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How HUD’s mortgage policy fed the crisis

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Greebo

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http://www.msnbc.msn.com/id/25053787/

In 2004, as regulators warned that subprime lenders were saddling borrowers with mortgages they could not afford, the U.S. Department of Housing and Urban Development helped fuel more of that risky lending.

Eager to put more low-income and minority families into their own homes, the agency required that two government-chartered mortgage finance firms purchase far more "affordable" loans made to these borrowers. HUD stuck with an outdated policy that allowed Freddie Mac and Fannie Mae to count billions of dollars they invested in subprime loans as a public good that would foster affordable housing.

One of the worst quotes in the whole article (emphasis mine):

HUD officials dispute allegations that the agency encouraged abusive lending and sloppy underwriting standards that became the hallmark of the subprime industry. Spokesman Brian Sullivan said the agency and Congress wanted to increase homeownership among underserved families and could not have predicted that subprime lending would dominate the market so quickly.

"Congress and HUD policy folks were trying to do a good thing," he said, "and it worked."

You couldn't predict that if you lent money to bad credit risks, that the bad credit risks would flock to the opportunity to get something they could never afford long term???

So the creation of a housing bubble followed by the collapse and loss of wealth by hundreds and thousands due to Government meddling is your definition of "it worked"???

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