2008 was the end of a long chain of government mistakes and the beginning of the current real estate nightmare. The cause was simple, 20 years of bad policies and real estate lobbing to grow the homeownership rolls, specifically more minority, lower-income earners and those with poor credit ratings.
The government "persuaded" lenders with an iron fist in a velvet glove - forcing - them to forego prudent underwriting guidelines; predictably the real estate bubble BURST.
Would be homeowners borrowed far beyond their means to buy homes at artificially inflated prices - due to the artificial demand of all the new unqualified buyers. FNMA/FHLMC guaranteed that "all is well" while Rome burned. How could anyone lose?
Everything collapsed when the unqualified buyers couldn't make their payments. A massive wave of foreclosures overwhelmed the market and lenders lost billions. As the inventory of homes when up and the buyer pool went down - values plummeted.
Real estate lobbying efforts and others are now forcing The Federal Housing Administration to pick up the dropped ball of Fannie and Freddie chasing the same folly that caused the last bubble; in an attempt to "save the market."
FHA still underwrites loans to borrowers with scores of 580. Most landlords won't even rent to someone with less than 640 scores. Lenders are trying to raise the 580 threshold but are being sued by greedy community organizations claiming to represent lower income communities.
The real estate profession should lobby congress to make FHA-insured loans comply with the same standards now in place at FNMA/FHLMC and support all lenders who apply the stricter guidelines.
If the real estate community continues to exploit lax rules for their own short term gain another real estate crash will surely come
Comments(0)