FHA – the next subprime

[CA renter]

That was an excellent article. I would add that all govt-backed loans should explicitly ban any kind of seller credits. These credits seem to be getting pretty outrageous, and it artificially inflates the official selling prices — which are used as comps for the next sale… Same problems as before. The only difference is that the taxpayer is now officially backing these junk loans.

As stated before, selling a house usually costs well over 5-6%. If a buyer only puts 3.5% down, they are underwater from day one.

The **minimum** down payment should be 20%, and credits (both tax credits and seller credits) should be somehow reflected in the official recording of the sale. This is the only way to safeguard the lenders — and the taxpayers who are backing all these mortgages.

[blahblahblah]

But this misses the whole point of FNM and FRE and FHA. They are there to funnel money into housing demand, to make home prices higher than they would otherwise be. Since most voters own homes, and most voters really want to see their home prices high, not low, pols direct various institutions to do things that increase house prices. If they pulled the guarantee from FHA loans, pols would replace it with something else. If they didn’t, home prices would really collapse, and voters and banks would besiege Congress.

State governments also need home values high for property taxes. Realtors need them high for commissions. Banks need them high because they make more interest (as long as they don’t have to suffer the result of defaults).

What do you think will happen? A sudden return to sanity, 20% downpayments, and getting your mortgage from your local banker? Or more intervention, more chicanery, more government guarantees? Who stands to gain in each case?

[blahblahblah]

But this misses the whole point of FNM and FRE and FHA. They are there to funnel money into housing demand, to make home prices higher than they would otherwise be. Since most voters own homes, and most voters really want to see their home prices high, not low, pols direct various institutions to do things that increase house prices. If they pulled the guarantee from FHA loans, pols would replace it with something else. If they didn’t, home prices would really collapse, and voters and banks would besiege Congress.

State governments also need home values high for property taxes. Realtors need them high for commissions. Banks need them high because they make more interest (as long as they don’t have to suffer the result of defaults).

What do you think will happen? A sudden return to sanity, 20% downpayments, and getting your mortgage from your local banker? Or more intervention, more chicanery, more government guarantees? Who stands to gain in each case?

[blahblahblah]

But this misses the whole point of FNM and FRE and FHA. They are there to funnel money into housing demand, to make home prices higher than they would otherwise be. Since most voters own homes, and most voters really want to see their home prices high, not low, pols direct various institutions to do things that increase house prices. If they pulled the guarantee from FHA loans, pols would replace it with something else. If they didn’t, home prices would really collapse, and voters and banks would besiege Congress.

State governments also need home values high for property taxes. Realtors need them high for commissions. Banks need them high because they make more interest (as long as they don’t have to suffer the result of defaults).

What do you think will happen? A sudden return to sanity, 20% downpayments, and getting your mortgage from your local banker? Or more intervention, more chicanery, more government guarantees? Who stands to gain in each case?

[blahblahblah]

But this misses the whole point of FNM and FRE and FHA. They are there to funnel money into housing demand, to make home prices higher than they would otherwise be. Since most voters own homes, and most voters really want to see their home prices high, not low, pols direct various institutions to do things that increase house prices. If they pulled the guarantee from FHA loans, pols would replace it with something else. If they didn’t, home prices would really collapse, and voters and banks would besiege Congress.

State governments also need home values high for property taxes. Realtors need them high for commissions. Banks need them high because they make more interest (as long as they don’t have to suffer the result of defaults).

What do you think will happen? A sudden return to sanity, 20% downpayments, and getting your mortgage from your local banker? Or more intervention, more chicanery, more government guarantees? Who stands to gain in each case?

[blahblahblah]

But this misses the whole point of FNM and FRE and FHA. They are there to funnel money into housing demand, to make home prices higher than they would otherwise be. Since most voters own homes, and most voters really want to see their home prices high, not low, pols direct various institutions to do things that increase house prices. If they pulled the guarantee from FHA loans, pols would replace it with something else. If they didn’t, home prices would really collapse, and voters and banks would besiege Congress.

State governments also need home values high for property taxes. Realtors need them high for commissions. Banks need them high because they make more interest (as long as they don’t have to suffer the result of defaults).

What do you think will happen? A sudden return to sanity, 20% downpayments, and getting your mortgage from your local banker? Or more intervention, more chicanery, more government guarantees? Who stands to gain in each case?

[34f3f3f]

“” will the removal of the Government guarantee (as is the suggestions) really provide incentives to ensure the underlying loans are good?”

Of course it would.”

Well I’m sorry but it was my impression that the unfettered and unregulated market was the one that got us into this mess. So how is it that these same forces are also going to get us out of it. I agree that Government support is not helping from many perspectives, but the lack of regulation played a equally important part in this chaotic situation? However, it doesn’t seem to be a very attractive option because it means a big shift in the balance of power.

[34f3f3f]

“” will the removal of the Government guarantee (as is the suggestions) really provide incentives to ensure the underlying loans are good?”

Of course it would.”

Well I’m sorry but it was my impression that the unfettered and unregulated market was the one that got us into this mess. So how is it that these same forces are also going to get us out of it. I agree that Government support is not helping from many perspectives, but the lack of regulation played a equally important part in this chaotic situation? However, it doesn’t seem to be a very attractive option because it means a big shift in the balance of power.

[34f3f3f]

“” will the removal of the Government guarantee (as is the suggestions) really provide incentives to ensure the underlying loans are good?”

Of course it would.”

Well I’m sorry but it was my impression that the unfettered and unregulated market was the one that got us into this mess. So how is it that these same forces are also going to get us out of it. I agree that Government support is not helping from many perspectives, but the lack of regulation played a equally important part in this chaotic situation? However, it doesn’t seem to be a very attractive option because it means a big shift in the balance of power.

[34f3f3f]

“” will the removal of the Government guarantee (as is the suggestions) really provide incentives to ensure the underlying loans are good?”

Of course it would.”

Well I’m sorry but it was my impression that the unfettered and unregulated market was the one that got us into this mess. So how is it that these same forces are also going to get us out of it. I agree that Government support is not helping from many perspectives, but the lack of regulation played a equally important part in this chaotic situation? However, it doesn’t seem to be a very attractive option because it means a big shift in the balance of power.

[34f3f3f]

“” will the removal of the Government guarantee (as is the suggestions) really provide incentives to ensure the underlying loans are good?”

Of course it would.”

Well I’m sorry but it was my impression that the unfettered and unregulated market was the one that got us into this mess. So how is it that these same forces are also going to get us out of it. I agree that Government support is not helping from many perspectives, but the lack of regulation played a equally important part in this chaotic situation? However, it doesn’t seem to be a very attractive option because it means a big shift in the balance of power.

[patientrenter]

“Well I’m sorry but it was my impression that the unfettered and unregulated market was the one that got us into this mess.”

I think political partisans on one side like to point to govt intervention as the source of all the problems, and partisans from the other side like to point to the lack of govt intervention as the source of all problems.

I think we had a lot of things going on:

1. Excess savings imported into the US from China and some oil exporting countries via US trade deficits with those countries

2. Cowboy activity in the private investment world recycling the extra dollars into high risk debt disguised as AAA debt

3. Baby boomers saving virtually nothing for the last 30 years, but expecting long and luxuriant (and medically expensive) retirements on the back of nothing but asset price inflation, not the production of more goods and services over their working lifetime than they consume

A few well-timed and well-placed actions could have made a big difference. Hitting hard against the whole collapse in home loan underwriting standards would have helped. Yanking the FNM, FRE, FHA etc govt supports from housing finance would have made a real difference. It would help a lot now, too, but we seem to have the stomach only to point at symptoms, or more minor causes. We really don’t want to truly deflate the housing bubble. That would PO the baby boomers, big-time. There’s only one thing that will get people more excited than the chance of getting a free lunch, and that’s the chance they’ll lose a free lunch.

[patientrenter]

“Well I’m sorry but it was my impression that the unfettered and unregulated market was the one that got us into this mess.”

I think political partisans on one side like to point to govt intervention as the source of all the problems, and partisans from the other side like to point to the lack of govt intervention as the source of all problems.

I think we had a lot of things going on:

1. Excess savings imported into the US from China and some oil exporting countries via US trade deficits with those countries

2. Cowboy activity in the private investment world recycling the extra dollars into high risk debt disguised as AAA debt

3. Baby boomers saving virtually nothing for the last 30 years, but expecting long and luxuriant (and medically expensive) retirements on the back of nothing but asset price inflation, not the production of more goods and services over their working lifetime than they consume

A few well-timed and well-placed actions could have made a big difference. Hitting hard against the whole collapse in home loan underwriting standards would have helped. Yanking the FNM, FRE, FHA etc govt supports from housing finance would have made a real difference. It would help a lot now, too, but we seem to have the stomach only to point at symptoms, or more minor causes. We really don’t want to truly deflate the housing bubble. That would PO the baby boomers, big-time. There’s only one thing that will get people more excited than the chance of getting a free lunch, and that’s the chance they’ll lose a free lunch.

[patientrenter]

“Well I’m sorry but it was my impression that the unfettered and unregulated market was the one that got us into this mess.”

I think political partisans on one side like to point to govt intervention as the source of all the problems, and partisans from the other side like to point to the lack of govt intervention as the source of all problems.

I think we had a lot of things going on:

1. Excess savings imported into the US from China and some oil exporting countries via US trade deficits with those countries

2. Cowboy activity in the private investment world recycling the extra dollars into high risk debt disguised as AAA debt

3. Baby boomers saving virtually nothing for the last 30 years, but expecting long and luxuriant (and medically expensive) retirements on the back of nothing but asset price inflation, not the production of more goods and services over their working lifetime than they consume

A few well-timed and well-placed actions could have made a big difference. Hitting hard against the whole collapse in home loan underwriting standards would have helped. Yanking the FNM, FRE, FHA etc govt supports from housing finance would have made a real difference. It would help a lot now, too, but we seem to have the stomach only to point at symptoms, or more minor causes. We really don’t want to truly deflate the housing bubble. That would PO the baby boomers, big-time. There’s only one thing that will get people more excited than the chance of getting a free lunch, and that’s the chance they’ll lose a free lunch.

[patientrenter]

“Well I’m sorry but it was my impression that the unfettered and unregulated market was the one that got us into this mess.”

I think political partisans on one side like to point to govt intervention as the source of all the problems, and partisans from the other side like to point to the lack of govt intervention as the source of all problems.

I think we had a lot of things going on:

1. Excess savings imported into the US from China and some oil exporting countries via US trade deficits with those countries

2. Cowboy activity in the private investment world recycling the extra dollars into high risk debt disguised as AAA debt

3. Baby boomers saving virtually nothing for the last 30 years, but expecting long and luxuriant (and medically expensive) retirements on the back of nothing but asset price inflation, not the production of more goods and services over their working lifetime than they consume

A few well-timed and well-placed actions could have made a big difference. Hitting hard against the whole collapse in home loan underwriting standards would have helped. Yanking the FNM, FRE, FHA etc govt supports from housing finance would have made a real difference. It would help a lot now, too, but we seem to have the stomach only to point at symptoms, or more minor causes. We really don’t want to truly deflate the housing bubble. That would PO the baby boomers, big-time. There’s only one thing that will get people more excited than the chance of getting a free lunch, and that’s the chance they’ll lose a free lunch.

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