Thursday, September 29, 2005

Housing price boom is fueled by BAD federal policy

The Treasury Department sets mortgage lending standards for the national banks. It has the power the pop the housing bubble by restricting non-conventional mortgages which encourage speculation, and to insist buyers be held to the traditional 25% gross income to loan amount standard.

Learned yesterday 20% of Wells Fargo's residential mortgages are non-conforming, and the bank will qualify borrowers up at 45% gross income to loan amount. Suspect most, if not all, of Wells Fargo's competitors are doing the same thing.

Were we governed by grownups who actually cared about the practical needs of ordinary people, in a heartbeat they'd kybosh these economically unsound lending practices.


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