure rate is miniscule when compared with the Wisconsin foreclosure rates for FHA and subprime loans, which are 4.30% and 11.31%respectively.And note that none of the conditions for the WHEDA program under discussion here--or any WHEDA program, ever--come close to the greatest abuses of private mortgage brokers making subprime loans, like the infamous NINJA loan. And as we learned last week, wealthy homeowners (at least, those owning million-dollar homes) have defaulted at nearly twice the rate of middle-class and poor homeowners.
McAdams concludes, "[O]n a public policy landscape littered with outrages, this falls far short of being an outrage. In fact, it’s probably an outright good thing." And I agree. McIlheran, indefatigable defender of the upper classes, does not deem the working poor worthy of this assistance.
* Indeed, this WHEDA program was apparently a Charlie Sykes talking point and McAdams stood up for the program then. I'm surprised McIlheran didn't see the McAdams pre-buttal and leave this thing alone.