The new overseer of Freddie Mac and Fannie Mae, former N.C. Congressman Mel Watt, is urging the easing of mortgage loan underwriting standards in an effort to encourage growth in the real estate market- and the economy.
According to a story in the Wall Street Journal:
For the past year, top policy makers at the White House and at the Federal Reserve have expressed worries that the housing sector, traditionally a key engine of an economic recovery, is struggling to shift into higher gear as mortgage-dependent borrowers remain on the sidelines.
In coming weeks, six agencies, including Mr. Watt's, are expected to finalize new rules for mortgages that are packaged into securities by private investors.
Those rules largely abandon earlier proposals requiring larger down payments on mortgages in certain types of mortgage-backed securities.
One teeny-tiny background note, likely of little importance: Freddie and Fannie have been stewarded under federal conservatorship since 2008. Perhaps this was because it was the only part of the government that wasn't affected by the financial meltdown. Or was it because they were the primary contributors to it and lost billions of dollars in the process?
Why would the Administration choose to jump back into the fire, especially through the same government-supported institutions and lending policies that led to such spectacular failure in the first place?
Politics and staggering arrogance, of course. This chart tells the story:
Two things to consider:
From 1995 to 2004, large numbers of Americans were thrilled to become homeowners for the first time. And they were happy.
After 2004, many of them lost their homes. And then they were not happy.
The conclusion? Obviously, the Obama administration is choosing to ignore history- and the facts- in order to gain political favor with people by giving back their happiness. Why shouldn't they? Like any good progressives, they're quite confident of their good intentions- because, you guys, everything will work just great this time, we super promise.