It was reported this week that Financial Services Chairman Barney Frank (D-MA) and Congressman Anthony Weiner (D-NY) have called for relaxed lending standards for condos. Recently, both Fannie Mae and Freddie Mac decided to tighten mortgage lending standards on condos, no longer guaranteeing mortgages in buildings where fewer than 70% of units have been rented. The threshold was previously 51%. This is a prudent business decision by both Fannie and Freddie, as it’s essential that we make reforms like this to our housing market as we work to turn our struggling economy around and put in place the mechanisms to ensure we are never faced with a crisis like this again.
But unbelievably, Frank and Weiner sent a letter to the CEOs of both Fannie and Freddie, attempting to make the case that these more rigorous standards “may be too onerous” It’s short-sighted policy like this that kick-started the financial crisis in the first place. Relaxing mortgage standards to increase sales is terrible public policy, and proves once again that government has no place making business decisions.
If we can’t learn from our past mistakes, we’re doomed to repeat them. Sadly, here we go again.