US mortgage lending needs to change, claims IMF

The International Monetary Fund is responsible for overseeing the global financial system. The IMF has recently reviewed several of the moving parts of the global recession. One of the biggest findings of this inquiry is the United States government puts too high a value on home ownership. The IMF suggests that the government either take over mortgage funding or get out of the market entirely. Post resource – International Monetary Fund calls for changes to mortgage lending by MoneyBlogNewz.

All about ending U.S. lending involvement in the future

The way the current mortgage market in the United States is structured, the government has a partial hand in most home loans. Fannie Mae and Freddie Mac own almost 90 percent of the secondary loan industry. These two businesses are in government conservatorship and have long been government-backed. Combined, this means that the federal government has a significant hand in the country’s mortgage market.

Home loans looked at by the International Monetary Fund

Upon reviewing the United States Mortgage industry, the International Monetary Fund suggested multiple changes. The IMF suggests the U.S. government get out of the mortgage industry. Either that or put home loans it owns on its balance sheets. Since the Great Depression, the U.S. government has instituted programs meant to encourage home ownership. Tax deductions for mortgage interest, government-supported home loans and low interest rates all contribute to making recessions worse. The International Monetary Fund study also highlighted that high loan-to-value ratios and debt-to-income ratios trigger overly complex mortgage products that are unnecessarily risky.

Housing opportunities available

The United States government policy is not in the right place when it comes to encouraging home ownership, according to the International Monetary Fund. The European countries typically have higher down payments on homes. The rates are usually variable also. The damage of heavy recessions is limited while ho me ownership rates are down due to this. the International Monetary Fund suggests that the United States focus on more affordable rental housing that is encouraged. The mortgage products have to be simpler as well.

Articles cited

Business Week

businessweek.com/news/2011-04-06/imf-urges-u-s-to-be-explicit-on-housing-finance-guarantee.html

RTE News

rte.ie/news/2011/0406/imf-business.html