8/19/2011

Not surprisingly, the Nation magazine bungles the discussion on the Texas Housing market

Robert Scheer in The Nation claims:

From the first days of statehood in 1845, Texas has maintained the strictest laws on home mortgages in the nation. The Texas constitution’s blanket ban on home equity loans, born of outrage over previous land grabs by banks, has been eased substantially over the years, but a firm commitment that the total amount in loans on a house not exceed 80 percent of appraised value, and other consumer-friendly restrictions on mortgage lenders, saved Texas from the home mortgage disaster visited upon many other states. . . .


As a February 21, 2001 article in the American Banker notes, home equity loans have and are made in Texas. In 1998, Texas passed a law that "lifted a 150-year-old ban on home equity loans. . . . . In 1998 the state constitution was amended to allow home equity lending." Texas banks have been relatively small because of various past state regulations and these new loans were large made by out-of-state organizations.

Presumably this is the type of thing that Paul Krugman was misleadingly alluding to the other day in his attack on Texas.

The vast majority of companies making home equity loans in Texas are out-of-state banks and finance companies that are "big enough to absorb the risk," said Ann Graham, chief counsel and vice president of the Texas Bankers Association. . . .


Also, Texas was spared the worst of the housing crisis, partly because it turns out to have surprisingly strict regulation of mortgage lending. . . .

The reason that Texas didn't have a meltdown is largely because it didn't have the huge rise in housing prices preceding it and the reason that happened was because Texas has relatively few zoning regulations that restrict growth.

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