Federal policies designed to ensure mortgage loans were affordable for risky borrowers helped push the U.S. mortgage industry toward crisis, analysts said.
Since 1992, when the Department of Housing and Urban Development became the regulator for the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp., the federally chartered companies have been obligated to help expand the availability of mortgages, The Washington Post reported Tuesday.
But, as consumer groups warned banks were offering mortgages with low initial payments -- called "teaser" rates -- to unqualified buyers, HUD neglected to assess the risks, The Post reported.
"For HUD to be indifferent as to whether these loans were hurting people or helping them is really an abject failure to regulate," Michael Barr, a University of Michigan law professor, told the newspaper.
Between 2004 and 2006, Freddie Mac and Fannie Mae helped set lending trends by purchasing $434 billion in securities backed by risky, subprime loans. Now, with 3 million to 4 million mortgage foreclosures expected, Congress is considering a move to find a stronger regulator to oversee the Freddie Mac and Fannie Mae, and may do so before the July 4 recess, the report said.
~ "HUD fails to assess risks", UPI, June 10, 2008