Friday, December 19, 2014

Borrowing Bad: Risky New Mortgage Rules Could Take Us Back to 2008 | The Fiscal Times

Borrowing Bad: Risky New Mortgage Rules Could Take Us Back to 2008 | The Fiscal Times: "As Kevin Drum points out, excessive leverage was the main driver of the financial crisis. When it comes to banks, regulators and experts seem to understand that. But when it comes to homeowners, they ignore that lesson, even though leverage on consumers is no less dangerous, and possibly even more so, than leverage on financial institutions. In fact, overleveraging homeowners with debts they cannot afford will unquestionably backfire on banks over time. 

Underwriting standards have eased for just about every financial product except mortgages, and the government, wanting to reverse housing market sluggishness, wants to push mortgages over the edge as well. That drive for short-term economic gain simply generates unavoidable risk. We would justly decry the abandonment of bank leverage rules; the same rules should apply to protect homeowners. 

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