10 Oct 2008

Mortgage Reform - one aspect overlooked by George Soros

While I agree with most points that Soros makes today (Wall Street Journal, 10 Oct 2008) I think that he should have focused more on one important aspect: there have to be limits on the amount mortgage providers are allowed to lend against property. In previous times it was just inconceivable that anyone - let alone 24 year olds barely out of school - was able to borrow more than a conservative amount (60-70%) against the value of a property. In addition there were strict limits on the multiple of income and this income was also much more carefully documented. These lending policies would be simple to monitor by senior bank management and regulators alike - no need to rocket scientists or highly paid risk managers! It would also be appropriate if similar regulations would be applied to commercial property lending where (near) 100% mortgages were also available to persuasive property 'tycoons' during the height of the asset bubble.

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