Just read this article, seems like a policy that's similar to what was going on during the subprime mortgage collapse but curious to hear everyone's thoughts on its impact since I don't have much experience with real estate.
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Hey Greenspan's Panties, sorry about the delay, but are any of these useful:
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You're welcome.
It's not quite the same as subprime mortgages but it's probably worse.
Subprime mortgages were loans provided to individuals with very low creditworthiness (NINJAS: No Income, No Assets). As mortgage lenders were running out of decent borrowers they started lending to people with lower and lower credit to keep fuelling the speculative bubble around MBS (Mortgage Backed Securities) products. Unsurprisingly they started defaulting on their loans and the whole market collapsed. Subprimes were therefore the product of bankers' greed (especially IB with all the fat fees they were getting from these transactions). This escaped the control of both the FED and the SEC (willingly or unwillingly).
But here what we have is worse in the sense that the federal government is going to subsidise lending to people with a low credit. So basically they're nudging/pushing lenders to provide mortgages to borrowers that are very high risk. They're pushing lenders to act with less cautiousness/prudence.
It is a recipe for absolute disaster.
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