By David Dayen | New Republic
(Editor’s note: Opinion pieces are published for discussions purposes only.)
One of the more consequential moments for the future of the U.S. economy happened off the campaign trail Monday, at a ballroom in the Mandalay Bay Hotel in Las Vegas. At the annual conference of the Mortgage Bankers Association, Mel Watt, chairman of the Federal Housing Finance Agency (FHFA)—the conservator for Fannie Mae and Freddie Mac—delivered a speech that will matter to anyone who wants to buy a home or even hold down a steady job in the next few years.
As expected, Watt signaled to mortgage bankers that they can loosen their underwriting standards, and that Fannie and Freddie will purchase the loans anyway, without much recourse if they turn sour. The lending industry welcomed the announcement as a way to ease uncertainty and boost home purchases, a key indicator for the economy. But it’s actually a surrender to the incorrect idea that expanding risky lending can create economic growth.
Note: Statement by Rose Law Group Founder and President Jordan Rose:
“I totally disagree with this. The loan standards are far too stringent and have had a real negative effect on our housing market. The lenders aren’t saying, ‘Let us make bad loans again,’ but rather, ‘Let us be fair.’ When according to some well-respected homebuilders, 60 percent of buyers in 2013 couldn’t meet the loan standards in 2014, that means government over regulated. These tweaks should really help us into 2015.”
