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Wednesday, March 11, 2009
Like James Taranto, I don't care if Muslim home buyers are jumping through hoops pretending they're not paying interest when they buy houses... but I do have some questions about the Minnesota program:
* Why is the state of Minnesota doing this at all? Why is a state agency buying and selling houses to anyone? Why does a state agency need to be buying and selling houses? * Given that the Muslim home buyer is paying an above market price for the house (since the purchase price is the sum of the current value of the property plus the sum of the would-be-paid interest, to what extent are these transactions adding to the number of 'underwater' homes, where the homeowner owes more on the house than the house is worth? Note: the reason this could matter is that the number of so-called underwater homes is used in part to justify Obama's mortgage plan. * How does the home buyer sell the house? They're 'buying' the house for over twice the value (factoring in interest payments as principal), and if they sold it in, for example, five years, I doubt the value of the house would have appreciated enough for the house to be worth more than what the homeowner owes on this special mortgage... so how does the homeowner sell the house without getting into all kinds of problems with the lender? * To the extent the state agency is selling the house for more than it is worth and, presumably, for more than the state paid to acquire the house, is the paper 'profit' being used in any way to balance the state budget? * If the Muslim homeowner does somehow sell the house before the end of the mortgage period, at which point they presumably are selling for a loss (relative to their 'purchase' price) do they get to take a tax loss of any kind on the sale? * Who is financing the mortgage and how do they deal with the situation where a borrower owes over twice as much on the mortgage as the house is worth? Is there a special section of the banking regulations that allows lenders leeway, some special box to check on some form, to make these kinds of loans?
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