Affordable housing didn’t cause the financial crisis

http://www.washingtonpost.com/blogs/wonkblog/wp/2015/01/27/wonkbook-affordable-housing-didnt-cause-the-financial-crisis/

Irresponsible lending might have been one of the many causes of the financial crisis -- but not just irresponsible lending to poor people, according to a new study.

"The large majority of mortgage dollars originated between 2002 and 2006 are obtained by middle- and high-income borrowers (not the poor)," the authors write. "In addition, borrowers in the middle and top of the distribution are the ones that contributed most significantly to the increase in mortgages in default after 2007." Rich people tend to take out larger mortgages, of course, but the fact is that the amount of money poor borrowers failed to pay back was just never that significant, as this chart from the paper shows. In case you have a hard time believing that so many larger mortgages could have gone into default, The Washington Post just published a series of stories on subprime, sometimes predatory lending in relatively affluent places such as Prince George's County, Md., outside Washington, D.C.

The findings undermine criticism of recent modest efforts by the Obama administration to make housing more affordable for low-income borrowers by loosening federal credit standards. It's important to lend responsibly, even for the federal government, but the risks in this case might be exaggerated.