Should the government tightly regulate the mortgage industry and make illegal overly aggressive lending products such as ARM's,  High LTV's, and Subprime Mortgages?

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kapokkid eNotes educator| Certified Educator

Though it is a matter of opinion to some extent, government regulation could certainly play a role in reducing predatory lending, the type that produces high LTV loans and ARM's that the lender knows will not be re-paid.  The implicit government guarantee of loans purchased by Fannie and Freddie also played a large role in encouraging this type of lending.

The other side of the argument is that a complete absence of regulation or other types of government intervention might in fact do more to reign in those practices than any increase in regulation.  If lenders that made stupid decisions and harmful and fraudulent ones were allowed to suffer the consequences of doing so, that would be a big deterrent.