“In 2004, as regulators warned that subprime lenders were saddling borrowers with mortgages they could not afford, the U.S. Department of Housing and Urban Development helped fuel more of that risky lending. Eager to put more low-income and minority families into their own homes, the agency required that two government-chartered mortgage finance firms purchase far more ‘affordable’ loans made to these borrowers. HUD stuck with an outdated policy that allowed Freddie Mac and Fannie Mae to count billions of dollars they invested in subprime loans as a public good that would foster affordable housing.” So reports the Washington Post today.
Now, of course, Congress is trying to make American taxpayers pick up the bill for defaulting mortgage borrowers, including those who chose risky mortgages with low introductory payments in order to buy fancy cars and enjoy lifestyles beyond their means. We earlier discussed why those mortgage bailout proposals are unfair, bad for the economy and taxpayers, and larded with political pork for left-wing groups; how they will actually encourage borrowers to default on their mortgages; and how they will reward speculators while doing nothing to stabilize the housing market or financial markets.