Too Little Way Too Late
In his State of the Union address, President Obama announced the creation of a task force to investigate and prosecute those who are responsible for making abusive home loans during the housing boom. While this sounds like a laudable goal, it’s way too late to get help to the thousands of homeowners who are facing foreclosure or have already lost their homes.
We’ve known for a years that there were problems. In fact, during the heyday of stated income loans, everyone in the industry knew they were creating the foreclosures of tomorrow. The problem was that Fannie Mae and Freddie Mac were buying these loans. Any bank who wanted to make loans had to comply with their requirements. If they didn’t, someone else would.
That’s not an excuse for doing the wrong thing, of course, but the way to fix it isn’t by prosecuting a few people within the industry that did the wrong thing. It’s to make doing the wrong thing unprofitable, even costly, to everyone involved. If that can be done retroactively, maybe it will make everyone think twice before taking advantage of loopholes that will obviously cause problems.
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