How One Lawmaker Wants To Make It Harder Not Easier For Some To Get A Home

: Image by WBUR via Flickr

The entire concept of subprime mortgage lending is about to be Franked (as in U.S. Rep. Barney Frank, chairman of the House Financial Services Committee.

Frank told a university audience Monday that his committee would “bring a bill out in April that will stop people from getting loans in the future that they cannot repay.”

But Frank is smart enough to know that that is not likely to happen the way he wishes it would. And so, says a Reuters report, the bill would limit, though not eliminate, the securitization of subprime mortgages.

Whether this will work (that is, if the bill ever becomes law) is a more interesting topic of discussion.

Deploy Countermeasures, But Carefully!
If banks can no longer bundle up their more risky mortgages and sell them to investors, they may slow down the mortgage lending process even more so than has already been the case. Sure the whole idea is to stop banks from making greedy loans to people they know could never afford the product they are buying, but if the reaction isn’t a measured one, we could see the housing situation get worse rather than better.

A certain amount of risk taking is needed or the entire machine simply stops in its tracks.

Frank apparently understands this–”We start with restricting securitization,” he is quoted as saying, but quickly adding, “not to the point where it stops.”

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Article Author: Charles Feldman

Charles has written 179 articles for us.
Visit Charles's Website: http://www.thefeldmanblog.com

Charles is currently reporting for KNX Radio in Los Angeles, is the co-author of the book No Time To Think, and can be found commenting about the news on his blog, The Feldman Blog, as well as on The Huffington Post.

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{ 5 comments… read them below or add one }

1 David K April 7, 2009 at 7:58 am

I’m still confused how some of the instigators of the entire sub-prime crisis are still in office and forming policy on housing.

2 Brendan April 7, 2009 at 8:38 am

One of those key instigators being Barney Frank! The problem is that the media does not want to expose him. But Frank encouraged subprime loaning to people who couldn’t afford the payments (not giving those loans was “racist”), resisted attempts to reform Fannie and Freddie and insisted they were in great shape long after they started to fall apart.

3 Joshua Dorkin April 7, 2009 at 8:42 am: I think that is what David was implying, Brendan. He and President Obama were certainly instrumental in encouraging the subprime loans in their meetings with Fannie and Freddie.

4 ben huynh April 18, 2009 at 8:31 am