May 24, 2022

CRISES BY DESIGN: This Is The Worst Possible Time For The FHFA To Mess With Lending Standards.

From the placement of keys or strings on musical instruments to the shape, colors, and lettering of road signs, standards surround us, protect us, and ease our lives. They provide practicality, accessibility, and stability.

Yet at a time when our economy is facing countless challenges and continues to send loud signals of instability not seen since the financial crisis of 2008, a federal agency charged with the specific mission of ensuring stability and policing risk in the housing industry is considering a proposal that would abolish the proven standard upon which the mortgage industry relies to determine creditworthiness.

If you are befuddled as to why the Federal Housing Finance Agency (FHFA) is contemplating whether to tinker with lending standards during a time of elevated financial insecurity and housing market volatility, then you are not alone. It is further astonishing to wonder how the lessons of the ’08 crash have seemingly been so easily forgotten. As everyone is well aware, the underlying cause of that disastrous economic meltdown was the collapse of the housing and mortgage industries brought about by a previous “innovation:” subprime lending.

Don’t worry, I’m sure it won’t end badly, this time around.

Earlier: The Economic Doom Loop Has Begun.

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