AgentMortgage

Do away with appraisals, ‘blanket affordability’ rules

A plan to jump-start housing

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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 subprime borrowers were not affordable past the initial rate period -- usually two years.The blanket affordability requirement that emerged is preventing loans from being made that are safe to the lend...