"In the go-go years of the U.S. housing boom, virtually anybody could get a few hundred thousand dollars to buy a home, and private lenders flooded the market, aggressively pursuing borrowers no matter their means or financial history.
Now the pendulum has swung to the other extreme. Only one lender of consequence remains: the federal government, which undertook one of its earliest and most dramatic rescues of the financial crisis by seizing control a year ago of the two largest mortgage finance companies in the world, Fannie Mae and Freddie Mac.
While this made it possible for many borrowers to keep getting loans and helped protect the housing market from further damage, the government's newly dominant role -- nearly 90 percent of all new home loans are funded or guaranteed by taxpayers -- has far-reaching consequences for prospective home buyers and taxpayers.
The government has the power to decide who is qualified for a loan and who is not. As a result, many borrowers among both poor and rich are frozen out of the market.
Government officials generally agree that it would be better for private lenders to resume their traditional role as major providers of finance for home loans. But policymakers now face some tough choices. They must decide how to reduce support for the mortgage market without letting it collapse. And they must decide what kind of support the government should provide in the long run. "
4 comments:
Government intervention introducing systematic overhaul measures to reduce foreclosures can also help recover the situation. With the current situation, stringent lending practises and the weak economic situation is continuing the drain the buyers from affording to buy their own homes. Hence, the housing condition is at a risk where quick fix may not be easily expected.
Government intervention also created “affordable,” but dangerous, lending policies that encouraged lower down payments, looser underwriting standards and higher leverage. In the short run, this government intervention was successful in its stated goal – raising the national home ownership rate. However, the ultimate effect was to create a mortgage tsunami that wrought devastation on the American people and economy. While government intervention was not the sole cause of the financial crisis, its role was significant and has received too little attention.
http://www3.signonsandiego.com/stories/2009/aug/06/lz1e6issa22228-government-interventions-high-cost/
Government regulation of the mortgage industry is a topic of great interest on industry discussion boards across the internet. Should the Goverment get involved or shouldn't they, this is the basis for the debate. I really doubt it.
There are basically two camps, those who believe the government should provide more regulation and oversight of the mortgage industry and those who think the market should remain free of government intervention and should be left to figure things out for itself. For what my opinion is worth, not much according to last years tax returns, this debate is a little late. The simple fact of the matter is that the government is already intimately involved in the regulation of almost every aspect of our lifes including the mortgage industry and we need to refocus the debate to how to provide the most efficient and effective regulation of the mortgage industry instead of whethere we should or shouldn't have any regulation in the first place.
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