The CRA, 2008 Crash, and Now

[Joshua Howaniec]

If policies like the Community Reinvestment Act are still active are we bound to repeat the 2008 crash?

[Chris Mason]

I'm not a macroeconomist that's going to offer predictions about the global economy.

I will say that I am 100% certain, however, that current mortgage credit standards and current mortgage loan quality are not even in the same universe as the subprime 2005-07 loans.

Furthermore, the up-and-coming younger couples buying homes today have all had uncles/cousins/etc that got foreclosed on. They don't walk into my office asking what their maximum purchasing power is, they walk in with a PITI number that they want on a 30 year fixed that I'm not allowed to go over, and we calculate purchase price from there. These are quite often 25-35% DTI loans.

Baby boomers are still all at 40-50% DTI, of course, because they walk in demanding as high a purchase price as possible, and that's just how that generation does things.

I will say that the amount of student loan debt these younger people have incurred is absolutely insane. *THAT* I think we need to fix. If I issued a $200k loan on an investment property expected to command $200/month in rent for someone with no other income besides that $200/month, it would likely be called predatory lending and I would lose my license because I probably would have had to commit fraud to close it. 

OK, so why are student loan lenders allowed to lend $200k on an Art History degree? How is THAT not predatory?