Chief Economist

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Dr. Sam Chandan

An irreverent take on the macroeconomic environment. Dr Sam Chandan is President and Chief Economist of Chandan Economics and an adjunct professor in real estate and public policy at the Wharton School of the University of Pennsylvania.


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This mess in the single-family mortgage market is a direct result of congress for decades forcing Fannie and Freddie to purchase mortgage debt of low income borrowers.

Congress and several liberal administrations, including those of Jimmy Carter and Bill Clinton, wrongly assumed that expanding homeownership for low income buyers would benefit all involved. Instead, it has killed the residential mortgage market. The entire system of the governemnt subsidising homeownership needs to be abandoned. Buyers should be required by the lender, and not the Feds, to invest at least 20% equity for any home purchase. Obviously the homebuilders will fight this because of few buyers, but unfortunately the homebuilding business has been a phantom business, with limited demand from buyers, just as the Dotcom and telco businesses of the late 90s were phantom businesses with very week demand.

Trying to create increased demand by homebuyers by subsidizing the lower income bracket through Fannie and Freddie has been a huge mistake that needs to be corrected. There is nothing wrong with renting a home.
Posted by comment_user_450031 | Wednesday, May 19 2010 at 10:06AM ET
Uh Marty, yes the government pushed for lenders to "broaden" their guidelines to make the American dream of owning a home more available to lower income families; and yes I agree that was somewhat of a mistake, but I believe you are overstating the case while playing politics by blaming "liberal" administrations. To counter your "liberals" argument, I would remind you that good ol' Bushy boy deregulated our financial institutions and failed to enforce the remaining regulations he left in place; meanwhile his buddy Greenspan lowered rates to a such a level that any schmuck with a pulse could lie a bit about his income and assets and get a 90% LTV loan or greater. Couple that with the lack of governmtal oversight allowing Wall St to bundle crap loans as AAA rated bonds, and whamo.....global disaster!!!

Also - subprime mortgages are not all bad. In terms of refinancing it allows a homeowner to consolidate debt (assuming they have enough equity) and save money. Then if they are wise and don't overextend themselves again (a problem largely created by Reagan's "trickle down"/supply side theory of economics and practiced by every administration since), then in two years when the subprime fixed rate is set to adjust they can refi back into an A paper loan with the 2 year clean mortgage history required by Feddie and Frannies A paper guideline systems DU and LP.

So yes, while I agree that homeowners should be required to put down at least 20%, this is not a liberal problem as you put it, and your insistence of such is proof that you only watch Fox News. Wake up you silly little puppet. Our country has moved so far right fiscally that we cannot truly call ourselves a democracy any longer; rather we are building a fascist goverment.
Posted by comment_user_450032 | Saturday, May 22 2010 at 7:18PM ET