Yet another piece in the NY Times predicting mortgage problems because of the Government

Here is an article from October 3, 2004 in the NY Times:

Still, the most damaging legacy of Fannie Mae's years of unchecked growth may not be evident until the next significant economic slump. Only then, argued Josh Rosner, an analyst at Medley Global Advisors in New York, will the effects of Fannie Mae's relaxed mortgage underwriting standards be felt. A result could be a more pronounced downturn in the real estate market and more stress on the consumer.

"The move to push homeownership on people that historically would not have had the finances or credit to qualify could conceivably and ultimately turn Fannie Mae's American dream of homeownership into the American nightmare of homeownership where people are trapped in their homes," Mr. Rosner said. "If incomes don't rise or home values don't keep rising, or if interest rates rose considerably, you could quickly end up with significantly more people underwater with their mortgages and unable to pay."

SO far, Fannie Mae's rarefied status as a government-sponsored enterprise has certainly helped holders of its debt stay calm. But life for the company is surely about to change. The biggest difference will be in Fannie Mae's growth. For years, its regulator, the Office of Federal Housing Enterprise Oversight, has allowed the company to expand its business and portfolio to the max. Thanks in large part to Fannie Mae's torrid growth, the market for mortgage securities now surpasses that for Treasury securities. . . .

abudzar