The Senate Votes on Bill Designed to Help Homeowners

Experts Worry About Expansion In The Mortgage Market

Washington, D.C. – December 14, 2007

The Senate passed legislation today expanding the power of the Federal Housing Administration to help address the subprime mortgage issue. The bill would allow the FHA to lower the minimum amount necessary to get a loan and raise the limit on the mortgages the FHA can insure. But many experts are concerned that taxpayers are being put at risk.

"I don’t think we should look towards the government sponsored enterprises as a solution to this problem. The private market is actually working very well. We see both lenders and buyers already correcting their behavior in this market. If you come in again with the government saying we're going to relax the standards for some of these loans, we'll implicitly subsidize these loans through our activity in the marketplace, when you do that, you encourage some of the speculation that got us to where we are in the first place," said Wayne Brough, Chief Economist, FreedomWorks, "So I would say we don't look to expand government program, such as the government-sponsored enterprises, and let the market do what it does best, which is allocate these resources to where they should be."

A recent poll by a grassroots organization shows a majority of those surveyed do not support lowering the down payment requirements.