Sunday, March 4, 2007
Another Success For Market Deregulation
It's become something of a common wisdom that the housing market is being threatened with collapse by the proliferation of subprime mortgages. What's less commonly understood is how these mortgages have come to make up 20-25% of all mortgages currently approved. Here's the key graf from a Christian Science Monitor piece on the problem:
Deregulation has allowed the mortgage industry to create products like the no-down-payment mortgage and the even riskier "no documentation" loan where all borrowers have to do is state their income without providing proof of their ability to repay the loan. (Emphasis added.)
In the face of rising foreclosures and stormclouds on the horizon, Congress is already vetting proposals for more active regulation, and Fannie Mae is busy putting together "rescue" products to help bail strapped homeowners out before they default.
Trouble is, the Federal Trade Commission was aware of abuses in the subprime lending market as far back as 1998, as this report appropriately titled "Home Equity Lending Abuses in the Subprime Mortgage Industry" shows. The only difference being that back then, the major abuses were targeted towards minorities and the elderly, whereas now they're generalized.
Funny how conservatives are so keen to regulate who gets married, but couldn't care less about who gets screwed.