Have Banks Screwed the Pouch in the Affordable (Sub-Prime) Housing Market?

Of course, I am using "screw the pouch" in the technical sense of "really made a rotten mess of." Here's the Washington Post waving a warning flag a few days ago:

Is a blowout taking shape in the impaired-credit mortgage market? Could lax underwriting standards during the housing boom years--no verification of applicants' incomes or assets, low or no down payments, and big mortgages to people already saddled with heavy consumer debt--finally be coming home to roost? Post article.

I think the answer is going to be yes. And who will pay the price? The people who need the banks the most right now, people who are trying to buy an affordable place to live before prices take another up-tick. Already we are seeing the negative impact on people's lives (in this case "we" is me and my construction business partner, master builder Don Davino). And here's what we see: People come and look at the homes we are selling (you can look here).

Quite a lot of these people like the houses and ask the real estate agent what kind of income they will need to pay the mortgage. Many figure out they can afford it and head to the bank. And the bank would love to help BUT, oh dear, there is now huge pressure on banks to avoid loans with anything but perfect credentials. So people who can afford a relatively small mortgage--and have a huge incentive to keep current with their payments--can't get one because they don't have unblemished credit.

Come on! Who does? Particularly in a sector of the market where buyers often lack credit history altogether or are emerging from a period of financial strain. So, because some banks screwed up in their greed for business, consumers are penalized. And the economy, which could use an up-tick in home sales, suffers too.

You might think "negative impact on people's lives" is a bit over-dramatic. I don't. Renting is still more expensive than buying and buying is a great way for families to cement their long-term financial security. If the next rising tide in property prices does not raise everyone's fortunes, including those suffering from the "sub-prime pouch screwing fallout," potentially dangerous gaps in social equity will continue to widen.