Do We Need a Government Guarantee For Mortgages?
Earlier, I wrote about the various proposals circulating through Washington DC on the future of housing finance in the USA. Virtually every one had a government guarantee in their proposal, as if the mortgage market would collapse without Uncle Sam.
As Nancy Pelosi once famously stated, we need to look at government guarantee “away from the fog of the controversy.”
Several economists at The Federal Reserve produced a nice graphic on prime versus subprime borrowers. Essentially any loan with a down payment of less than 20% is considered subprime and credit scores of 660 are prime if the down payment is more than 20%.
Here is the performance (as measured by delinquency of 90 days) for subprime (white) and prime (red) loans (although not the same definition of prime and subprime as The Fed’s definition, but close).
Read More: http://confoundedinterest.wordpress.com/2013/06/17/do-we-need-a-government-guarantee-for-mortgages/
As Nancy Pelosi once famously stated, we need to look at government guarantee “away from the fog of the controversy.”
Several economists at The Federal Reserve produced a nice graphic on prime versus subprime borrowers. Essentially any loan with a down payment of less than 20% is considered subprime and credit scores of 660 are prime if the down payment is more than 20%.
Here is the performance (as measured by delinquency of 90 days) for subprime (white) and prime (red) loans (although not the same definition of prime and subprime as The Fed’s definition, but close).
Read More: http://confoundedinterest.wordpress.com/2013/06/17/do-we-need-a-government-guarantee-for-mortgages/
