International Monetary Fund Asks USA To Change Home Loans

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The happenings of the global economy are reviewed by the International Monetary Fund. The recent recession has led to an in-depth investigation by the International Monetary Fund. Several changes have been suggested by the Fund. Top of the list is that the U.S. government should go all in or get out of mortgage finance.

Lending the United States works with

The way the current mortgage market in the United States is structured, the government has a partial hand in most home loans. About 90 percent of the loan industry for secondary loans is owned by Freddie Mac and Fannie Mae. These two companies are in government conservatorship and have long been government-backed. The government is very involved in the mortgage industry when considering these two corporations combined.

Checking out the International Monetary Fund’s views of things

The International Monetary Fund thought up some changes that could occur after looking at the U.S. Mortgage market. The IMF suggests that the U.S. government get out of the mortgage industry. Either that or put mortgages it owns on its balance sheets. The U.S. government has put in programs to help individuals own homes since the Great Depression. There are many things the government put into place which made the recession worse. This involves low interest rates, government supported home loans and tax deductions on interest. The International Monetary Fund pointed out that home loans are riskier than they have to be. This is because of the high loan-to-value ratios and debt-to-income ratios.

Possibilities for housing

In short, the International Monetary Fund believes that the United States government’s policy of encouraging home ownership is misplaced. In several European countries, home loans are often variable rate and require higher down payments. These factors, combined, keep home ownership rates down and help limit the damage of heavy recessions. the IMF suggests the U.S. focus on more affordable rental housing that is encouraged. The mortgage products have to be simpler also.

Articles cited

Business Week

RTE News

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