A good series in the NYT, focusing on how we as a nation got into the financial mess we're in. Appears the 'Ownership Society' was just so much hooey. It was always intended to be the 'Debt Society'. Homeownership is at record levels, we're told by our leaders. But it's not really true, when you consider that equity is the accurate measure of ownership: "For the first time since World War II, the portion of home value that Americans own has fallen to less than 50 percent."
Looser and looser restrictions on banks and other lenders led them into a competitive frenzy as they sought to create--and capitalize upon--an ad-driven demand for borrowing.
Since the early 1980s, the value of home equity loans outstanding has ballooned to more than $1 trillion from $1 billion, and nearly a quarter of Americans with first mortgages have them. That explosive growth has been a boon for banks. Banks’ returns on fixed-rate home equity loans and lines of credit, which are the most popular, are 25 percent to 50 percent higher than returns on consumer loans over all, with much of that premium coming from relatively high fees.
It might seem hard to believe, but not long ago people borrowed money to buy a home with the expectation that they would eventually pay off the debt... The newly mortgage-free even used to throw mortgage-burning parties to celebrate their financial freedom. In 1975, Edith and Archie Bunker torched their mortgage on “All in the Family.” Two years later, the Walton family burned theirs on “The Waltons.” Now the idea of paying off the mortgage and owning a home outright is disappearing. One reason is that many people make smaller down payments on homes than they once did, so it takes longer to pay off their debt.
But another reason is that banks now enable homeowners to keep borrowing. In fact, they encourage it... As a result, the United States has become a nation of half-home owners. For the first time since World War II, the portion of home value that Americans own has fallen to less than 50 percent. In the 1980s, that figure was 70 percent...
Marketing executives knew that “second mortgage” had an unappealing ring. So they seized the idea of “home equity,” with its connotations of ownership and fairness...
“That ‘unused home equity in your house? Put it to work for you.’ ” Professor Warren said, mimicking the ads. “Doesn’t that sound financially sophisticated?” Not to Professor Warren. “Put it to work,” she said, is just a euphemism for borrowing.