Editor's note: This is the second in a three-part series. The first article in this series argued that a rollback of Fannie Mae and Freddie Mac lending terms to where they were before the financial crisis was needed to prevent a second round of home-price declines.In addition to benefiting homeowners and the economy, this would reduce Fannie-Freddie losses on both old and new loans, which makes it a requirement of responsible conservatorship. This article and the one that follows will discuss a few of the many specific changes in underwriting rules that are needed. Modify rigid affordability rules The post-crisis rule that every mortgage loan must be affordable to the borrower was a knee-jerk reaction to the excesses of the bubble period, when many adjustable-rate loans to subp...
Get Inman via Facebook Messenger
Our top headlines delivered once a day.