An Asst. Treasury Secty has proclaimed to the Mortgage Bankers Association that Fannie Mae and Freddy Mac didn't fail because the government mandated they relax lending standards in order to meet affordable housing goals. Nope, they failed because Fannie and Freddie relaxed lending standards in order to generate more loans and make more money!
Treasury Official Says Housing Goals Not to Blame for Fannie, Freddie Failures - WSJ
Methinks the Asst. Treas. Secty doth protest too much. Fannie, Freddy, and lenders in general
were directed by the government to relax lending standards; in effect, to abandon most of what they had learned over the years about the very basics of sound underwriting. That was a terrible idea, giving our nation's mortgage lending institutions a boost down the slippery slope of lending money to borrowers who predictably would not be able to afford the payments.
Nowhere along the way did the government tell homebuyers that they were expected to do their own underwriting, that getting a mortgage no longer meant that the lending institution was confident in their ability to repay it.
Suspicion is warranted anytime a government official attempts to justify disastrous regulatory mandates by blaming the regulated entities for having complied. - David
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