Fannie Mae Eases Credit To Aid Mortgage Lending. This was an article headline from the NY times on September 30th, 1999. Fannie Mae was under "increasing pressure" from President Clinton's administration to expand mortgages to moderate income people. The problem was that moderate income people in general did not have a traditional 20% down payment and often their credit was below a level that would lead to a loan being approved.
Fannie Mae succumbed to the pressure and eased their credit requirements. Franklin D. Raines, Fannie Mae's then chairman and CEO 
was quoted as saying, "Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements" and "Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market."
So to get more people into homes sub-prime became Main Street and 100% financing was born.
There were some that questioned the lending changes and were concerned with the risks involved, but the "everyone should be a homeowner" policy leaders pushed ahead and made loans affordable for everyone.
The rest is history!
It would be great if everyone could own their own home, but the truth is we need renters, too. Lending guidelines were in place to prevent the current catastrophe from happening. When we make changes to these guidelines we put ourselves in a position to have great success, but also dramatic failures.
The current changes to lending requirements are really not changes at all. They are simply reverting back to before and only lending to qualified individuals who have good credit and a down payment. That actually sounds like a good plan.
President Clinton recently said that he was not to blame for the economic mess we are currently in. I would not argue that he is totally to blame, but he has to admit some responsibility. Not to be political, but the liberal approach of everyone should own a home just does not work.
Here is a link to the NY Times article: http://tinyurl.com/4ulb87
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