Hoss. We probably are not going to agree about the housing bust, but 20% or so of the market would and did affect the price of housing dramatically. When you introduce a whole new set of buyers to the market, folks who have little money, credit, or income, that is a dramatic increase in demand. ARMs were not much more than 19% of the total mortgage universe, but they were up to 80% of the sub-prime market. ARMs just delayed the bust, but they were another method of drawing in unqualified borrowers.
Unqualified borrowers is the key. Taken together with the government's policy of purchasing these mortgages, a system developed where neither the borrower nor the lender had any skin in the game. This affected housing prices in an upward direction. As I have said, if the banks and finance companies had been required to keep the paper they generated, there would have been no bust, because there would have been few loans given to unqualified buyers. When the government gives away "free money" one can expect corruption. Fannie and Freddie didn't care that they were losing money because they were achieving some "Social Justice" (which I define as taking money from the productive and giving it to the non-productive).
Unqualified borrowers is the key. Taken together with the government's policy of purchasing these mortgages, a system developed where neither the borrower nor the lender had any skin in the game. This affected housing prices in an upward direction. As I have said, if the banks and finance companies had been required to keep the paper they generated, there would have been no bust, because there would have been few loans given to unqualified buyers. When the government gives away "free money" one can expect corruption. Fannie and Freddie didn't care that they were losing money because they were achieving some "Social Justice" (which I define as taking money from the productive and giving it to the non-productive).
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