As a result of the mortgage and banking shakeup the last few months, American finance is no longer operating under the same old rules any more. The government's intervention by trying to fix Fannie Mae and Freddie Mac and assume risks, in my opinion, is contributing to further hindrance of normal real estate market functions. A perfect example is the federal government's tightening of mortgage rules. Now lenders are becoming more and more restricted in their loan making process. So much so that it appears for the moment, financing is frozen because lenders are even turning down loans to borrowers with excellent and good credit too. It's getting hard and harder to close deals. If things were not bad enough, what's it going to take to get back on track?
Will investors and homeowners continue to look for further ways to be rescued? Will the federal government's tightening of mortgage rules cripple the already failing mortgage industry?
It seems like the entire U.S. policy of promoting homeownership during our latest real estate boom, which by the way raised the homeownership rate from 64% to 69%, has now left us with some serious unintended consequences-failing mortgages. Something is wrong with this picture!
The 2008 mortgage meltdown and banking crisis can be contributed to not only lenders who were supposed to be regulating mortgage borrowing, but also to the credit-rating firms who were supposed to monitor them failing to do their jobs. Another question you have to ask is where were investors in all of this? If investors were supposed to be monitoring the capital of these failing financial institutions, then it seems that investors
must have been asleep at their jobs too. Let's get back to American capitalism the good old-fashioned way!
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