Coming financial reform legislation misses the point if it doesn't address the federal government's growing dominance of the mortgage market because the United States is already being set up for another bubble.
Uncle Sam's best role is to set the parameters for the industry, including sane underwriting requirements for banks and non-bank lenders, along with other rules to prevent abusive lending, while slowly weaning the mortgage market off the programs that have helped feed the boom-and-bust cycle.
But Senator Chris Dodd's "Restoring American Financial Stability" bill does nothing of the sort. In fact, the bill doesn't address the future of Fannie Mae(FNM) and Freddie Mac (FRE), or the explosion of mortgages guaranteed by the Federal Housing Administration (FHA) at all.
Click to read: FHA Loans: The New Subprime...
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