Tom Purcell, 5/19/2014 [Archive]

Not Missing Out This Time

By Tom Purcell

President Obama is going to make me rich.

That's because the Obama administration, which has done everything in the government's power to hamper economic growth, just loosened lending standards so that people with poor credit can buy homes.

Why not? It worked out well for some people the last time the government loosened lending standards.

"The Obama administration and federal regulators are reversing course on some of the biggest post-crisis efforts to tighten mortgage-lending standards amid concern they could snuff out the fledgling housing rebound and dent the economic recovery," reports The Wall Street Journal.

Dent the economic recovery? Thanks to ObamaCare and Obama's massive expansion of government regulations, the economic recovery looks more like a train wreck.

Well, Obama must be thinking that desperate times call for desperate actions, so let's start the housing madness all over again.

I failed to benefit from it last time — and what a grand time it was — but I am not going to miss my chance this time.

See, back in 2002 or so, just as the housing bubble was forming, I was about to buy a townhouse for $165,000. I had the money. The owner was eager to sell. But my Midwestern cautiousness gave me cold feet and I backed out of the deal.

If only I had known that government stupidity was about to cause the value of the joint to soar over the next five years.

See, following 9/11, then-Federal Reserve Chairman Alan Greenspan lowered interest rates to stimulate the economy.

People were suddenly able to afford houses they couldn't afford before. Home sales began to shoot up. As demand for housing rose, so did housing values.

As housing values climbed, homeowners saw their equity climb. Others decided owning a home was the way to easy wealth, so they began to buy, too.

Soon, a frenzy was under way. Bidding wars were breaking out. It was common for sellers to receive multiple offers well beyond their asking price.

It appeared to many people — even rational, well-educated people — that the rapid rise in values would never end. That caused speculators to jump into the market, which drove up values even more. It was about then that unqualified buyers jumped into the fray.

Roughly 25 percent of Americans have a bad credit record or unstable employment history. But this didn't stop loan originators from going after them, too. Mortgage brokers and banks get commissions and fees every time they originate a loan — even a risky loan — and loose lending standards allowed them to write loans for virtually any old fool, not just people with bad credit.

Lost your job? No problem, we'll finance your loan. Want to buy a dozen condos as rentals? Sign here and we'll get you the cash.

After all, the lenders were thinking, we can sell the loans to someone else, who will sell them, through mortgage-backed securities, to Fannie Mae and Freddie Mac, quasi-governmental organizations that the government will have to bail out in the event of a housing-market collapse.

Finance companies created special mortgages — "subprime" loans — for people who didn't qualify for the safer "prime" loans. Because subprime loans came with greater risks, higher interest rates were charged — usually 2 or 3 percentage points higher. That made these loans extremely profitable — until the people who got them stopped paying them back and the entire economy, propped up on funny money, went into freefall.

Well, the insanity of that time — made possible by loose lending standards — caused the townhouse I didn't buy for $165,000 to soar to $525,000 in 2007 — before falling to about half that value following the collapse.

I won't miss out on a deal like that again. This time, I'll ride the boom to its peak and sell just before the inevitable market correction!

And that's how Obama is going to make me rich.

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© 2014 Tom Purcell. Tom Purcell, author of "Misadventures of a 1970's Childhood" and "Comical Sense: A Lone Humorist Takes on a World Gone Nutty!" is a Pittsburgh Tribune-Review humor columnist and is nationally syndicated exclusively by Cagle Cartoons Inc. For info on using this column in your publication or website, contact Sales@cagle.com or call (805) 969-2829. Send comments to Tom at Purcell@caglecartoons.com.



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