Mortgage insurance can help Poland
Editor:
It is clear to me that if the Polish government wants to increase home ownership, subsidization of interest rates is not the answer. Government interest rate subsidies are like narcotics: They are expensive and one can become easily addicted to them. Government interest rate subsidies are already causing significant budget problems in Slovakia, the Czech Republic and other Eastern European countries. People are not purchasing homes in Poland because few can afford to make a down payment equal to 20% of a home's value. The most efficient way to resolve this problem is for the government to provide a mortgage insurance program, similar to the Federal Housing Administration mortgage program provided by the U.S. government. This type of mortgage insurance covers any losses that exceed 20% of the home's value, enabling first-time homebuyers to obtain mortgages with down payments as low as 5%. In the U.S., less than 40% of homebuyers have the savings to make a down payment that is equal to 20% of their home's value. Without FHA mortgage insurance, the U.S. home-ownership rate would plummet. Unlike interest rate subsidies, mortgage insurance would require the government to make a cash payment only if, due to the borrower's default, the lender did indeed incur a loss that exceeded the amount between the borrower's equity and the value of the home. Poland has plenty of mortgage lenders and plenty of potential borrowers; a government mortgage insurance program would assist in bringing the two together and getting the home-ownership rate where it should be for such a developed country. Maureen Bolton Washington, D.C.
