In 1993 the FHA began to increase the percentage of its loans that involved

down payments of less than 3 percent.

13% in 1992

28% in 1996

50% in 2000

Standards lowered for approving mortgage loans

In 1989, only 1 in 230 homebuyers bought a home with a down payment of 3 percent or

less. In 2003, that ratio was 1 in 7. By 2007, it was 1 in 3.

Buying made easy

In 2009, one in four taxpayers itemized mortgage interest, accounting for about two-thirds of the mortgage interest paid by all borrowers.

Tax deductions encourage oversized mortgages

To expand ownership to homebuyers with shaky credit, government

increasingly has backed subprime and nonprime mortgages. By 2008,

Fannie and Freddie alone held or insured 13.4 million of them while

overall, government and its entities guaranteed more than 20 million.

Government doubles down

Government investment in 20.4 million subprime and other risky

loans is about three times the size of the private mortgage-

backed securities market.

Inflating the bubble

In 2003, homeowners cashed out equity in

their homes to the tune of $400 billion. Equity extraction was worth

more than $700 billion in both 2004 and 2005.

Homeowners take the money and run

The average US homeowner has less than 7 percent equity in his or her home. As recently as 1990, US home equity was 45 percent.

Not much left to bank

43%

8%

The Federal Housing Administration has increased its market share of home purchase loans, from 8 percent in 2007 to 43 percent in 2010.

Government ups its skin in the game

1986 1999 2007

In 1986, residential mortgage debt accounted for 39 percent of gross domestic product. In 1990, mortgage debt was 50 percent of GDP. In 2007, it was 75 percent.

Debt’s climb as a percent of GDP

By 2008, half of all mortgages in America — 28 million — were subprime or nonprime loans. Seventy-four percent of them were guaranteed by government or government-agencies

Government is left holding the bag

American Enterprise Institute