Laurie Goodman for the Urban Institute: Many argue that government policies aimed at increasing first-time homebuyers caused the housing crisis. This narrative persists despite considerable evidence to the contrary. Our Housing Credit Availability Index suggests the presence of risky products, not increased lending to riskier borrowers, was a significant contributor to the crisis.
New data from the government-sponsored enterprises Fannie Mae and Freddie Mac (GSEs) now suggest a further culprit: mortgage refinance activity. At the height of the boom, mortgage refinances were more likely to default than mortgages taken out to purchase a home, mostly because many people were treating their homes as ATMs through cash-out refinances. Eighty-four percent of GSE refinancings in 2006 and 2007 were cash-out refinances. These refinanced loans suffered from sloppier underwriting, so for any set of observable risk characteristics, these refinance loans defaulted more often than purchase loans. …
Between 1999 and 2015, 4.48 percent of refinancings and 3.3 percent of purchase loans went more than 180 days delinquent. In the peak year of 2007, 15.78 percent of refinancings and 9.95 percent of purchase loans went more than 180 days delinquent.
Since 2009, delinquency rates have been low for all loans. The largest differences in performance between purchase and refinancing loans were those originated in the boom period of 2004–08.
Conventional wisdom suggests that refinancings should be less risky than purchase loans and default less because the borrowers have a known history of payment. So these results are surprising, especially given the stronger credit characteristics of refinancings, such as lower loan-to-value and debt-to-income ratios.
No red scare
Ian Adams for the R Street Institute: The Cold War ended decades ago, but vestiges of the conflict still surround us. In the California legislature, Assemblyman Rob Bonta, D-Oakland, has introduced a bill that seeks to bring one chapter of that history to a close.
The legislation would replace a nearly 80-year-old prohibition that barred members of the Communist Party or individuals who otherwise advocated communist ideals from employment by the state of California. In its place, the bill would impose an ideologically neutral prohibition on employing anyone who actively seeks the forceful or violent overthrow of the government of the United States.
There can be no doubt that communism was a blight on the 20th century. In its name and under its red banners, hundreds of millions of people were killed. And the chief geopolitical rival of the United States through the second half of that century — the Soviet Union — was a power animated by communist ideology.
It is, therefore, no wonder that, in an effort to ensure the state’s government institutions were not subverted by those who would like to see the Soviet Union best the United States, legislators placed in statute a prohibition on employment for anyone with ongoing ties to or outspoken sympathy for the Communist Party …
But while it remains helpful to examine the history of communism to better understand dictatorial barbarism and anti-democratic preferences, the time has come to correct the mistakes that legislators of decades past made when they needlessly trampled their own values by targeting people’s beliefs rather than their actions. Bonta’s bill does that.
The hard work of cheap food
Michele Abbott and Deborah Cohen for the Rand Corporation: As Uganda undergoes a period of rapid urbanization (expected to increase from 13 percent in 2010 to 60 percent by 2040), the number of people eating meals outside the home is also on the rise. Most urbanites seem to be looking for food that is convenient and affordable, and Kampala’s growing street food industry delivers …
Street food vendors typically cater to lower-income, price-sensitive consumers and need to keep prices low to compete successfully. In addition, a fair amount of their income must be used to purchase ingredients for the next day’s food offerings. After paying their daily living expenses, too many street vendors don’t have sufficient capital to maximize their sales and profits. …
The street food vendors all appeared to be hardworking and enthusiastic. But their reality is stark — many are one family or health crisis away from losing everything. In Kampala, selling food on the street is technically illegal, and the Kampala City Council Authority intermittently cracks down on vendors. However, many of the sanctioned markets are already full, and renting a space costs money. Micro-loans could help move these vendors up the economic ladder, but a broader social safety net in addition to a small influx of capital is needed. Improved vendor registration, regulations regarding the cost of renting market booths, and the provision of safe and energy-efficient cooking equipment could improve the economic stability of vendor households.
Compiled by Joseph Lawler from reports published by the various think tanks.
