At the peak of the housing boom in 2005, my pal Mitch asked me, "Does someone truly own a house when they put nothing down?" His question gets at the core problem with the U.S. housing market: a disregard for the rule of law. Fundamental rules of real estate have been dismissed, such as requirements around good credit, full disclosure, transparency, a meaningful down payment, rational fees, common-sense loans and personal responsibility. And at the extreme, consider the number of falsified loan applications in the last five years, sometimes making ordinary homeowners criminals and real estate professionals their enablers. Short-term responses such as assigning blame, prosecuting the bad guys, shoring up Fannie Mae, and helping homeowners in foreclosure are necessary to stop the bleeding. But to fix the housing market long term, bigger changes must be applied up and down the value chain, from individual accountability and enacting laws to tougher regulators who bett...
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