Edward Pinto: The Future of Housing Finance - WSJ.com

There is so much wrong with the American housing market but the US Government continues to insist upon extraordinary non-market measures to try to keep it afloat. This approach to trying to prop up investment into housing will only serve to prolong and deepen the agony in the housing market and more than likely create other problems in the American economy.

However, one must always remember that roots of the housing market collapse are in central government command policies that created excess investment and higher prices to start with. This is the money quote from the attached article.....

In 1991, the Senate Committee on Banking, Housing, and Urban Affairs was advised by community groups such as Acorn that "Lenders will respond to the most conservative standards unless [Fannie Mae and Freddie Mac] are aggressive and convincing in their efforts to expand historically narrow underwriting."

Congress made this advice the law of the land when it passed the inaptly named Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (GSE Act of 1992). This law imposed affordable housing mandates on Fannie Mae and Freddie Mac

. Essentially what it did, was create demand for less than credit worthy loans and these loans were eventually forced onto the books of the under-capitalized mortgage guarantee companies.

This sin, along with other non-market and less than best practice government mandates created the housing bubble and the bubble's collapse late in the last decade.

Edward Pinto: The Future of Housing Finance - WSJ.com