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EDITORIAL: Occupying your mortgage
Congress just can’t kick the government-subsidized lending habit
Politicians and realtors want to maintain a permanent government occupation of the housing market. If the hippies clogging the streets of major cities had any integrity for their cause, they'd speak out against mortgage lending practices that stick taxpayers with the bills when banks make bad loans. On Thursday night, the Senate voted 60-38 to do more of the same.
At the beginning of the month, the maximum amount of a home loan that Uncle Sam would back dropped 17 percent. That spurred a mostly Democratic group of lawmakers to take steps to restore the higher conforming loan limits. They want to see the Federal Housing Administration (FHA), Department of Veterans Affairs, Freddie Mac and Fannie Mae backing loans at the boosted rate of $729,750 instead of just $625,500. Here we go again.
It wasn't so long ago that congressional meddling diluted lending standards so thoroughly that the public bought more house than it could afford with low rates and zero down. The deals appeared too good to be true - because they were. When payments were not met and defaults mounted, the unsustainable housing market collapsed. The implicit government guarantee behind the Freddie and Fannie loans became explicit, and taxpayers absorbed at least $150 billion in losses. We have yet to recover from the resulting Great Recession.
Now 60 senators led by Robert Menendez, New Jersey Democrat, and Johnny Isakson, Georgia Republican, insist government-sponsored enterprises need to keep buying larger loans because the housing market is weak, credit is tight and housing prices continue to decline. Their cause is supported by the National Association of Realtors, the homebuilders and mortgage bankers - the groups with the most to gain from socializing the risk of pricier financing on more expensive estates.
If approved by the House and signed into law, the Senate-passed amendment would impose an extra fee on the high-dollar loans made by the government-sponsored enterprises, but not FHA. That would drive business to FHA and even further away from the private market.
When it comes to pouring public money into housing, Capitol Hill can't control itself. The old limit was put in place by the Economic Stimulus Act of 2008 as a "temporary" measure. President Obama's stimulus spending bill extended the subsidies through 2009, and a pair of continuing resolutions had extended the subsidies through the beginning of the month. The amendment from Mr. Menendez would extend those temporary limits until January 2014.
The House ought to recognize this as a move in the wrong direction. The loan limits should be reduced, not increased, so government can gradually withdraw from the sector it destroyed. Taxpayers have already paid enough for the folly of Washington's housing policies.
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