Former FDIC Chairman Bill Isaac Believes Another Banking Crisis Possible

The ailing economy, high unemployment and massive foreclosure rates can largely be blamed on one thing – the failure to regulate bank mortgage activities and a lack of transparency in mortgage related investment products like CDO’s. Former FDIC chairman Bill Isaac believes regulators passed on a great opportunity to really reform the banking system and how banks are allowed to operate in relation to mortgages. As such, he sees another crisis as imminent as the conditions that led up to the worst economic situations since the Great Depression are all still in play.

Fundamentals in Housing Still Not Balanced

If the former FDIC chairman sees a danger in another meltdown, you should as well. In the recent financial disaster, people took on too much debt based on credit. Combine that with outrageous mortgages not supported by income and you can see why we are in our current situation with home prices falling. So how can you take advantage? When the economy recovers, steer clear of any unnecessary debt and start investing and saving to take advantage of the next economic downturn. It’s no secret that homes are extremely affordable now, but not to relative incomes. If you have amassed a decent savings, you could be picking up properties very cheaply during the next housing cycle.

How Much Mortgage Do You Need?

As always, mortgage rates alone should not be a factor in determining home affordability. You should stick to the old rule of not spending more than 3 times your current income on a home. Many homeowners today also failed to produce large down payments, which could definitely help to lower monthly mortgage costs. Take advantage and learn about the current housing market so that you can be prepared to buy a home for a low price when others are looking to sell.