The strangest fact is that the housing sector is having such problems when the economy otherwise has been doing well. Why have there been so many defaults when the economy has not been in a recession, asks John R. Lott Jr., the author of "Freedomnomics" and a senior research scientist at the University of Maryland?
The defaults are the result of rules that were created to accomplish the "noble goal" -- an increase in home ownership among poor and minority Americans. Accepting these rules and criteria were hardly voluntary, with the Fed warning banks that failure to comply could subject a financial institution to civil liability for actual and punitive damages.
[some of the governments imposed rules:]
- Lack of credit history should not be seen as a negative factor because, for lower-income applicants in particular, unforeseen expenses can have a disproportionate effect on a credit record.
- Accumulating enough savings to cover the various costs associated with a mortgage loan is often a significant barrier to homeownership by lower-income applicants.
- Fannie Mae and Freddie Mac will accept overtime and part-time work, retirement and Social Security income, Veterans Administration (VA) benefits and others and valid income sources. [valid yes, reliable no]
[i.e., political correctness run amok was the impetus for this mess, with the government telling professional risk managers how to evaluate risk. Yet the politicians and media are spinning the root cause as a lack of government intervention... They'll probably pull it off]
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