September 1, 2010

The Return of the $1,000 Down Mortgage

In case you assume people learn from their mistakes, read this story in The Washington Independent.

In the states of Idaho, Massachusetts and Wisconsin, the National Council of State Housing Agencies along with Fannie Mae---the government "sponsored" enterprise that just recently had to be saved from bankruptcy with billions in federal aid but continues to purchase mortgages from lending banks---have launched a pilot program called "Affordable Advantage." (California, Colorado and Pennsylvania have similar schemes in place.) The gist? With just $1,000 down, people can get a mortgage to buy a home there.

Given the dangers of these types of mortgages and the specter of the housing bubble, where unconventional loans wreaked disaster, it is also raising questions from wary housing experts and legislators.

You think?

At Voices for Reason, Alex Epstein reminds us that this is exactly the sort of policies that brought about the recession in the first place. "The idea that it is the government's job to 'promote homeownership' or create 'stimulus' is the root cause of the financial crisis." While millions of Americans are still out of work or struggling to make ends meet, government agencies are already hard at work, preparing the way for the next recession.

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