The mortgage mess

We should learn several lessons from the property crisis in the US

1. The government has unwisely promoted massive property ownership, hence encouraging people to borrow more and financial institutions to ease the restrictions on lending. As an illustration, George Bush's speech in 2002 below is retrospectively catastrophic: @scrap the downpayments@ is the worst...



2. Brokers and other intermediaries of the mortgage business had all incentive to encourage prospective home-buyers to engage into loans they could not afford: they are paid proportionally to the size of the loan (and of the interest rate) at the time of the transaction, hence not bearing any of the default risk. Their compensation method should be reviewed.

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