-the FBs are still expected to pay off their loan(s)
What I don’t like about it:
-Ms. Bair makes the common mistake of confusing
housing affordability with gimmicky mortgages.
True housing affordability comes in the form of
**lower prices**, not more gimmicky loans that
postpone the actual payment of principal & interest.
-What happens in five years when wages are stagnant or
lower and housing prices are stagnant or lower — leaving us right back where we are today? Do we
get another “5 year plan”? Does it ever end?
-What about the incoming buyers? Are they expected to
take on funky mortgages because the govt insists on
keeping an artificial floor under housing prices?
-Who is making sure we don’t see any more of these loan
“products” that caused the problem in the first place?
I’m still hearing commercials for funky loans and the
pace seems to be picking up again — heard of the new
“combo loan” from Countrywide where you wrap all your
debt into a mortgage — effectively what people were
doing all along, but is now being directly encouraged
by the lender…
I still think the best method is to let housing prices fall to such an extent that people can buy based on their documented income (and no more than 30% DTI, max!), using traditional, 15-yr or 30-yr fully amortized loans.
With all the crying about the “affordable housing crisis” over the past few years, one has to wonder why they are now fighting like mad to keep housing at artificially high and unaffordable levels.
