“NewDayUSA is aggressively advertising a VA (government insured) mortgage program that it says allows veterans to borrow up to 100% of their home’s current value (pulling all of their home equity out to pay off other debts or for any reason)! How can the government offer this risky and irresponsible mortgage program? This VA program is only viable if housing prices always rise…

…And post-crisis, we know that national home prices can fall (even without a Great Depression) and fall precipitously, causing massive mortgage defaults and foreclosures. Again, have we learned nothing from the 2008 crisis? In the LA MSA in which I live, FHFA’s historical home price data over the past two decades shows that over 45% of the time home prices have fallen (on average about 5% a year) rather than risen. How can 100% loans (after housing prices have run-up in recent years) make any sense to the government/taxpayers and lenders? (It actually may make sense to the borrower, as they can pull all their home equity out at the top of the market with this VA loan and if home prices decline, “walk away” with no liability in many states.) To those who love to blame the private sector, isn’t this a clear example of our government mortgage programs/housing policies leading home borrowers and lenders to make risky and irresponsible economic decisions? I think so.”, Mike Perry, former Chairman and CEO, IndyMac Bank

Posted on March 25, 2015, in Postings. Bookmark the permalink. Leave a comment.

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