Monday, April 1, 2013

Home mortgages

Private lenders are still unwilling to make home loans that they want to hold as investments as in the old days.  So Fannie May and Freddie Mac are necessary to guarantee or buy the mortgages.  This is what got us into trouble.  This process means that the original mortgage grantor is less careful in evaluating the capacity of the borrower to repay the loan.  Fannie and Freddie originally were public corporations but with the prevailing ideology they were privatized (you know downsizing too big government).  They sought risky investments to please their stockholders.  All of this went s south and the government bailed them out (all the time their management reaped handsome salaries in spite of their mistakes).  The taxpayer bill could be $200 billion by the end of 2015.
     Ideology makes poor public policy.

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