Housing Regulator Wants to Throw the Drowning Poor an Anchor; Mish Alternative Proposal

Now that home prices have recovered from the Great Financial Crisis to the point of being way overvalued again in many areas, a Housing Regulator Targets More Support for Poor Borrowers.

The regulator for U.S. housing finance giants Fannie Mae and Freddie Mac told the two firms on Wednesday to provide more support to low-income Americans taking out mortgages and refinancing home loans.

The Federal Housing Finance Agency released goals for the two government-controlled firms for 2015-2017 that would advance agency chief Mel Watt's aim to widen access to housing credit.

The rules direct Fannie Mae and Freddie Mac to expand the number of loans they back for low-income families to 24 percent of the their purchases of single-family home mortgages over the period, up from a target of 23 percent in 2014.

FHFA also asked each firm to make mortgages refinanced by low-income families a bigger share of their refinancing purchases, and to increase the number of mortgages they buy for multi-family properties each year.

Throw the Poor an Anchor

The increases are small. But they are also symbolic of the same attitudes that got us in trouble before. It would have made far more sense to widen availability in 2009 when homes were more  affordable.

Now after prices have recovered, regulators again want to "do something" to make housing more affordable. But the more support they give, the more people are encouraged to buy beyond their means, and the more prices rise.

We don't need regulators of this nature. Nor do we need a Fed price-fixing interest rates. Both contributed to the housing boom-bust and both are back at it again.

No one learned a damn thing.

Mish Proposal

1. Shut down Fannie Mae
2. Shut down Freddie Mac
3. Shut down the FHA
4. Get the hell out of Ownership Society promotion
5. End all affordable housing programs
6. Let free market forces regulate the market

Mike "Mish" Shedlock