Why is the Obama government starting the next housing bubble?
Seriously foloks, this reeks of stupid.
Among other remedies: favorable interest rates and down-payment assistance for minority borrowers with weak credit.
For example, the government has ordered Midwest BankCentre to set aside almost $1 million in "special financing" for residents living in predominantly black areas of St. Louis. The program includes originating conventional home loans at fixed prime rates for African-American borrowers "who would ordinarily not qualify for such rates for reasons including the lack of required credit quality, income or down payment."
The same federal order, signed last month, praises Midwest for adopting "less stringent underwriting criteria" while under investigation.
In the case against Citizens Bank of Detroit, settled in May, the U.S. decrees that "the bank may choose to apply more flexible underwriting standards in connection with the programs under this order."
Such efforts risk recreating the government-imposed lax underwriting that led to the housing boom and bust, critics fear.
"It's absolutely outrageous after what we've just gone through," said former Rep. Ernest Istook, a Heritage Foundation fellow. "How can someone both be financially stable enough to merit a mortgage at the same time they're on public assistance? By definition, you don't have the kind of employment that can support such a loan."