patrick.net

http://ochousingnews.com/blog/despite-industry-spin-mortgage-lending-standards-tight/

Real estate industry lobbyists foster the false impression mortgage lending standards are tight. They are not.

Real estate industry lobbyists appeal to lawmakers for policies the real estate industry believes will promote more transactions at higher prices. Most often this lobbying is short sighted and causes unintended long-term detrimental impacts on the housing market.

For example, real estate industry lobbyists continually support relaxed lending standards. In 2004 they watched all of their dreams come true as all mortgage standards were abandoned causing a large boost in transaction volume and much higher home prices. Rather than being the panacea they envisioned, the abandonment of lending standards inflated a massive housing bubble that pulled forward demand, caused a deep house price crash, lowered home ownership rates to 20-year lows, and caused an 80% reduction in new home construction — a condition the industry has not recovered from.

Rather than learn an important lesson from this disaster, real estate lobbyists continue to pepper the press with complaints about how tight mortgage standards are today with hopes that policymakers will lower standards at the FHA and GSEs to promote more transactions by making bad loans to people who won’t repay them. In short, they learned nothing; lobbyists still promote short-term goals at the expense of long-term stability. And the worst part is they are completely wrong about mortgage standards being tight today.

Source: http://ochousingnews.com/blog/despite-industry-spin-mortgage-lending-standards-tight/#ixzz3Aw9idQJU

#housing