A recent article by Michael Booth in the admittedly conservative online magazine American Thinker posits that the much of the blame for the housing crisis can be traced to the Democrat’s “affirmative credit” policies. Booth argues that the naming of Michael Raines as the CEO of Fannie Mae turned Fannie Mae into a Democratic “campaign machine,” and helped reshape Fannie Mae by lowering credit standards and allowing for no documentation loans and “liar loans.” There is simply no simple way to explain the housing crisis. While Booth’s argument attempts to lay the blame on “progressive” housing policies, clearly, there was much more at play. Securitization, huckster mortgage lending, low interest rates, greed, fear, wanting more than you should have all played a role in this, and trying to pin it on the lenders, bankers, Barney Frank, Countrywide, undeserving homeonwers does not help explain the complexity.
What is clear is that the pendulum swing in lending has been severe. Home ownership is at the lowest point it has been in forty years. Rob Couch, a commissioner for the Bipartisan Policy Center’s housing commission argues that “all the laws set up to protect low-income, moderate-income and first-time buyers are protecting them out of a chance to buy a home. And consider the difference it makes on the community to have homeowners, to take chances on people on the margins and have them grow into responsibility.” So many of the laws that have been implemented since the crash have impacted mortgage lending to the point that many lenders just cannot make any money making loans to these groups. All of these vacillations in lending standards seems to argue for a more localized lending process through banks where individuals can make decisions based on knowing people, their needs, the strengths and weaknesses. Securitization certainly created great incentives for lenders and banks and played a huge role in the crash. A return to local lending decisions based on practical guidelines would help create a stable housing market.