Washington is pushing housing loans down the same path that led to the last financial crisis, says Paul Sperry, a media fellow at the Hoover Institution.
"Nobody wants to return to the kind of risky home loans that spurred 2008’s banking collapse. Sliding back toward lax lending would be nuts," he writes in the New York Post.
"Yet Washington officially endorsed such loans this month."
The mortgage agencies Fannie Mae and Freddie Mac have decided to back loans to low-income homebuyers who provide just a 3 percent down-payment, "even though such loans have a high default rate," Sperry says.
With Fannie and Freddie guaranteeing 90 percent of all mortgages, "private lenders will match their weaker standards," he writes.
"Many of these weak loans will, in turn, be securitized and traded on Wall Street. This is the hazardous cycle that led to the financial crisis."
So why enter it?
"Because the administration, with help from the media, has convinced the public that greedy Wall Street banks were to blame for the disaster, not Fannie and Freddie and their 'mission' regulators in Washington," Sperry says.
Other experts across the political spectrum also oppose the 3 percent guideline.
"It is dubious housing policy to encourage moderate income people to take out mortgages on which they are likely to default," Dean Baker, co-director of the Center for Economic and Policy Research, writes in a blog.
"Furthermore, since the median period of homeownership among low income homebuyers is less than five years, a relatively small portion of households who are able to buy homes through this policy will accumulate any substantial amount of wealth. By contrast, the policy is likely to help the banking and real estate industries accumulate wealth."
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