That led to people leaving houses that they could pay for but chose not to because they were upside down on it. (In other words, if they took out a 200,000 mortgage and the value of the house fell to 125,000 they would still owe the 200,000 but would instead balk on the deal, even if they could afford the monthly payments.) This would cause a larger inventory of empty homes, and prices would fall further.
Well, one lesson we definitely learned from that was to tighten up lending standards so that people that bought property were really going to be able to handle the responsibility. We learned that, right? Clearly, Washington lawmakers won't do something crazy like convince two of the biggest lenders in the country to relax the rules again, right?
(Reuters) - Two U.S. Democratic lawmakers want Fannie Mae and Freddie Mac to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing-market recovery, the Wall Street Journal said.
In March, Fannie Mae (FNM.N)(FNM.P) said it would no longer guarantee mortgages on condos in buildings where fewer than 70 percent of the units have been sold, up from 51 percent, the paper said. Freddie Mac (FRE.P)(FRE.N) is due to implement similar policies next month, the paper said.
In a letter to the CEO's of both companies, Representatives Barney Frank, the chairman of the House Financial Services Committee, and Anthony Weiner warned that a 70 percent sales threshold "may be too onerous" and could lead condo buyers to shun new developments, according to the paper.
The legislators asked the companies to "make appropriate adjustments" to their underwriting standards for condos, the paper added.
OK, any takers seeing something good come out of this? I give it 3-5 years before we start seeing craziness happen again. What say you?