TEXT OF STORY
Kai Ryssdal: There are, depending on how you count them, oh, about a million reasons the real-estate market went bust. One very big one, no matter how you count, is that the government-owned mortgage companies Fannie Mae and Freddie Mac bought up huge numbers of subprime loans.
Today, there was a very small step toward cleaning up the housing mess — limiting Fannie and Freddie’s exposure to those subprimes. From Washington, Brett Neely reports.
BRETT NEELY: The proposed rules could take Fannie and Freddie out of the subprime business. Before the crisis, the companies bought up subprime mortgages. That essentially gave the mortgages a government seal of approval. Fannie and Freddie got to count those loans toward their affordable housing goals from the government.
Kathleen Day is with the Center for Responsible Lending.
KATHLEEN DAY: It was crazy that the government said you can count toward your housing goal these mortgages that lenders were making without regard to whether the borrower could repay them.
Borrowers will notice the difference under the proposed new rules, says Peter Wallison at the American Enterprise Institute.
PETER WALLISON: It’s going to be harder for low-income Americans to get subprime or other non-prime loans. If they have down payments, if they have unblemished credit, they will be able to get loans in the normal way.
Wharton professor Susan Wachter says it’s a principled step in the right direction as the government rethinks Fannie and Freddie’s role in the housing market.
SUSAN WACHTER: It’s a recognition that subprime lending and sustainable home ownership do not go together.
She also thinks the proposed regulations could help drive the housing market in a healthier direction.
But Kathleen Day also sees the rules with a measure of regret.
DAY: It would have been wonderful if this had been put in place in 2003, 2004.
She says this rule alone wouldn’t have prevented the meltdown, but it would have been a big help.
In Washington, I’m Brett Neely for Marketplace.
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