Wednesday, September 17, 2014

AMERICAN DREAM - Feds Making Home Ownership Harder

"Whither the American Dream?" by Mitria Wilson, In These Times 9/9/2014


In the wake of the foreclosure crisis, the Federal Housing Finance Agency has moved to make homeownership harder for ordinary Americans.

Hollywood celebrity and actress Katie Holmes recently bought a $3.8 million home in Calabasas, California (near the famous Kardashian family) for her and her daughter, Suri.  Actor Vince Vaughn last week closed on a $2.4 million home in Los Angeles with a lap pool.

Are celebrities the only Americans who should be able to afford a dream home?  The federal government seems to think so.

In the wake of the foreclosure crisis, the federal government stepped in to rescue Fannie Mae and Freddie Mac and prevent a broader housing-market collapse.  It is clear that the mortgage giants made some mistakes in the foreclosure crisis, including underestimating their amount of risk from defaults.  But neither they nor consumers were the primary cause of the 2008 financial crisis:  The blame for that belongs to financial institutions that made predatory lending their primary business model.

Nevertheless, the Federal Housing Finance Agency has forced Fannie and Freddie to adopt a series of policies, price hikes and additional fees that will make it much harder for the average American to buy a house.

In a recently released rule laying out goals for Fannie and Freddie to make housing more affordable, the Federal Housing Finance Agency projects that the number of low-income Americans who may actually be able to get a mortgage loan could continue to shrink from 26.6 percent to 19.8 percent by 2017.  Before the housing-market crash, 45 percent could do so.

The Agency points to the need to ensure the “safety and soundness” of the mortgage industry as the ostensible reason for its actions.  Yet, the changes it is proposing will force consumers to cover twice over the actual financial risk posed to Fannie and Freddie, resulting in soaring costs to homebuyers.

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