[quote=markmax33]The $250,000 tax credit was certainly part of it, but if the private market had to own the mortgages and didn’t have the GOV to compete with and lead the way on MBS and encourage MBS’s through the GSEs, this wouldn’t have happened on this scale if at all. If interest rates could have floated up, instead of the FED slashing them and encouraging bad investing the $250,000 credit would have been a non-issue. I believe the second the $250,000 tax credit was issued that a flood of investors would have been trying to get credit and rates would have adjusted upward, thus stabalizing the market and balancing out the risk with the tax credit.[/quote]
Just to clarify, there was never a $250,000 tax credit. It’s a $250,000 exclusion. ($500,000 for a married couple.) And it replaced an unlimited exclusion for move-up sellers. And it happened way back in 1997. And it doesn’t and never did apply to investment property, only to primary residences. And beginning in june of 2004 and the end of 2006, the federal funds rate and the discount rate were raised 17 times.
