There's an interesting post by Annette Haddad at the L.A. Land blog citing a new report issued by UC Irvine's entitled "Subprime Lending and the Housing Bubble: Tail Wags Dog?" The report argues that it was actually the departure of Fannie Mae and Freddie Mac from the lending market in 2003 due to their accounting scandals and related political pressures. From the blog:
When Fannie Mae and Freddie Mac pulled back from the credit markets in 2003 and significantly slowed their lending volume in response to internal accounting problems and outside political pressure, the breach was filled by aggressive securities issuers in the private mortgage market.
And helping to fuel them on was an enthusiastic administration pushing the "dream of homeownership" without a whole lot of regulatory restraint. As a result, total mortgage volume skyrocketed and pushed up home prices "with momentum characteristic of a bubble," the study says.Although cynics might be put off by the sponsors of the report, which included the Mortgage Bankers Association, the NAR and FreddieMac, I thought it interesting that Economy.com co-founder Mark Zandi also touches on this same subject in his book "Financial Shock: A 360-Degree Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis."