The Death of Affordable Housing?

It appears as if the entire housing crisis happened as playing cards were used to build the foundation, which is quite unfortunate as now the affordable housing is becoming more difficult for individuals to procure. Historically, Fannie Mae and Freddie Mac were responsible for meeting specific lending goals for providing funding options for those seeking to purchase affordable housing in the form of approving subprime and Alt-A mortgages. That philosophy has been the pinnacle of the overwhelming amount of default rates that helped contribute to the economic downfall the U.S. economy has been experiencing.

Even now Fannie Mae and Freddie Mac are supposed to focus over 55% of their mortgages and guarantees towards  low- to moderate-income borrowers, but as of 2008, have fallen short of that goal. According to a statement made by Federal Housing Finance Agency (FHFA) Director James Lockhart  stated that those goals were ‘simply too aggressive.’

Real estate experts are now admitting that throwing money in the form of mortgages does not create an affordable housing market. Ultimately affordable housing is created by a reduction in the cost of putting the roof over one’s head, not the lending of money to purchase a home that really is not affordable or realistic from the get go. Because of that new-found knowledge and the desire to prevent another real estate bust from occurring in the future, both Fannie Mae and Freddie Mac are lowering the percentage of their mortgage efforts to a more conservative and hopefully obtainable number.

Although Lockhart has made public statements regarding the limitation on target goals of lending to those who are lower earners, no official cap has been announced. It is a known fact that the mortgage industry giants are now operating a bit more cautiously in order to become easier to maintain. Until law makers and lenders get on the same page regarding a practical affordable housing strategy, low-income earners trying to buy their own home have another hurdle they need to pass.