Government

Krugman says government did not cause housing crisis

In a 12-18-15 NYT op-Ed Paul Krugman builds the case that government agencies and polices did not cause the housing crisis, but rather it was all on the private sector and lenders. He cites many reports on the subject. The idea that government pushed sub-prime lending is called a lie. Really?

Over decades and through various presidents administrations have pushed home ownership; Bill Clinton pushed home ownership as did others. See chart below. 

Even today this administration pushes home ownership.

WASHINGTON
New HUD chief Castro is ready to start pushing homeownership | Dallas Morning News

Source: New HUD chief Castro is ready to start pushing homeownership | Dallas Morning News

While the standard down payment when buying a home is 20%,  you can get a FHA mortgage for as low as 3.5% down payment. If that is not encouraging homeownership among people who probably can’t afford it, I don’t  know what is.

For an FHA loan, the minimum down payment you would need to buy a home is 3.5% down. Most lenders can lend up to $417,000 with the exception of Alaska, Hawaii and Guam. An FHA loan comes with a monthly mortgage insurance payment, which can make it more expensive than a conventional mortgage. Source: credit.com

Banks and other lenders compiled faulty mortgage investments to be sure, they granted loans that shouldn’t have existed, but in the final analysis, none of that would have been possible without the push for home ownership especially through sub-prime lending  (and gullible people allowing lenders to tell them what they could afford).

  

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Categories: Government

1 reply »

  1. Many of the problems were caused by investors flipping houses. When credit tightened, and there were no buyers, they just walked away. The government needs to get out of healthcare, education and housing. I saw a report that said the next bubble to pop will be commercial real estate. I am sure the Congress will bail out their Wall Street buddies once again.

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