Richard Mize
It's a wonderful life, and Henry F. Potter would hate it.
Potter, the hoary, craggy, cranky, despicable and downright mean banker slumlord antagonist in "It's a Wonderful Life," made his fortune from the sweat of the working class.
Not just the literal perspiration off their brows, but the cold sweat that came in the middle of the night when latent buyer's remorse metastasized into late-term borrower's sorrow.
There are still some things to lament in the housing market. Minority home ownership lags behind the average. New kinds of predatory lending ruin lives. A few bad builders make some people think they're all a bunch of scoundrels. A few bad Realtors are the bane of good ones. One thing that's long gone is the kind of lending that led to Potter's fancy bread and store-bought butter, although the practice of some creditors sticking it to some debtors will never go away completely - human nature being what it is unless a Clarence-the-angel-second-class is hanging around.
What drove Peter Bailey, then his son, George, to keep Bailey Bros. Building & Loan open wasn't just Potter's incorrigibility.
There was that, of course. The lower middle class of Bedford Falls was getting a little uppity in Potter's eyes with the Baileys' approach to lending, and ol' Potter hated it: "a few starry-eyed dreamers like Peter Bailey stir 'em up and fill their heads with a lot of impossible ideas," Potter was saying as George Bailey disrupted the building and loan's board of directors meeting.
"Now, you're right when you say my father was no business man. I know that," George Bailey replies in one of holiday cinema's most famous little-man speeches. "Why he ever started this cheap, penny-ante building and loan, I'll never know. But neither you nor anybody else can say anything against his character, because his whole life was - why, in the 25 years since he and Uncle Billy started this thing, he never once thought of himself. ...
"And what's wrong with that? Why - here, you're all businessmen here. Don't it make them better citizens? Doesn't it make them better customers? You, you said that they - what'd you say just a minute ago? They had to wait and save their money before they even thought of a decent home. Wait! Wait for what? Until their children grow up and leave them? Until they're so old and broken-down that - do you know how long it takes a working man to save 5,000?"
It wasn't just that Potter was a hard-hearted old coot. His callous attitude was backed by the lending practices of the day.
Combined, Potter's meanness and the rules of the game drove borrowers to despair and the Baileys to do business on the higher plane of a building-and-loan association.
By the conclusion of World War II, the time of "It's a Wonderful Life" (1946) Potter's ways were on the way out as a standard form of lending.
The movie doesn't go into detail about Potter's ways. But borrowing from him to buy a home probably involved loan-to-value ratios of 50 percent (in other words, down payments of 50 percent), and nonamortizing balloon mortgages, which had low regular payments that didn't pay off all principal and interest by the maturity date - which meant either the loan had to be rolled over or paid in full in a lump payment.
Only the wealthy could afford those kinds of loans, pointed out Stuart A. Gabriel, professor of finance and business economics at the University of Southern Californiacolor>.
That's why the real option for the good people of Bedford Falls was one of Potter's hovels or a loan from the Bailey brothers. Potter wasn't really in the lending business. He was a landlord, the worst kind.
What has made Potter's particular stripe of credit nearly obsolete? Not low mortgage interest rates, which are an aberration.
It's the 30-year fixed-rate mortgage itself, Gabriel wrote in a white paper for the Homeownership Alliance, "Mortgage Finance Innovation and the Achievement of Homeownership: The Role of the Fixed-Rate Mortgage."
Eliminating balloon loans, leveling out monthly payments and stretching loan maturity dates, thanks to the Depression-era Federal Housing Administration, have made it easier to become a homeowner, Gabriel wrote.
This Thanksgiving weekend, breath a prayer of thanks for the 1930s FHA, as well as subsequent efforts to increase home ownership. It's one reason that, for all the evils in the world - and they are aplenty - Henry F. Potter and his particular ilk are no longer among them.
Real Estate Editor Richard Mize can be reached by e-mail at richardmize@oklahoman.com or by phone at 475-3518.