Flaherty is said to be hinting that mortgage terms may have to be further reduced, and down payment size increased. This would reduce the number of future defaults as people would need to be in a better financial position to buy a home.
The Problem: The housing market would slow as a result, dragging the economy, and potentially reducing house prices. Lower house prices can cause problems with mortgage renewals and people with zero down and 40 year mortgages may end up owning homes worth less than their mortgages. Banks just don't go for that.
Even people purchasing recently under the 5% down and 35 year term rules can find themselves owing more than they own.
I think the feds are going to be gradually firmly up the lending rules, to hopefully reduce risk without slumping the housing market too much.
Good luck with that. Looks to be quite the teeter totter.
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