BUSINESSWEEK
NOVEMBER 1, 2004
ECONOMICS/Commentary
When Home Buying By The Poor Backfires
By: Peter Coy
For many families, a house can be a bad investment
Mildred Wilkins calls it "falling out the back door." It's what happens when low-income families who have bought their first houses are forced out because they can't keep up the mortgage payments. Says Wilkins, an Indianapolis consumer advocate who once worked for Fannie Mae (FNM ) selling foreclosed properties: "I don't care if you put five families in the front door if three families fall out the back door. It breaks my heart to see it. It absolutely breaks my heart
In Washington, making it easier for the poor to buy homes is as uncontroversial as Mom's apple pie. Measures to increase the rate of low-income homeownership have historically been strongly supported by both Democrats and Republicans, as well as homebuilders and banks. Fannie Mae and Freddie Mac (FRE ), the giant mortgage-finance institutions, have justified their existence by their promotion of homeownership among the poor. More recently, boosting low-income home buying has been an important part of what President George W. Bush calls the "ownership society."
Unlike many government initiatives, the homeownership campaign is succeeding: The nation's homeownership rate reached a record 69.2% in the second quarter, up from 67.2% four years earlier. Among families in the bottom half of incomes, the rate rose to 53.1% from 50.8% over the same stretch. Advocates say ownership builds wealth while promoting responsibility.
