“Aggressive (U.S. government) housing programs have not always helped the poor and middle class. The median net worth of American adults is now one of the lowest among developed nations—less than $45,000, according to the Credit Suisse Global Wealth Databook. That compares with approximately $220,000 in Australia, $142,000 in France and $54,000 in Greece.”, Michael Milken, WSJ, March 6, 2014

“Uniquely among nations, the U.S. gives mortgage borrowers a trifecta of benefits: extensive tax advantages, no recourse against the borrowers’ nonresidential assets if they walk away, and typically no protection for the lender if the borrower prepays the loan to get a lower rate.

These policies long seemed like a great deal for borrowers, but they wreaked havoc on the financial system. People with marginal credit were encouraged to finance more than 90% of the purchase price with 30-year mortgages. If interest rates later fell, they could refinance. If rates rose, they could congratulate themselves for locking in a low rate. If prices rose, they enjoyed all the upside and could tap the equity. If prices fell and they faced foreclosure, their other assets were protected because the loans were usually non-recourse.

Investments in quality education and improved health will do more to accelerate economic growth than excessive housing incentives. That will give everyone a better chance to achieve the real American dream.”, Michael Milken, WSJ March 6, 2014

“In my opinion, Mr. Milken’s arguments and facts in this WSJ OpEd are powerful. As a (former) leader in the mortgage industry for more than 25 years, I have always been troubled by the government’s (Fannie Mae, Freddie Mac, FHA, Ginnie Mae, etc.) overpowering role in establishing underwriting standards and other important terms in housing finance. I agree with Mr. Milken, the government needs to substantially reduce its role in supporting housing and mortgage finance, so that investment (which has been distorted towards housing for decades) can more properly flow to other important areas of the economy.”, Mike Perry, former Chairman and CEO, IndyMac Bank

Posted on March 10, 2014, in Postings. Bookmark the permalink. Leave a comment.

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