To the People

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or TO THE PEOPLE.

Thursday, December 20, 2007

Government Policies Caused the Mortgage Crisis. Do We Trust Them to Solve It?

The biggest factor that drove the housing bubble and subsequent mortgage industry collapse is the IRS code that allows for mortgage interest to be tax deductible. That policy also allows property owners to itemize deductions, which, without being a property owner, is a pretty hard thing to do.

So should we be surprised that so many Americans were trying desperately to be homeowners when the tax code puts renting at such an economic disadvantage? What is wrong with renting, anyway?

The Fed has proposed new tough laws on lending that will hurt consumers. I propose instead that mortgage brokers, who were the real bad players in this debacle, operate under a self-regulatory organization such as stock brokers do under NASD. Under NASD, brokers have a "suitability" requirement. I would prefer to see all options of loans available to the consumer with a bit more of responsibility on the part of the brokers.

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