There’s always something to howl about

Apparently, insanity is buying the same house over and over again, even though you never qualify.

You just can’t make this shit up: Obama administration pushes banks to make home loans to people with weaker credit. Why not? It worked out so well the last time.

The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.

President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.

Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan and are seeking to make it easier for people who owe more than their properties are worth to refinance at today’s low interest rates, among other steps.

Obama pledged in his State of the Union address to do more to make sure more Americans can enjoy the benefits of the housing recovery, but critics say encouraging banks to lend as broadly as the administration hopes will sow the seeds of another housing disaster and endanger taxpayer dollars.

“If that were to come to pass, that would open the floodgates to highly excessive risk and would send us right back on the same path we were just trying to recover from,” said Ed Pinto, a resident fellow at the American Enterprise Institute and former top executive at mortgage giant Fannie Mae.


5 Comments so far

  1. Mark Madsen April 3rd, 2013 9:19 am

    Awesome, I knew it wouldn’t take long to bring sub-prime loans back. I’ll be better prepared to make the most of this next boom so that I can finally retire just after the crash.

  2. Greg Swann April 3rd, 2013 9:25 am

    This is just the husbandry of suckers. Seemingly, they are lucky to herded as sheep and not cattle.

  3. cooksquared April 3rd, 2013 2:47 pm

    Even without the deadbeats, the real estate market seems to be picking up steam in a major way. Especially in your neck of the woods Greg.

  4. Greg Swann April 4th, 2013 9:47 am

    When the gamblers stop coming to your casino, you ease up on the hold for a little while. Obama gave the game away yesterday, not that we all hadn’t already figured it out: Homeowners are sheep being herded by Wall Street. Every once in a while, they get shorn so the game can start over: Greater-fools who should not buy run up prices so the lesser-fools can sell at huge profits, prices crash when unqualified greater-fool buyers fail to perform, thus enabling lesser-fools to buy in once again at fire-sale prices.

    FWIW, I represent the lesser fools in all of this. They’re doing very well, and I’m doing as well as I want to be.

  5. cooksquared April 12th, 2013 11:02 am

    Real estate cycles are as old as real estate. I will say they seem to be coming faster and faster lately with much higher peaks and valleys. I would attribute this to both the information age and to the plethora of financial instruments designed to “mitigate” financial risks.

    The more banks make on fees and less on actual interest, the more we have to worry about. When banks are more concerned with the investment banking fees they make on packaging loans or the tens of other fees they make on bundling and selling mortgages, than they are on whether the homeowner and home are appropriate for the loan, you have a systematic issue.

    Even the rating agencies are paid by the very same people that they rate. If there are two regulators and you can pick and pay, do you pick the one that is going to tell you the truth or the one that tells you what you want to hear?

    While Greg always puts these things so eloquently, I would look at it another way. When everyone is incentivized to fleece the store, why are we surprise when the store is empty? Or a better question, why do you put your goods in the store?