The Corner

The Predatory Lending Myth

If predatory lending caused the subprime mortgage crisis, John Carney asks, then what’s to blame for the coming commercial real-estate crash?

If only regulators had been empowered to oversee these mortgage companies, journalists had paid more attention, or people had been better educated about the loans they were taking, none of this ever would have happened, according to the myth.

But the disaster in commercial real estate shows just how wrong this is. Commercial real estate loans weren’t made to unsophisticated buyers. It’s not like the people buying office parks, huge urban towers or shopping didn’t understand the terms of their loans. Yet 55 percent of commercial commercial mortgages that will come due before 2014 are underwater.

The new Consumer Financial Protection Agency is predicated on the idea that predatory lending is a huge problem and that consumers need a financial nanny sticking its nose into every loan or credit decision they make. It’s a bad idea. Senate Republicans (and Democrats) can and should oppose it while still supporting smarter regulations.