The older I get the more George Will makes sense to me.  In today’s column he gives us this nugget.

To get a mortgage is usually to commit capitalism. . .

Right on George.   People buy homes to get a slice of the American dream, but they also buy them with the hopes of turning a profit a few years down the line when they sell.

The problem with the market today is simple greed.  Twenty years ago it took good credit and a chunk of cash to put down to get a home loan.  Six months ago a person with a bankruptcy in the last five years could get a home loan with no cash down and a cursory credit check.  The sub-prime market got a lot of people into houses that quite frankly didn’t belong in them.

A friend of mine in Memphis saw this coming back in 2002.  He showed me a memo from the loan department of the bank where he works that described a new mortgage product.  One that required the borrower to pay only the interest for the first five years of the loan.  He knew then that type of product would lead to people buying homes they couldn’t afford, hoping that their lives would drastically change in five years and they would be able to refinance the loan into something more stable.  How right Matt was.

What is going on now with CountryWide (which holds the mortgages on both of my homes) and other lenders is a normal correction of a wayward market.  The market strayed too far from sound practices and now must come back within its reasonable boundaries.   An action that will lead to a more stable market and economy in a few months.

The people harmed are those that were on the margins for the market.  People with blemished or bad credit will find it harder to get the money for housing, and those with “trick mortgages” will be hard pressed to flip them when the real payments come due.  Is this a bad thing overall?  Not really, it just means that a nation used to spending more than it can afford has to learn some restraint.  At least until the next time a bank finds a dubious way to finance the market.