Politics

Because What Could Go Wrong With Government-Backed, Low-Interest, No-Money-Down Housing Loans?

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Can we get government out of the goddamned mortgage industry, already? Your latest demonstration that the federal government is incapable of learning, care of The Washington Independent:

"Buy new with $1,000 down," the advertisement says, the words resting atop a trim green clapboard house offset by a bright blue sky. "The time has come. Stop wasting rent check after rent check and start building equity in your own home. And with only $1,000 down, affordable monthly payments and no private mortgage insurance required, the dream is closer than you think."

It sounds too good to be true. But it is true. This offer does not come from a subprime lender, looking to reel in thousands of unqualified and ill-advised homebuyers, only to slap them with add-ons, fees and variable rates. It is not a teaser or a trick. The advertisement references a program initiated by the National Council of State Housing Agencies and Fannie Mae, the taxpayer-backed, government-sponsored enterprise that buys up mortgages from lending banks. […]

Now, qualified homebuyers in the three states pioneering Affordable Advantage do not need to put down the 3.5 percent minimum down payment required by the Federal Housing Administration, or much of a down payment at all. They can get 100 percent financing — a loan as big as the purchase price of the house — for a 30-year, fixed-rate mortgage — a vanilla mortgage. The deal includes a program to help homebuyers if they become unemployed, lowered fees and there is no requirement that the homebuyer purchase mortgage insurance.

Comments Megan McArdle: "The important thing […] is that this is how the government thinks about housing."

Link via Glenn Reynolds. Reason on housing policy here, including Tim Cavanaugh's before-the-TARP-was-dry "Houses of Pain: When did declining home prices become politically intolerable?"