From today’s Wall Street Journal article “Banks Push Home Buyers To Put Down More Cash”:

The median down payment in nine major U.S. cities rose to 22% last year on properties purchased through conventional mortgages, according to an analysis for the Wall Street Journal by real-estate portal Zillow.com. That percentage doubled in three years and represents the highest median down payment since the data were first tracked in 1997. The move to force home buyers to lay our more cash is driven mostly by banks, who have found that larger down payments discourage delinquencies by increasing the buyers’ exposure to loss and reducing the impact of declining prices.

The following is from The New York Times. A story about one man’s real estate melt down.

If there was anybody who should have avoided the mortgage catastrophe, it was I. As an economics reporter for The New York Times, I have been the paper’s chief eyes and ears on the Federal Reserve for the past six years. I watched Alan Greenspan and his successor, Ben S. Bernanke, at close range. I wrote several early-warning articles in 2004 about the spike in go-go mortgages. Before that, I had a hand in covering the Asian financial crisis of 1997, the Russia meltdown in 1998 and the dot-com collapse in 2000. I know a lot about the curveballs that the economy can throw at us.

But in 2004, I joined millions of otherwise-sane Americans in what we now know was a catastrophic binge on overpriced real estate and reckless mortgages. Nobody duped or hypnotized me. Like so many others — borrowers, lenders and the Wall Street dealmakers behind them — I just thought I could beat the odds.

Read more: Even the smart ones can lose their homes

File under: “Hell has three gates: lust, anger, and greed”

Alex Pollack reckons finance professionals did believe housing prices could fall, but just not on a national level. The data used to stress test mortgage assets was based on the experience of Texas and other oil-patch states in the 1970s and 80s. It provided an instance of a housing bubble that led to falling house prices. The problem was, since the Depression, house prices had never fallen on a national level. There existed no data that contained a large and positive correlation of home price across different regions and also had prices falling. This is the limitation of istorical data; you use the past to predict the future. When you enter a new regime you are left with your own ad-hoc judgement. Rather than take on that sort of responsibility, most prefer to base their assumptions on historical data.

Read More: The Economist

John:
I read your blog regularly (and occasionally post comments), and was thinking that one of my recent blog posts might be of interest to your readers. It discussed a flaw in the American mortgage system that Lester Thurow pointed out to me – that mortgages aren’t tied to future streams of incomes and how this affects housing plans and mods.

http://gettogreen.blogspot.com/2009/03/obamas-housing-plan-needs-to-stop.html

–
Ted Chan

Fannie Mae, the giant mortgage purchaser owned by taxpayers, has cut hundreds of jobs over the past four weeks, reports National Mortgage News. Hmmm …  I thought government officials wanted Fannie to increase its support of home lending by expanding operations. I guess I’m wrong.