James Pethokoukis writes for the American Enterprise Institute's publication AEIdeas. He reports the Obama Administration is pushing lenders to relax mortgage credit standards. Their goal is to increase home ownership, particularly among the disadvantaged.
Luring economically marginal individuals into home ownership is much of what caused the 2008 Great Recession. Now they plan to repeat that mistake, if Pethokoukis is correct.
It will put into motion policies which will fuel another housing boom—in the effort to put families with limited resources and poor credit histories into highly leveraged loans. This policy has been a failure since it began around 1960. It places low income borrowers with a high degree of income volatility into loans with the greatest amount and varieties of leverage so as to enable them to buy homes in neighborhoods with the highest levels of house price volatility.It is a recipe for disaster.
