Your government is choking off any chance of a housing recovery. How?
The lack of common sense in lending standards. They control them since they own Freddie and Fannie. Just ask anyone how difficult it is to get a mortgage done today. It takes an act of Congress – and that act is all about saying NO.
But Mr. Frank and so many others, including Mr. Trump, keep telling us “the banks won’t lend”. I can’t explain Trump’s motivation to mislead, but I can understand the government’s. Frank and the rest of the folks in charge just don’t know what they’re doing.
Sure, lending standards went too far – like many examples of economic excess. And – like all examples of economic excess followed by a crash, the government reacts violently in a manner that brings the gears of progress to a grinding halt.
And so it is with lending – the government has shut things down. Consider the following example:
- Stated income loans are dead – but housing is in dire need of them. The idea is simple – many people (especially the self employed) are challenged in documenting income, so lenders typically look at collateral (the home) for repayment in the case of default.
- A guy with a lot of money in the bank that is self employed and whose aim is to minimize his tax liability looks poor on paper – yet he has the dough to afford the loan. But his tax return is his proof of income – and since he can’t prove it, he needs a stated income loan. SO – if he owes only 50% of the value of the home – WHY CAN’T HE GET A LOAN? This is a sweet loan! If he defaults, the lenders takes his house and dumps it…easily recovering the amount due and then some.
This is just one example in a myriad of lending standards that lack any sort of common sense. Housing depends on the self employed to be able to obtain credit. Yet alas, we won’t give a loan to a person that creates JOBS, yet we’ll give a 97% loan to a person with a poor credit score, with no money in the bank, and we’ll guarantee that loan with taxpayer money. This is offered by the FHA – your new sub prime lender folks.
Conclusions here? Not only is the government killing housing with its policies, it is creating yet more dependency on the system by the folks who can’t afford a home and rightfully shouldn’t be enabled to buy one.
But isn’t this the point of it all? Make the people dependent on you and they’ll bow down to you.
Think about it……