Gimme A Break

by Peter G. Miller
May 30th, 2007

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The American Financial Services Association (AFSA) says we may be headed for a credit crunch.

“The study, conducted by the Center for Statistical Research (CSR),finds that more restrictive mortgage regulation would deny credit not only to those who would actually experience a foreclosure, but also to the whole class of borrowers in a particular risk category — the vast majority of whom would otherwise use the credit successfully.

“The study looks at the effect of a 10% and a 20% reduction in available credit, considered against 2005-2006 lending levels. It finds that reducing available subprime credit by 10% would result in about 580,000 borrowers (1% of homeowners) and $94 billion rendered unavailable to borrowers. A 20% reduction would mean that 1.1 million borrowers (2.3% of homeowners) would be denied a loan and $188 billion would not be available to American consumers.”

But what if “more restrictive mortgage regulation” meant consumers had lower costs? Would that be a problem? The FHA loan program has avoided a lot of the outrageous terms that now characterize “nontraditional” loans — you know, the financing that’s leading lots of people to foreclosure.

Betcha those folks are in favor of more regulation.

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