Yesterday, leaders of the National Association of Realtors were in front of the Senate Banking Committee asking them to change the criteria for Federal Housing Administration loans. Instead of maintaining the basic standards for new borrowers, the NAR is asking them to lower them.

To me this seems like an act of desperation and foolish to boot. We all know that lower rates and lose lending standards created the mess we are in now. It is not rocket science. But to now ask the federal government to step in and continue these practices that have been proven not to work is madness.

I want real estate agents to make money. I think that is fine, but right now we are fighting through the perfect storm. To few buyers for too much inventory, rising rates, tightening lending standards, and too many agents. If we put in government programs that make it easier for people who should not buy a home to buy one now and have the tax payers absorb the risk is dumb. Just plain stupid.

Instead, let’s ride out the storm. It will be rough and some will get hurt, but that is capitalism. The market will absorb the inventory, the builders will get beat up for being too aggressive, and housing prices will find their equilibrium.

NAR asked the Senate Banking, Housing and Urban Affairs Committee to move forward in enacting legislation to reform the FHA program, and noted that “now is the time when the country needs FHA.” As subprime loans reset and real estate markets no longer experience rapid appreciation, “a reformed FHA would be perfectly positioned to offer borrowers a safer mortgage alternative and bring stability to local markets and local economies…

NAR also supports eliminating the 3 percent minimum cash investment and downpayment calculation and allowing FHA the flexibility to provide risk-based pricing. “Providing a universal and consistently available FHA loan product is the hallmark of the program which has made mortgage insurance available to individuals regardless of their racial, ethnic, or social characteristics during periods of economic prosperity and economic downturn,” said Anderson. “Now, more than ever, FHA needs to be strengthened to continue to be available to borrowers. In just the past few months at least 25 subprime lenders have exited the business one way or another. FHA is a leader in preventing foreclosures.” via REALTOR® Magazine

Related posts:

1. The National Association of Realtors Are Not Leasing Agents
2. FHA New Lending Standards For Mortgages and Home Refinances