Risky Business by Mike Whitney

[Crewleader]

October 28, 2014

"Easy Money" Mel Watt Loosens Lending on Mortgages

Risky Business

by MIKE WHITNEY

Here we go again.

Last week, the country’s biggest mortgage lenders scored a couple of key victories that will allow them to ease lending standards, crank out more toxic assets, and inflate another housing bubble. Here’s what’s going on.

On Monday, the head of the Federal Housing Finance Agency (FHFA), Mel Watt, announced that Fannie and Freddie would slash the minimum down-payment requirement on mortgages from 5 percent to 3 percent while making loans more available to people with spotty credit. If this all sounds hauntingly familiar, it should. It was less than 7 years ago that shoddy lending practices blew up the financial system precipitating the deepest slump since the Great Depression. Now Watt wants to repeat that catastrophe by pumping up another credit bubble. Here’s the story from the Washington Post:

“When it comes to taking out a mortgage, two factors can stand in the way: the price of the mortgage,…and the borrower’s credit profile.”

On Monday, the head of the agency that oversees the mortgage giants Fannie Mae and Freddie Mac outlined … how he plans to make it easier for borrowers on both fronts. Mel Watt, director of the Federal Housing Finance Agency, did not give exact timing on the initiatives. But most of them are designed to encourage the industry to extend mortgages to a broader swath of borrowers.

Here’s what Watt said about his plans in a speech at the Mortgage Bankers Association annual convention in Las Vegas:

Saving enough money for a downpayment is often cited as the toughest hurdle for first-time buyers in particular. Watt said that Fannie and Freddie are working to develop “sensible and responsible” guidelines that will allow them to buy mortgages with down payments as low as 3 percent, instead of the 5 percent minimum that both institutions currently require.”

http://www.counterpunch.org/2014/10/28/risky-business-2/