An easy way to lower the scope of a housing bubble and the problems with mortgage backed securities

[RB TexLa]

Not one many are going to like but it's part of the "good ole days," people want back without looking at some aspects of those days.

If lenders went back to charging 18 to 15% interest and requiring 20 to 15% down on 30 year mortgages they wouldn't be packaging the loans up and selling them. And of course only write them on high to mid high credit.

[On the Road]

1. It Would Certainly Prevent a Bubble

but it would just as surely cause a further collapse in house sales and see more prospective homeowners keep on renting from Mr. Potter.

[RB TexLa]

2. I'm just saying there has to be a middle that lets companies create ways

to provide loans for people with lower income yet keep stability in the process.

How it used to work locked millions of people out of buying a house, but the run-a-way we had led to what we have now.

[Statistical]

3. You can't go from one extreme to another.

No need for 18% interest rates when inflation is 3% on a secured asset like a home which historically has a <3% default rate.

However creditors are already tightening standards. When we refinanced our house we needed 20% equity or it would have been a higher rate.

My credit is "good" but aparrantly not "good enough". Having me on the app would cost us an extra 1 discount point.
Luckily my wife income is high enough that they would underwrite the loan only in her name and that saved us the 1pt.

No need to jump to the far extreme.

Just the basics would be enough
1) require some down payment. 3% (i.e 97% LTV or less)
2) don't allow seller to pay all closing costs
3) get rid of exotic loans.
4) no "stated income loans".
5) no piggy back loans 80%/20%
6) if someone wants a variable rate they MUST be offered a fixed rate also.
7) if someone wants a variable rate they MUST meet credit/underwriting requirements at the highest possible rate adjustment.
8) require lenders to keep 10% equity in loans they originate. no selling off 100% of the loan and it is someone else problem.

Common Sense Stuff.