Lenient lending standards allow poor people to buy and then LOSE their home.
So the home ownership rate has been increased, but at the expense of great suffering. Because that increased home ownership rate is only temporary.
If we really want to help the poor, give them some free credit counseling, help them raise their credit score, and then put them into a loan product which allows them to buy and KEEP a house.
Lenient lending standards are often accompanied by unscrupulous high lending costs. Broker commissions and prepayment penalties are highest on these loans.
The poor are the target of subprime loans. Subprime loans are concentrated in low income areas, not spread equally across the US, and they are a way to taking advantage of lower income borrowers. One study found that subprime borrowers who went to Wells Fargo’s subprime branch were put into a subprime loan, even when they qualified for a lower rate prime loan through Wells Fargo’s main banking division. Lenient lending standards are a way of taking advantage of the poor.
