The unintended consequences of expanding low-income home ownership rates
Posted Oct 20 2008 3:23pm
The New York Times has an revealing article on Henry Cisneros. Mr. Cisneros was the U.S. Secretary of Housing and Urban Development (HUD) under President Clinton. In an attempt to expand home ownership rates, especially among low-income households, Mr. Cisneros loosened mortgage restrictions. ” Families no longer had to prove they had five years of stable income; three years sufficed…lenders were allowed to hire their own appraisers rather than rely on a government-selected panel.”
The article portrays the fallout from HUD reforms under Cisneros. Lago Vista is a Cisneros development in San Antonio and was supposed to be a beacon of hope for low income households. Now, “scores of homes have been foreclosed, including one in five over the last six years on the community’s longest street, Sunbend Falls, according to property records.”
Conflicts of Interest
Mr. Cisneros later capitalized on his experience at HUD. “[H]e joined the boards of a major builder, KB Home, and the largest mortgage lender in the nation, Countrywide Financial — two companies that rode the housing boom, drawing criticism along the way for abusive business practices.” Later, Mr. Cisneros became a developer himself and built up the now impoverished Lago Vista development.
Government intervention towards the noble goal of increased home-ownership rates for the poor, has had the unintended consequence of exacerbating the housing crisis.