US mortgage finance needs a new foundation. Sure, fixing up Fannie Mae, Freddie Mac and the private home loan market is crucial -- and remains a work in progress. But the crisis had a third leg: borrowers got ahead of themselves.
With around 110 million homes in the United States, simplistically this means the lending boom handed some 5 million properties to people who perhaps should never have owned them. As of June, the rate had dropped back to about 67 percent, implying at least part of the excess has been painfully worked out.
Some of the ways future bubbles could be limited aren't new. First, borrowers should have to make a decent down payment. Back in 2000, only 5 percent of subprime borrowers had no equity in their homes, yet by 2006 -- in a market that had more than tripled in volume -- some 70 percent had mortgages worth at least as much as their real estate.
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With around 110 million homes in the United States, simplistically this means the lending boom handed some 5 million properties to people who perhaps should never have owned them. As of June, the rate had dropped back to about 67 percent, implying at least part of the excess has been painfully worked out.
Some of the ways future bubbles could be limited aren't new. First, borrowers should have to make a decent down payment. Back in 2000, only 5 percent of subprime borrowers had no equity in their homes, yet by 2006 -- in a market that had more than tripled in volume -- some 70 percent had mortgages worth at least as much as their real estate.
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