San Diego Housing Bubble News and Analysis

Your tax dollars at work. Mine too, unfortunately.

Makes me wonder why my wife and I lived way below our means and saved for years so that when it came time to buy our first house (in July) we could put 20% down and get decent financing with near-800 FICO scores.

I kind of feel like a sucker for doing the right thing: maybe we should have lived la vida loca instead of grimly pinching pennies. Seems to be working for the Baby Boomers--why can't Gen X (which I am, barely) have a little fun too?

The insanity continues. Now I just keep checking to see what else they have up their sleeves.

Really, when you think about it, the real estate market has just been perpetually and continually government sponsored, from when Clinton did away w/the capital gains tax of 250k for individuals to 500k for couples on 2 years of owning, then came the low rates, then came the zero down, then came the I/O, then came the Option ARMs.

Now we've got whatever government Hope program to keep you enslaved to your house, the 8k loan to lure people in, the 8k credit to bribe some more, next the 15k credit and well, it only makes sense that they're going to do the 125% loan-to-value. How else can they float this thing? We're going on 15 years of propping this market. Maybe down the road we'll see 150% and 20k credit. I mean 2 years ago, would you have thought 15k credit and 125% loan-to-value. I don't think any Pigg predicted that, just that the government will continue to throw money at this.

I'd like to say, when will it end, but we already know who runs this country and it's not anyone we voted for, as they are owned.

I will clearly explain to people that they are enslaving themselves even further because they don't want to "lose THEIR house"

I try to tell people that when they owe as much or more than THE house is worth, they own absolutely nothing. They will have a tax deductible rent payment, which is really only the difference between the standard deduction and their housing deduction...

I am no more a fan of this crappy loan than an FHA loan, but it will be promoted by the hucksters as the salvation for millions...

Foreclosures are the solution, they are not the problem. The govt will NEVER admit this... HLS

Actually, jpnpb, it goes back further than that. Deductibility of home mortgage interest goes back a long way, as do the price support schemes called FNM, FRE, FHA etc. (With more limited programs than they are offering now, but still very important, and designed to boost prices to benefit older folks who bought earlier at the expense of younger folks who have to buy later.)

Amen!

Here are my thoughts ...

This might actually DEcrease risk to Fannie Mae, and therefore the cost to taxpayers. (At least in the short term.)

This might not be the best choice for homedebtors, but at least they're taking responsibility for repaying the principal.

This won't bail out the option ARM borrowers -- I'm guessing that most of those loans aren't held by Fannie, and in any case many of them couldn't even qualify for a 0% refi.

I do think it's a huge gift for the holders of 2nd TDs, HELOCs, and for mortgage insurers. They should be required to chip in. If they had any brains they'd do it without hesitation.

And as foreclosure prevention programs go, I think it's better than forcible mortgage mods, cramdowns, and the other silly plans still being bounced around. It provides a way to save the few who can be saved, without a blind focus on "keeping people in their houses."

With this program, you can only refi an existing 1st mortgage. If there is a 2nd they must agree to a subordination. It's not intended to be a gift to holders of 2nds. If you currently have mtg insurance it remains.

Perhaps having a 125% loan at a lower interest rate decreases the risk to FNMA a tiny bit, but I'd say that the ice cream is now melting in 80 degree weather instead of 100 degree weather. It's still melting.

The true fix is accelerated, forcible foreclosures.
A very painful solution, but one that will restore the credibility of the entire system and bring people's attitudes about money and values back down to earth.
Until then it's a wishful game of musical chairs....HLS

does this make the loan recourse?

That is a good question. Will it become recourse?

OK - here are my thoughts.

It's stupid... to loan more than a house is worth... BUT - since there is a restriction on no cash out - the people who take advantage of the LTV of 125% already owe at least 125%. Perhaps there will be people who are underwater MORE than 125% who bring cash to the table to get the lower interest rate. If that's the case they're potentially showing commitment to pay the debts they have.

we had 115% LTV or more in 05 and 06.

Builder credits for downpayment was the trick.

Sadly, that is a good point that I knew about and forgot to mention. True that. Thanks for the reminder. It's all been tricks.

Don't forget the seller "credits" to cover closing costs and other items, and now with the $8,000 tax credit, and 3.5% FHA loans...we are absolutely back to 100%++ LTVs. That's why the market's so hot, IMHO.

Ironically, Fannie was originally intended to make homes "affordable", now it keeps them much higher than they should be.

Take ,gov financing away and see where prices go.

A whole bunch more people will get burned again.
If they would let prices revert, write down mortgages, and
then clean up the damage we'd be fine. Instead Bush sent FHA and
Fannie in to pour water into the leaking container.

Disastrous strategy, kind of like invading iraq