If I follow, you (MWG) are able to live as you do because in addition to your income, you have the benefit of a gift from your father (the difference between what he could have been paid for the house, and what you paid him).

Are you saying that everyone should be required to act as your father did (to sell their houses for less than the "market price")? Do you think that imposing price controls on houses would result in anything other than some kind of black market in houses, and no one selling houses any more?

I remember the mid 1980's when there were a lot of Manhattan apartments under rent stabalization, and there were whole companies set up that would act as middle-men between owners and renters who had to pay multi thousand dollar fees to be entitled to sign a lease. I'm not sure that that system really benefited anyone (except for the army of middle men, from whom the land lords could extract some limited additional income).

Who's the bad guy in your story, and what are we supposed to do about it?

Sorry, Morris, for not responding earlier.

Oh, where do I start? First of all, I'm not remotely suggesting that everyone should be required to sell their houses for less than the market price. The point is that 1) New York property is so expensive that a two-income, midddle class household with two ivy league undergraduate degrees and two graduate degrees could not afford to buy a house in north Crown Heights on their own. 2)It's more than just sweat and hard work that enables to people to move ahead in life. It also assets and advantages left by previous generations, something most people of color don't have, relatively speaking.

Who are the "bad" guys? I believe all of our hands are dirty. The bad guys include: 1) Blood sucking property flippers and real estate hawks who don't give a damn about the tenants and neighborhoods they feed off of and who simply make their living from inflated real estate prices 2) The scam artists: predatory lenders, brokers, agents, home contractors and appraisers who collude to make unaffordable high-interest-rate loans, strip equity out of property, and contribute heavily to the high foreclosure rates in neighborhoods, which then displaces people and drives up real estate prices. 3) Policy makers who put blind faith in the "market", make homeownership a personal virtue and then do little to enable working people to actually afford homes. 4) Employers and policy makers who have allowed housing prices and the cost of living in New York to outstrip wages. 5) Those of us who are so desperate for property in certain areas in New York that we are willing to risk our financial security.

What we are supposed to do about it: 1) Create stronger laws that wipe out all forms of predatory lending - foreclosure rescue scams, flipping scams, home improvement scams, etc. 2) Create more counseling programs and affordable mortgage programs for working people. 3)Apply civil rights laws and usuary caps that would: curb high cost mortgages, prevent the steering of people of color to "exotic" and high cost mortgages when they are eligible for conventional market-rate loans, and lower the "ghetto tax" that was documented by the Brookings Institute and reported by the New York Times yesterday. 4) Conduct better code enforcement of housing 5) Train not-for-profits and landlords of owner occupied buildings to manage property
6) And yes, if necessary, exercise some type of price control for housing.

I am (as you know) against predatory lending, but it is a hard thing to define. And it is sometimes useful to play the part of the devil's advocate. You remember what happened in Georgia a few years ago? Georgia had a state law that essentially made a holder of a mortgage liable for rule violations when the mortgage was originated. The result was that for a month or two until they changed the law, none of the major mortgage companies were willing to loan any money to anyone in Georgia.

It is true that if you prevent some potential buyers from getting mortgages, you will tend to stem the tide of rising prices. Unfortunately, the people who you will be preventing from buying would be exactly those people who lack the assets and advantages left by previous generations.

Say for example that lending to people with "good credit" I have to plan on losing 1% to people who end up not able to make their payments. Lending to people with poor credit, I plan on losing 4%. That means that a lot of even poor credit people who get high interest rate mortgages do make their mortgage payments. It's not 96% because that 4% loss may really mean that many more of the home owners default, but that the bank is able to recover a lot of the money when the homes are sold.

Questions:

Would it really be best to pass a new rule that says that none of the "poor credit" people can get mortgages, because some of them (statistically) won't be able to keep up with their payments?

Are we confident that getting rid of these potential buyers will have the side effect of reducing prices for the rest of us?

Does "progressive" mean that we think it's a good idea to prevent two consenting adults from engaging in a business transaction that both expect to benefit from?

Morris - There is a fundamental assertion you make that I need to push back on. I'll let the Center for Responible Lending do the talking for me:

"African-Americans and Latinos get high-priced subprime mortgages far more frequently than whites -- even when they are equally qualified, according to a groundbreaking new study from CRL.

Lenders say they charge more because African-Americans and Latinos on average have shakier credit histories, which makes lending to them riskier. But that explanation is simply wrong.

In the most extensive study of its kind, CRL found that African-Americans and Latinos are commonly almost a third more likely to get a high-priced loan than white borrowers with the same credit scores. The study examined 50,000 subprime loans."

You can find this study at:
http://www.responsiblelending.org/pdfs/rr011-Unfair_Lending-0506.pdf

Thousands of subprime loans are made to people who would otherwise be eligible for market rate loans. And the foreclosure rates on sub-prime mortgages are much higher than market-rate loans because of the price, not the risk. In fact, many go into default within the first year, indicating incredibly bad underwriting.

The other thing I have to push back on is the notion that low- and moderate-income communities and neighborhoods of color only have two choices: Expensive, exploitative services or no services at all. It's a choice that would not be tolerated in other communities and it's one that I'm not willing to accept, especially when it's predicated on the assumption that black/brown = deadbeat.

There are credit unions and loans funds all over the country (not to mention micro-enterprise institutions throughout the world) proving that you can be profitable AND make loans to low-income people of color. And the Clinton-era Community Development Financial Institution (CDFI) Fund reflected governmental will to support these kinds of institutions.