This is a tale of two sisters, two mortgages, and the complete weirdness of the political and economic moment.
You will understand how weird it is – how politically distorted and economically stunted — when I tell you a bit about the sisters, and what happened last month when each of them tried to buy a house.
The first sister — let’s call her Jane – has a learning disability and works at a gym in New England. She’s sweet and well-meaning but she’s hopeless with paperwork.
A couple of years ago, she bought a car, but she didn’t keep up with the payments and the vehicle was repossessed. Not long afterwards, Jane decided to buy a house.
Given Jane’s limitations, her family was apprehensive. “She doesn’t understand what a mortgage is, let alone the implications of taking one out,” Jane’s sister told me.
But Jane’s social worker knew about a government program that provides matching taxpayer funds for aspiring low-income homeowners.
With the social worker’s guidance and money from her hopeful parents, Jane began salting away small sums for a down payment.
At the same time, Jane’s sister — we’ll call her Mary – was also thinking of buying a new house. With a growing family and a husband moving from a seat in Congress to the more lucrative private sector, Mary began scouting properties in suburban Washington.
Mortgage brokers cheerfully assured Mary that with her husband’s new income, the couple’s excellent credit rating, and the family’s substantial assets – including cash for a 25-30% down payment – getting a loan would a snap even in these lean and hungry times.
Well, it wasn’t a snap. Mary and her husband weren’t seeking any special insider’s deal, and they weren’t looking to buy something flashy or quirky or difficult to re-sell.
They sought a 30-year mortgage on a basic, not-expensive-for-Washington center-hall colonial, such as innumerable former congresspeople have purchased before them.
Their first loan request, supported by piles of evidence of their credit-worthiness, was denied. The fact that Mary’s husband was now self-employed could not be overcome by his list of blue-chip clients (or by his signed contracts with them).
That he’s no longer subject to the caprice of voters and the uncertainty of re-election every two years counted, bizarrely, against him, even though his income is more secure, and more than double what it was.
The couple scaled back expectations, choosing an even more modest home. “We spent untold hours producing documentation,” Mary says.
Mortgage brokers from bank after bank assured Mary and her husband that everything would be fine – who wouldn’t want such customers?
while underwriters from bank after bank turned them down. A few weeks ago, the couple decided to try one more bank before giving up.
Meanwhile, 500 miles away, Jane too had picked out a house. Her down payment – half of which was supplied by taxpayers, remember – amounted to a tiny fraction of the purchase price.
Jane’s social worker walked her through the paperwork. As a first-time, low-income purchaser, Jane was happy to learn that Uncle Sam would waive her fees and closing costs.
Jane’s family, in the meantime, was getting anxious. Her parents now felt it would be a terrible mistake for their daughter to go through with a purchase.
Jane, they realized, would default almost as soon as her payments came due. Mary remembers getting on the phone with her sister the night before Jane’s closing, and begging her not to sign anything.
Yet the next morning, egged on by the state and by her helpful caregivers, Jane signed for a loan that she’s probably incapable of paying back.
The very same morning, here in Washington, Jane’s prudent, credit-worthy, taxpaying sister and brother-in-law learned there would be no mortgage for them.
“That was irony enough,” says Mary, but “what really stings,” she says, is that Jane phoned their parents right after she closed on her house, in a state of glee and surprise. “Guess what?” she apparently crowed, “Obama is sending me a cheque for eight thousand dollars!”
That would be the $8,000 tax “credit” that the benevolent Mr. Obama and his friends in Congress now give to certain first-time homebuyers – to people like Jane.
According to her sister, Jane’s already excitedly planning how she’ll spend the windfall: Not to cover her mortgage payments, or to reduce the size of her loan, but to put up a pretty fence around her new front yard.
Examiner columnist Meghan Cox Gurdon is a former foreign correspondent and a regular contributor to the books pages of the The Wall Street Journal. Her Examiner column appears on Thursday.
