mortgages

SEC vs. Goldman Sachs: Legislation by Demonization

The Obama administration thinks it has discovered the perfect formula to cram legislation through in a hurry:  Demonize some prominent firm within an industry you plan to redesign, and then pass a law that has nothing to do with the accusation against the demonized firm.  They did this with health insurance and now they’re trying it with finance.

Random Thoughts on Obama’s New Mortgage Plan

In case you missed it, President Obama gave a big speech out in Las Vegas about both his “jobs” plan and a new plan to help underwater borrowers re-finance their mortgage. First, let’s recognize that it is not really “his” plan. The proposal is being issued by the Federal Housing Finance Agency (FHFA), an independent regulator that the President is supposed to have no control over. Frankly, I find it troubling for a president to be so involved with an independent agency.

Do Forced Mortgage Writedowns Create Wealth?

Matt Yglesias recently added his voice to the long running calls for principal reductions on underwater mortgages.  His argument is that such would create additional spending.  Or as he puts it, “I think that if people in Phoenix got a principal writedown on their mortgages, they’d have more disposable income and might go to the bar more.”

Good News on Housing!

The Wall Street Journal reports that some mortgage insurers and lenders are beginning to relax their down-payment requirements, so that buyers in some parts of the country can now borrow 95% instead of 90% of a property’s value. Buyers who can’t come up with even a 5% down payment can turn to the Federal Housing Administration, which will make loans with as little as a 3.5% down payment. Unsurprisingly, the FHA is increasing its market share.

What Caused the Crisis?

Last night National Government Radio promoted a documentary on National Government TV about the financial crisis of 2008, which concludes that the problem was … not enough government.

If the “Frontline” episode mentioned any of the ways that government created the crisis – cheap money from the central bank, tax laws that encourage debt over equity, government regulation that pressured lenders to issue mortgages to borrowers who wouldn’t be able to pay them back – NPR didn’t mention it.

Housing Bailouts: Lessons Not Learned

The housing boom and bust that occurred earlier in this decade resulted from efforts by Fannie Mae and Freddie Mac — the government sponsored enterprises with implicit backing from taxpayers — to extend mortgage credit to high-risk borrowers. This lending did not impose appropriate conditions on borrower income and assets, and it included loans with minimal down payments. We know how that turned out.

Don’t Bail Out Bernanke

Here is the message members of Congress should send to Ben Bernanke during the Fed chief’s annual Capitol Hill testimony this week: He is fighting for his job. With his term up in January of next year, Bernanke needs to be called to account for the Fed’s many questionable actions during the financial turmoil of the past year.

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