Mortgage Micromanagement

Apparently “playing by the rules” , according to Obama, includes taking an adjustable mortgage that results in monthly payments equal to 43% (or more) of income. According to the Homeowner Affordability and Stability Plan

“For a sample household with payments adding up to 43 percent of his monthly income, the lender would first be responsible for bringing down interest rates so that the borrower’s monthly mortgage payment is no more than 38% of his or her income. Next the initiative would match further reductions in interest payments dollar-for-dollar with the lender to bring that ratio down to 31 percent…”

So in the case of two families with identical earnings and living in identical houses we take the tax money of the responsible family that saved for a downpayment and give it to the irresponsible family that didn’t. And if you were responsible enough to rent until prices came down then you’re just out of luck.

Redistributing wealth based on income is a crude, but necessary, manner of levelling an uneven playing field. Redistribution based on debt introduces considerably more unfairness.