Remember how awful it was when the housing bubble burst, foreclosure rates skyrocketed, and we were thrust into a deep recession? Apparently, Denver Mayor Michael Hancock has forgotten. He’s out in front of a new initiative that is eerily reminiscent of the same kind of irresponsible policy that led to the subprime mortgage crisis in the first place.
One of the most troubling causes of the crisis was lenders’ penchant for offering loans to high-risk borrowers who put little to no money down. Without having invested any of their own hard earned cash, buyers were left feeling no real ownership stake in the house. Consequently, they were quick to abandon the property when their interest rate and monthly payment skyrocketed, while the value of their home plummeted. (Anyone remember the jingle mail from 2008 or the “strategic default” philosophical discussions from back then?)
Lesson learned, right? If you want to foster a sense of personal responsibility then don’t let people get something for nothing.
That is why Hancock’s recent move has really left us scratching our heads. He is teaming up with Wells Fargo to offer prospective homebuyers up to $15,000 of down payment assistance in the form of grants. While this may make Hancock feel warm and fuzzy inside, it’s exactly what Denver doesn’t need right now. In case Hancock missed the memo, the Denver housing market is booming. There is no shortage of qualified buyers with plenty of cash to put down.
Alas, we’re left wondering why Hancock is advocating for such an unnecessary handout.