“The contentious practice is called “seller-funded downpayment assistance” (SFDPA). It is used to allow home buyers getting Federally-backed mortgages to bypass the need for a downpayment, supposedly for charitable reasons.

On the surface, it sounds benign, but it is actually fraud and money laundering inflicted on the Federal Housing Administration (that is, taxpayers), the housing market in general, and in a sense, even the buyers!”

have you seen any charts delineating M3 growth in the OECD/”Industrialized” countries you’re mentioning?

That’s not how I remember history. Other countries did not do the dramatic cutting we did. Japan was already at nearly 0 anyway.

And, it doesn’t explain the lack of lending standards in Spain.

But, I meant to say Greenspan or Bush or Clinton. I see no credible link between our presidents and the price of houses in New Zealand. (which had a very different monetary policy, btw)

Chuck

When rates dropped, there was a thirst for yield everywhere…. this made it much easier to dump crap on unsuspecting investors (MBS, CDO, etc)

Money from London went into Spain… got to have that country house! Credit spreads got so low that Russians were finally able to have a McMansions of their own thanks to the Yen carry trade.

It’s all about cheap money…. and it came from Greenspan

‘There is no explanation of how the political goal of increased home ownership led to the business decisions by loan originators and banks to decrease lending standards.”

The ‘explanation’ is quite obvious. You have laws that promise to fine banks for discriminating against low income borrowers so they loosen up standards at a time when the Fed and the GSEs are making it very easy to borrow.

So, it is against the law not to make a bad loan? Then why are so many banks not having problems?

A bank that does not discriminate against low income borrowers will not be in business for long. Such laws as you suggest would seem to make banking itself effectively illegal.

I think you are leaving out many relevant facts in order to present a biased “explanation”. In other words, you are full of shit.

2000 They tried.

http://www.allbusiness.com/north-america/united-states-california-metro-areas/1055267-1.html

2003 They tried.

http://www.allbusiness.com/legal/laws/969006-1.html

Or copied from someone else without attribution.

I have been a student of the housing bubble now for almost 5 years and blogging about it for 4 of those. (socalbubble.com).

I still cannot for the life of me explain the link between politics and the bubble.

I also cannot for the life of me explain the link between the central bank and the bubble either. (only partially).

The gigantic elephant in the room of the housing bubble discussion that everyone seems to conveniently ignore when they write about it is that home prices bubbled almost everywhere. Look at Spain. Look at New Zealand. Look at Australia. Look at China. Look at England. Look at Greece, Turkey, Italy, France, Dubai, Singapore, etc.

It was a global synchronized housing bubble. Despite that most central banks were less accomodating than our own after 9/11.

I can only surmise that the write has political agendas of their own to assign blame. I’m no fan of Greenspan (far from it), but how could he have controlled housing prices in Singapore or France or Spain?

The more I learn about the bubble, the less I know about its cause.

They Warned Us About the Mortgage Crisis
State whistleblowers tried to curtail greedy lending—and were thwarted by the Bush Administration and the financial industry http://www.businessweek.com/magazine/content/08_42/b4104036827981.htm

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Hawke, a veteran banking industry lawyer appointed to head the OCC by President Bill Clinton in 1998, wouldn’t budge. He said he would reinforce federal policies that hindered states from reining in lenders. The AGs left the tense hour-long meeting realizing that Washington had become a foe in the nascent fight against reckless real estate finance. The OCC “took 50 sheriffs off the job during the time the mortgage lending industry was becoming the Wild West,” Cooper says.

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Assignee liability would radically reshape that market by making everyone involved potentially responsible when things go bad. Investment banks that created mortgage-backed securities and investors who bought them would be liable for financial damage if mortgages turned out to be fraudulent. The financial industry opposed assignee liability, maintaining that it would cripple the market for asset-backed securities. Major ratings agencies later agreed that allowing unlimited damages would be disruptive. The agencies threatened to stop evaluating many bonds tied to mortgages covered by the Georgia law.

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Mozilo of Countrywide took rather pointed, heated issue with assignee liability as one could well imagine.

Office of the Comptroller of the Currency. Oh the dirty laundry. Oh the ironying. Whitewashing (by the) ton, DC.