Why Is Our Government in the Mortgage Business?

We sure don’t want to be, but it looks like we are heading in that direction.

“In the name of affordable loans, the White House is creating the conditions for a replay of the housing disaster,” states the caption in a recent WSJ article on the “coming mortgage meltdown.”

[tweetthis twitter_handles=”@richardmbowen”]Why are we – oh, excuse me, why is our government in the mortgage business?[/tweetthis]

Looks like the Obama administration is lowering standards and annual mortgage insurance premiums “to make mortgages more affordable and accessible.” 

Prior to the 2008 debacle, private lenders campaigned for a loosening of credit standards from federal mortgage agencies and their regulators. They got what they asked for and it resulted in a price tag we are all still paying.

So Fannie and Freddie are now back on a deadly treadmill to meet government demands and each is offering to purchase from the private lenders 3% down payment mortgages at the behest of the Federal Housing Finance Agency.

Greed?

Lower pricing, increasingly loose credit and federal agencies fighting over high risk lending?

Studies from 2009 to today, by the government agencies themselves (FHFA) clearly point out that low down payment, 30 year loans to individuals with low FICO scores were consistently subsidized by less risky loans.

So given the recent history, why is Fannie offering to purchase heavily subsidized 3% down mortgages? Why are we heading down that path again? And why are government agencies allowing themselves to be involved in the affordable housing Ponzi game?

Ok, I keep saying greed. Is it? Or is this a deeper symptom of broken rules and regulations that allow government agencies to be subverted by business interests?

Sure looks like it!