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3% Down Payments: The Government Wants Another Housing Bubble

Written by Gary North on February 14, 2013

The government is pushing for loosened rules governing down payments. The idea that a borrower should pay 20% down is anathema. What about 10%? Too high.

I think 3% will satisfy legislators. Maybe 5%. But not much over 5%. They want another bubble.

Without government subsidies, the housing market would be very different. But voters want the subsidies. Legislators want to keep voters happy.

This policy of low down payments led to a disaster in 2008. But that does not faze Congress. Bubbles are popular. They always pop. Then politicians pass laws that start the process over again. “This will not create a new bubble. Trust us.”

Americans trusted them before. They trusted Greenspan, who said it was not a bubble. They will trust Congress again.

This is another reason to take advantage of today’s low mortgage rates.

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9 thoughts on “3% Down Payments: The Government Wants Another Housing Bubble

  1. Why not let Private Mortgage Insurance take on this low down payment risk?

  2. the mess that was as recent as the 90s was caused by this and other credit changes brought on by clowns like kenyan boy who boycotted major banks and they caved, then the idiot politicians caved and put out the CRA and then they screwed the taxpaying Real Americans in this country with the Fannie Mae – Freddie Mac changes…….and the communist politicians are still being elected to do more damage…….thanks to the major news networks that have not been doing their job since the mid 60s……

  3. Having said all that… there are people like me who took advantage of no down payment and now have my home paid nearly ten years ahead. I agree with Jim, above. Our mortgage insurance was paid out within five years. Now the kicker: we live in Texas where housing costs are relatively low and we were able to purchase a 2500+ square foot home for less than $150K, in a nice neighborhood in the country, beside a slow-moving river.

    We have it nice in Texas. Liberals stay in California, please.

  4. Bob Marshall says:

    Few Americans seem to know the part Obama, as a young lawyer representing ACORN played in the Fannie Mae fiasco.

  5. Making it easier for people that can "afford" the mortgage, is always a good idea, notice the word afford. When they granted liars loans it was a bad idea. House building is a large industry that employs millions of illegals & we all know they have to spend some of it here

  6. The toxic mortgages that triggered the 2008 meltdown were bundled together, fraudulently rated AAA investments and resold multiple times (a felony) to different institutional investors. It involved the banks, the government, the rating agencies (S&P, Moody's) and the corporate-owned media, so anyone who says that (like 9-11) that "there's no way a conspiracy that big could happen without somebody talking" is living in Wonderland.

  7. Danno, how is it “a felony” to sell or assign a loan agreement/contract multiple times? I must have missed that rule in my law classes.

    What really led to the real estate bubble was cheap money. If the money hadn’t been available, there wouldn’t have been so many liar loans, and there would have been greater competition among buyers to qualify for mortgages. Cheap money (and excess money created by government) is at the heart of all our nation’s fiscal problems. Whenever money is easy to lenders the price of what they’re lender for increases. College tuitions are another example. Easy money = increased prices. Now college students can’t “sell” their degrees to potential employers for enough to pay off their loans. They’re upside down in their investment. It’s a bubble, too.

  8. Bob Marshall says:

    The mortgage crisis originated with the Community Reinvestment Act signed into law in 1997 by Jimmy Carter. It forced banks to make loans to low-income-high risk customers. In the 1980,s ACORN was accusing banks of discriminating against minorities in mortgage lending.In 1989 congress got the Home Mortgage Disclosure Act amended to force banks to collect racial data on mortgage applicants. What wasn't pointed out was that it wasn't racial discrimination but that minorities tend to have weaker finances. ACORN was the driving force behind a 1995 regulatory revision by the Clinton administration that expanded the Community Reinvestment Act that laid the groundwork for the Fannie Mae-Freddie Mac crisis. Barack Obama was the young attorney who represented ACORN in this effort. Lenders $1 billion commitment to low-income loans in 1992 had grown to $80 billion by 1999 and $600 billion by early 2003. Sen.Lindsey Graham reported on Sept. 25, 2008 that the Democrats wanted 20% of the bailout money to go to ACORN. This showed ACORN's efforts to advance the Cloward-Piven Strategy and show the power they wield in Washington,D.C. In Obama's own words, "i have been fighting alongside ACORN on issues you care about my entoire career.Even before i was an elected official,when i ran project Vote voter registration drive in Illinois. ACORN was smack dad in the middle of it and we appreciate your work.- BarackObama,speech to ACORN,November 2007-Newsmax. in his fewyears as aU.S. senator Obama recieved campaign contributions of $126,349 from Fannie and Freddie. second only to Cris Dodd who received $165,400 who has been getting donations from them since 1988. Obama,who used the Cloward-Piven Strategy before he became president and has used Saul Alinsky's book,RULES for RADICALS as his play book ever since he became president. Not only did Obama say in his book, Audacity of Hope that he learned more from Saul Alinsky's "community organizing" than he did in all of his years at Harvard Law School." but Hillary Clinton while a student at Wesleyan College wrote a 75 page thesis on Saul Alinsky in which she praised his work. Alinsky, once offered Hillary a job.

  9. Why pay anything? just take the homes away from the people that have paid off their mortgages