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Goodbye To Big Down Payments

Posted by Scott Van Voorhis May 14, 2014 12:48 PM

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Don't have enough money stashed away to get a mortgage? Just wait a while. Seriously.

The Obama Administration, after spending years pushing tough new rules that would require as much as 20 percent down on most mortgages, is now scrapping the idea altogether and reversing course.

Mel Watt, the former North Carolina congressman now riding herd over federal mortgage behemoths Fannie Mae and Freddie Macs, contends the top priority now is opening up the mortgage spigot to home buyers, the Journal notes in this piece.

OK, before you cheer, just remember the return to 20 percent down was envisioned as one of the chief bulwarks against the return of the kind of loose lending that helped inflate the housing bubble in the first place.

And the decision to ditch plans to force buyers to cough up substantial down payment points to mounting anxiety on part of policy makers in Washington over just where the suddenly decelerating housing market is headed.

Uncle Sam is clearly more worried right now about signs of a housing market slowdown - and what that could do to the economy - than about the return of straw buyers, liar loans and all the crazy lending that happened back during the bubble years.

We have had years of shot-term fixes and pump priming aimed at getting the housing market up and going again. Some of it was clearly necessary.

Yet every short-term fix risks a longer-term problem, potentially fueling the return of the kind of crazy price appreciation and speculation that led us down that sorry path to the worst downturn since the 1930s.

Here's a worrisome line from the Journal piece.

Critics of the move to loosen the reins now, including some economists and lenders, worry that regulators could be opening the way for another boom and bust.

What say you?

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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