“Last, the only entities that is lending is the government.”
from my end-of-year letter to family and friends:
There must be a ray of sunshine somewhere, how’s the housing sector doing?
Most (over 70%) mortgage loans in 2009 came from Fannie Mae, Freddie Mac or FHA – banks, for the most part, are not originating mortgages that can’t be sold to one of these orgs – all of these agencies offer/guarantee govt subsidized mortgages with low down payments (3-5%) – with the $8000 federal tax credit, many people were able to purchase $250K and under houses with zero money coming out of their pockets – California added a $10K ($20K?) tax credit (http://www.sacbee.com/business/story/1641603.html ) on top of the $8K federal credit so residents of the Golden State could play the zero-down game at a much higher level
What? I thought we were making it harder for people to purchase homes they can’t afford …
How are Fannie and Freddie financing all these losses? Where is the money coming from?
In order to fund their operations, Fannie and Freddie sell bonds to investors – like US treasury debt, all the usual suspects have stopped buying Fannie and Freddie’s bonds – the only purchaser for this debt in 2009 was the US Federal Reserve
So, in a nutshell, you’re saying that over 70% of the mortgage issuance in 2009 occurred because of govt subsidized loans and tax credits? And the only financer for this government largesse was the US Federal Reserve?
Just as an interesting question, how much do you think housing values would fall from here if the government subsidized mortgages and tax credits were removed?
I’d say 40% but I doubt we’ll get a chance to find out
Well, how about foreclosures, are people staying in their homes?
