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How Banking Reform Hurts Consumers

Posted on April 29 2010 2:23 pm
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Punishing Wall Street with “financial reform” means punishing consumers.

John R. Guardiano’s latest post at FrumForum

The politicians in Washington are worried that the “big banks” might once again “run amuck.” Instead, they should be worried that they will over-regulate and destroy consumer-friendly banking and mortgage options.

When I had returned from Iraq I was able to secure a mortgage loan for my condominium by employing a now discredited and unavailable loan type: the “option-arm loan.”

This loan allows the borrower, for a five-year period, to make a minimum monthly payment that is less than the interest accruing on his loan. Since the borrower’s loan debt increases during the initial lending period, when he refinances he might be forced to bring tens of thousands of dollars to closing.

The media typically covers these loans with sad-sop stories about people who allegedly have been fooled into them. These people supposedly didn’t know what they were getting into and now face the prospect of outsized mortgage payments that will sink them financially.

While the loan is ill-advised for some, for others it has been a real blessing. The interest rate on my two-bedroom condo, for instance, is scheduled to “reset” this June at an annual interest rate of 2.341% fully amortized over a 35-year period. This means…

Read the entire article at FrumForum

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