NickGulliford

The New York Times Attack on Freddie Mac's Richard Syron

Good article! The Boston Globe defended Syron:

www.boston.com/busines...

"Syron encouraged the Boston Fed's research department to wade into important, but contentious public policy issues. Perhaps best known was its study of lending discrimination, which found race, not lending risks, driving loan decisions.......... the study helped change lending practices and expand credit to minority and poor neighborhoods. In taking on the issue ......... Syron was virtually alone in the financial industry."

That was clearly commendable. People should not be discriminated against on the grounds of race or neighbourhood. However, lenders need to assess the integrity of borrowers as well as their earnings or other income.

I have raised another issue in an article "Are the Sub-Prime, Northern Rock, Fannie Mae and Freddie Mac fiascos connected with the increase in cohabitation?"

I think we need to know whether the foreclosures are disproportionately against cohabiting couples - as compared with - married ones?

The parties who have the information that would enable an answer to be give to this question seem to be very reluctant to provide it.

Members of the public on both sides of the Atlantic will all agree with Sheila Bair, Chairman of the Federal Deposit Insurance Corporation (FDIC), “The signal that we send to our banks is that we want to continue lending. But we want healthy lending. We want good risk management. We want well underwritten loans to credit-worthy borrowers.”

In "Soaring cohabitation risky?" Mike McManus writes:

washingtontimes.com/ne.../

"Some 6.4 million couples were cohabiting at any moment in 2007, but only 2.2 million married, 700,000 of whom were not cohabiting. Cohabitors had a 23 percent chance of marriage. Grim odds .......... Many couples who cohabit say they are in a "trial marriage." That is a myth. More than 8 in 10 will break up either before or after the wedding,"

The survival rate of first time marriages for couples who did not cohabit first is more than twice as good as for couples who cohabit.

I don't know whether mortgage underwriters take these facts into account, but I think for the same reason that race and neighbourhood should not be used to discriminate against people applying for mortgages, the risk associated with a lack of marital commitment should be assessed in the light of proper research, if that is not being done at present.

This is "a contentious public policy issue", but I don't think the banks, the media and the politicians can continue to ignore it.