We should also take a closer look at the loan-to-value guidelines that depository institutions are required to follow in making real estate loans. We should review guidelines to ensure they are adequate, and we should apply them equitably to other lenders. Other lending provisions, subsidies and public policies directed toward the housing sector and home financing also need to be examined.
These would include the risk weights for mortgage loans and mortgage-backed securities under the Basel capital requirements, state and federal tax deductions for mortgage interest, reliance on credit rating agencies’ assessments of mortgage-backed securities, and the wide variety of other public policies related to housing.