Wednesday, March 30, 2011

Changes in the Housing Industry

Although deregulation of the housing and mortgage markets resulted in a catastrophic market crash, these regulation changes made housing affordable to many Americans. While we can see the error of our ways now… during the deregulation period many Americans thought this was great. It made home buying “appear” affordable to families who could previously not afford it.

The government is now faced with the difficult task of re-reregulating the industry, a necessary task but at the cost of making housing once again unaffordable to many Americans.

The following link http://www.washingtonpost.com/business/economy/housing-regulators-propose-20percent-down-payment-for-best-rates/2011/03/29/AFIRw5vB_story.html is a proposed change to housing regulations, which will require buyers to place a 20% down payment in order to receive the most favorable interest rate from their lending institution.

What are your thoughts on the re-regulation of the housing and mortgage industry and on the changes being made?

5 comments:

  1. Well Chris, it seems to me that these re-regulating policies are extremely necessary for our economy to regain strength. While in theory deregulation is optimal for players in the market, it seems that human nature abuses it's leniency. While low housing prices may be good for new home owners or those looking for homes, think about all those people who are stuck in their house because of the massive devaluation that has occurred due to the bubble bursting. Many houses are severely undervalued, which means land is not as valuable as a commodity as it should be. I hope the economy continues to recover as more and more regulations can be put on the market, but not so many as to hinder market players. Remember, everything in moderation.

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  2. While this deregulation will make it difficult for many people to obtain housing loans, this deregulation appears to be a step in the right direction. Before, mortgage lenders were handing out risky loans like candy. The new "risk retention" rule will make banks think twice before handing out so many potentially high risk loans, because they know that if the loan is not paid back they will be screwed.

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  3. I agree with both Michelle and Becky on this issue. These re-regulating policies are neccesssary to both regain stablitiy within the housing market and to get bank loaning back under control.

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  4. Maybe there are other ways of instituting protective regulations without putting in blanket down payment requirements and such. Instead of worrying just about the consumer the regulations could focus on transparency and accountability. So banks could still make risky loans if they wanted to but the details of subprime mortgages and corresponding MBSs would be more visible. This way if a bank decides to make those risky loans and they don't work out they are the ones who take the burn. or maybe there are other regulation options as well

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  5. At the end of the day, re-regulation of the housing market benefits homeowners. Whether or not housing appears affordable, the reality it that homes are expensive goods that many people 'consume' without the appropriate means. In my opinion, the 20% down payment requirement will weed out those who cannot actually afford a home and save them both money and financial crisis in the long run. While it may leave them in cheaper, more affordable, or lower quality homes, it will not lead them where many homeowners ended up following the 2008 crisis.

    That being said, this regulation has to be implemented correctly.

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