FNM/FRE to discontinue jumbo-conforming

[ucodegen]

@esmith

Freddie and Fannie were extremely thinly capitalized and they had a bunch of mortgage-backed securites on the books. Existing regulations forced them to mark to market. When the MBS market started tanking, Fannie/Freddie book value took a hit.

It was more than just that. They also were carrying higher LTVs than 80%. In particular Fannie. If they had stayed with the traditional 80% LTV, both of them would be in better shape.

In your point of view, CRA has been a time-delay fuse that was lit in 1977 and finally brought down Fannie and Freddie 31 years later, in 2008. Got it.

In a way (combined with later revisions to it as well).. but also that CRA achieved the opposite of what it was intended. The effect of the change in realized demand was ignored in housing prices. If you increase LTVs for low income, you also implicitly increase LTVs for investors through other channels. I would like to see all loans go to 80 LTV for Freddie and Fannie, but I just don’t see it happening.

My argument is, 20% down is not equally hard for everyone, it’s much harder for a low-income household than for a high-end household. It should be okay to give 3% down loans to low-income homebuyers.

I disagree here. If you consider both higher income and lower income buying the same house, it is true. If you consider buying houses at ratio to gross income, it is actually harder for the higher income person because taxes take a greater proportion of income… all other things proportionately.

If you remember, there was a neck(bend) in the ratio between quality of house and amount paid in 2007. 500k might get you a so-so house or condo. If you get up to 800k, you get a decent house. The improvement in sq footage was more than the ratio between the prices. Not only that, but the quality was much better. This had to do with the availability of easy financing and high LTV loans. They were more available under 500k because they could get handed over to Freddie and Fannie. You needed a high FICO for high LTVs over 500k and/or would pay high interest rates.

[CA renter]

My parents were in the RE business back in the 70s and 80s, and it was pretty much a given that there was a 20% down-payment requirement for conventional financing on an owner-occupied home. I believe there was a 25% down-payment requirement for investment properties (and more for raw land), IIRC.

One angle on the “investor” problem in low-income area (and it is a real problem, as they can cash-flow at 20%, while the low-income person cannot save the 20% down)…would go like this:

1. Eliminate Prop 13 protection on all non owner-occupied housing, with the exception of multi-family buildings, and SFHs where the LL agrees to be bound by strict rent control laws.

This would cause taxes to rise with prices, and during cycle tops, would put more inventory on the market (because LLs could not cash flow with the high taxes, they would sell high, take profits, and put more inventory on the market exactly when we need it), helping to stabilize the housing market.

While I firmly support Prop 13 for primary residences, the goal should be to keep granny in her house, not create a tremendous profit spread for landlords who got in early. After all, it is a subsidy paid by those who buy at cycle tops.

Opponents to this plan would claim that rents would rise as LLs try to cover their expenses, but I disagree. We’ve just witnessed how rents are more dependent on local wages, not what LLs want.

2. Eliminate all first-time buyer programs, including low down-payment and mortgage credit certificates, grants, etc. (except veterans, who earned VA loans, IMHO).

First-time and low-income buying programs actually serve to inflate prices in low-income areas, creating LESS affordable housing. The goal should be to keep debt-to-income levels as low as possible via low prices. Keeping this extra money from entering the market (and requiring 20% down) would bring prices down to a level that new buyers could afford.

3. Eliminate mortgage interest deductions for investment properties (same exemptions as above). This (along with lack of Prop 13 protection) would help keep investors out of the lower-end SFH areas.

We have to decide if home ownership really should be a goal for our society. I’d argue it should be, but should be done via lower prices, not more debt with gimmicky terms and interest rates, and not with govt money that only makes housing less affordable.

[CA renter]

My parents were in the RE business back in the 70s and 80s, and it was pretty much a given that there was a 20% down-payment requirement for conventional financing on an owner-occupied home. I believe there was a 25% down-payment requirement for investment properties (and more for raw land), IIRC.

One angle on the “investor” problem in low-income area (and it is a real problem, as they can cash-flow at 20%, while the low-income person cannot save the 20% down)…would go like this:

1. Eliminate Prop 13 protection on all non owner-occupied housing, with the exception of multi-family buildings, and SFHs where the LL agrees to be bound by strict rent control laws.

This would cause taxes to rise with prices, and during cycle tops, would put more inventory on the market (because LLs could not cash flow with the high taxes, they would sell high, take profits, and put more inventory on the market exactly when we need it), helping to stabilize the housing market.

While I firmly support Prop 13 for primary residences, the goal should be to keep granny in her house, not create a tremendous profit spread for landlords who got in early. After all, it is a subsidy paid by those who buy at cycle tops.

Opponents to this plan would claim that rents would rise as LLs try to cover their expenses, but I disagree. We’ve just witnessed how rents are more dependent on local wages, not what LLs want.

2. Eliminate all first-time buyer programs, including low down-payment and mortgage credit certificates, grants, etc. (except veterans, who earned VA loans, IMHO).

First-time and low-income buying programs actually serve to inflate prices in low-income areas, creating LESS affordable housing. The goal should be to keep debt-to-income levels as low as possible via low prices. Keeping this extra money from entering the market (and requiring 20% down) would bring prices down to a level that new buyers could afford.

3. Eliminate mortgage interest deductions for investment properties (same exemptions as above). This (along with lack of Prop 13 protection) would help keep investors out of the lower-end SFH areas.

We have to decide if home ownership really should be a goal for our society. I’d argue it should be, but should be done via lower prices, not more debt with gimmicky terms and interest rates, and not with govt money that only makes housing less affordable.

[CA renter]

My parents were in the RE business back in the 70s and 80s, and it was pretty much a given that there was a 20% down-payment requirement for conventional financing on an owner-occupied home. I believe there was a 25% down-payment requirement for investment properties (and more for raw land), IIRC.

One angle on the “investor” problem in low-income area (and it is a real problem, as they can cash-flow at 20%, while the low-income person cannot save the 20% down)…would go like this:

1. Eliminate Prop 13 protection on all non owner-occupied housing, with the exception of multi-family buildings, and SFHs where the LL agrees to be bound by strict rent control laws.

This would cause taxes to rise with prices, and during cycle tops, would put more inventory on the market (because LLs could not cash flow with the high taxes, they would sell high, take profits, and put more inventory on the market exactly when we need it), helping to stabilize the housing market.

While I firmly support Prop 13 for primary residences, the goal should be to keep granny in her house, not create a tremendous profit spread for landlords who got in early. After all, it is a subsidy paid by those who buy at cycle tops.

Opponents to this plan would claim that rents would rise as LLs try to cover their expenses, but I disagree. We’ve just witnessed how rents are more dependent on local wages, not what LLs want.

2. Eliminate all first-time buyer programs, including low down-payment and mortgage credit certificates, grants, etc. (except veterans, who earned VA loans, IMHO).

First-time and low-income buying programs actually serve to inflate prices in low-income areas, creating LESS affordable housing. The goal should be to keep debt-to-income levels as low as possible via low prices. Keeping this extra money from entering the market (and requiring 20% down) would bring prices down to a level that new buyers could afford.

3. Eliminate mortgage interest deductions for investment properties (same exemptions as above). This (along with lack of Prop 13 protection) would help keep investors out of the lower-end SFH areas.

We have to decide if home ownership really should be a goal for our society. I’d argue it should be, but should be done via lower prices, not more debt with gimmicky terms and interest rates, and not with govt money that only makes housing less affordable.

[CA renter]

My parents were in the RE business back in the 70s and 80s, and it was pretty much a given that there was a 20% down-payment requirement for conventional financing on an owner-occupied home. I believe there was a 25% down-payment requirement for investment properties (and more for raw land), IIRC.

One angle on the “investor” problem in low-income area (and it is a real problem, as they can cash-flow at 20%, while the low-income person cannot save the 20% down)…would go like this:

1. Eliminate Prop 13 protection on all non owner-occupied housing, with the exception of multi-family buildings, and SFHs where the LL agrees to be bound by strict rent control laws.

This would cause taxes to rise with prices, and during cycle tops, would put more inventory on the market (because LLs could not cash flow with the high taxes, they would sell high, take profits, and put more inventory on the market exactly when we need it), helping to stabilize the housing market.

While I firmly support Prop 13 for primary residences, the goal should be to keep granny in her house, not create a tremendous profit spread for landlords who got in early. After all, it is a subsidy paid by those who buy at cycle tops.

Opponents to this plan would claim that rents would rise as LLs try to cover their expenses, but I disagree. We’ve just witnessed how rents are more dependent on local wages, not what LLs want.

2. Eliminate all first-time buyer programs, including low down-payment and mortgage credit certificates, grants, etc. (except veterans, who earned VA loans, IMHO).

First-time and low-income buying programs actually serve to inflate prices in low-income areas, creating LESS affordable housing. The goal should be to keep debt-to-income levels as low as possible via low prices. Keeping this extra money from entering the market (and requiring 20% down) would bring prices down to a level that new buyers could afford.

3. Eliminate mortgage interest deductions for investment properties (same exemptions as above). This (along with lack of Prop 13 protection) would help keep investors out of the lower-end SFH areas.

We have to decide if home ownership really should be a goal for our society. I’d argue it should be, but should be done via lower prices, not more debt with gimmicky terms and interest rates, and not with govt money that only makes housing less affordable.

[CA renter]

My parents were in the RE business back in the 70s and 80s, and it was pretty much a given that there was a 20% down-payment requirement for conventional financing on an owner-occupied home. I believe there was a 25% down-payment requirement for investment properties (and more for raw land), IIRC.

One angle on the “investor” problem in low-income area (and it is a real problem, as they can cash-flow at 20%, while the low-income person cannot save the 20% down)…would go like this:

1. Eliminate Prop 13 protection on all non owner-occupied housing, with the exception of multi-family buildings, and SFHs where the LL agrees to be bound by strict rent control laws.

This would cause taxes to rise with prices, and during cycle tops, would put more inventory on the market (because LLs could not cash flow with the high taxes, they would sell high, take profits, and put more inventory on the market exactly when we need it), helping to stabilize the housing market.

While I firmly support Prop 13 for primary residences, the goal should be to keep granny in her house, not create a tremendous profit spread for landlords who got in early. After all, it is a subsidy paid by those who buy at cycle tops.

Opponents to this plan would claim that rents would rise as LLs try to cover their expenses, but I disagree. We’ve just witnessed how rents are more dependent on local wages, not what LLs want.

2. Eliminate all first-time buyer programs, including low down-payment and mortgage credit certificates, grants, etc. (except veterans, who earned VA loans, IMHO).

First-time and low-income buying programs actually serve to inflate prices in low-income areas, creating LESS affordable housing. The goal should be to keep debt-to-income levels as low as possible via low prices. Keeping this extra money from entering the market (and requiring 20% down) would bring prices down to a level that new buyers could afford.

3. Eliminate mortgage interest deductions for investment properties (same exemptions as above). This (along with lack of Prop 13 protection) would help keep investors out of the lower-end SFH areas.

We have to decide if home ownership really should be a goal for our society. I’d argue it should be, but should be done via lower prices, not more debt with gimmicky terms and interest rates, and not with govt money that only makes housing less affordable.

[(former)FormerSanDiegan]

3. Eliminate mortgage interest deductions for investment properties

When people make suggestions like this, it shows an obvious misunderstanding of business principles and taxes.

Rental real estate is a business. Business is taxed on the difference between income and expenses. A mortgage is an expense for a real estate business, along with taxes, insurance (which isn’t deductible for homeowners BTW), maintenance ((which isn’t deductible for homeowners BTW), advertising expenses, and the list goes on.

So, mortgage interest for investment property is inherently a business expense. The tax laws that apply also apply to your local restaurant owner who deducts his lease payments as business expenses. It also applies to many of our employers who deduct expenses such as the utility bills, office lease payments, and our salaries and benefits prior to computing the amounts on which they are taxed.

[(former)FormerSanDiegan]

3. Eliminate mortgage interest deductions for investment properties

When people make suggestions like this, it shows an obvious misunderstanding of business principles and taxes.

Rental real estate is a business. Business is taxed on the difference between income and expenses. A mortgage is an expense for a real estate business, along with taxes, insurance (which isn’t deductible for homeowners BTW), maintenance ((which isn’t deductible for homeowners BTW), advertising expenses, and the list goes on.

So, mortgage interest for investment property is inherently a business expense. The tax laws that apply also apply to your local restaurant owner who deducts his lease payments as business expenses. It also applies to many of our employers who deduct expenses such as the utility bills, office lease payments, and our salaries and benefits prior to computing the amounts on which they are taxed.

[(former)FormerSanDiegan]

3. Eliminate mortgage interest deductions for investment properties

When people make suggestions like this, it shows an obvious misunderstanding of business principles and taxes.

Rental real estate is a business. Business is taxed on the difference between income and expenses. A mortgage is an expense for a real estate business, along with taxes, insurance (which isn’t deductible for homeowners BTW), maintenance ((which isn’t deductible for homeowners BTW), advertising expenses, and the list goes on.

So, mortgage interest for investment property is inherently a business expense. The tax laws that apply also apply to your local restaurant owner who deducts his lease payments as business expenses. It also applies to many of our employers who deduct expenses such as the utility bills, office lease payments, and our salaries and benefits prior to computing the amounts on which they are taxed.

[(former)FormerSanDiegan]

3. Eliminate mortgage interest deductions for investment properties

When people make suggestions like this, it shows an obvious misunderstanding of business principles and taxes.

Rental real estate is a business. Business is taxed on the difference between income and expenses. A mortgage is an expense for a real estate business, along with taxes, insurance (which isn’t deductible for homeowners BTW), maintenance ((which isn’t deductible for homeowners BTW), advertising expenses, and the list goes on.

So, mortgage interest for investment property is inherently a business expense. The tax laws that apply also apply to your local restaurant owner who deducts his lease payments as business expenses. It also applies to many of our employers who deduct expenses such as the utility bills, office lease payments, and our salaries and benefits prior to computing the amounts on which they are taxed.

[(former)FormerSanDiegan]

3. Eliminate mortgage interest deductions for investment properties

When people make suggestions like this, it shows an obvious misunderstanding of business principles and taxes.

Rental real estate is a business. Business is taxed on the difference between income and expenses. A mortgage is an expense for a real estate business, along with taxes, insurance (which isn’t deductible for homeowners BTW), maintenance ((which isn’t deductible for homeowners BTW), advertising expenses, and the list goes on.

So, mortgage interest for investment property is inherently a business expense. The tax laws that apply also apply to your local restaurant owner who deducts his lease payments as business expenses. It also applies to many of our employers who deduct expenses such as the utility bills, office lease payments, and our salaries and benefits prior to computing the amounts on which they are taxed.

[CA renter]

FSD,

I fully understand the idea behind the MID. Yes, it’s a business expense.

Here’s my point (and the socialist in me is definitely coming out here):

-housing should not be a “business” where the landlords have greater benefits than the primary residents or renters. I know that people will argue that LLs offer a service to renters, and that’s true, but let’s not pretend it’s for altruistic reasons. I would continue with the current tax laws for multi-family dwellings (apartments, 2-4 unit rentals, etc.) and for SFHs where the LL agrees to be bound by strict rent control laws, but we should not be giving preference to LLs over owners.

Start a shoe business, make TVs, boats — any number of things that are “wants” and not “needs” and I have no problem with Darwinian capitalism WRT those industries. But a country’s natural resources (esp ones that are considered “needs” by the contry’s citizens) should be owned, controlled, or regulated by the govt, and that includes land (with the exception of a single, owner-occupied residence and possible exemptions for businesses).

Not saying we will ever come to an agreement, as we likely come from two very different perspectives and have different beliefs about capital, labor, and ownership of natural resources. This is just my personal opinion, as I think it would be in the best interest of society, as a whole.

[CA renter]

FSD,

I fully understand the idea behind the MID. Yes, it’s a business expense.

Here’s my point (and the socialist in me is definitely coming out here):

-housing should not be a “business” where the landlords have greater benefits than the primary residents or renters. I know that people will argue that LLs offer a service to renters, and that’s true, but let’s not pretend it’s for altruistic reasons. I would continue with the current tax laws for multi-family dwellings (apartments, 2-4 unit rentals, etc.) and for SFHs where the LL agrees to be bound by strict rent control laws, but we should not be giving preference to LLs over owners.

Start a shoe business, make TVs, boats — any number of things that are “wants” and not “needs” and I have no problem with Darwinian capitalism WRT those industries. But a country’s natural resources (esp ones that are considered “needs” by the contry’s citizens) should be owned, controlled, or regulated by the govt, and that includes land (with the exception of a single, owner-occupied residence and possible exemptions for businesses).

Not saying we will ever come to an agreement, as we likely come from two very different perspectives and have different beliefs about capital, labor, and ownership of natural resources. This is just my personal opinion, as I think it would be in the best interest of society, as a whole.

[CA renter]

FSD,

I fully understand the idea behind the MID. Yes, it’s a business expense.

Here’s my point (and the socialist in me is definitely coming out here):

-housing should not be a “business” where the landlords have greater benefits than the primary residents or renters. I know that people will argue that LLs offer a service to renters, and that’s true, but let’s not pretend it’s for altruistic reasons. I would continue with the current tax laws for multi-family dwellings (apartments, 2-4 unit rentals, etc.) and for SFHs where the LL agrees to be bound by strict rent control laws, but we should not be giving preference to LLs over owners.

Start a shoe business, make TVs, boats — any number of things that are “wants” and not “needs” and I have no problem with Darwinian capitalism WRT those industries. But a country’s natural resources (esp ones that are considered “needs” by the contry’s citizens) should be owned, controlled, or regulated by the govt, and that includes land (with the exception of a single, owner-occupied residence and possible exemptions for businesses).

Not saying we will ever come to an agreement, as we likely come from two very different perspectives and have different beliefs about capital, labor, and ownership of natural resources. This is just my personal opinion, as I think it would be in the best interest of society, as a whole.

[CA renter]

FSD,

I fully understand the idea behind the MID. Yes, it’s a business expense.

Here’s my point (and the socialist in me is definitely coming out here):

-housing should not be a “business” where the landlords have greater benefits than the primary residents or renters. I know that people will argue that LLs offer a service to renters, and that’s true, but let’s not pretend it’s for altruistic reasons. I would continue with the current tax laws for multi-family dwellings (apartments, 2-4 unit rentals, etc.) and for SFHs where the LL agrees to be bound by strict rent control laws, but we should not be giving preference to LLs over owners.

Start a shoe business, make TVs, boats — any number of things that are “wants” and not “needs” and I have no problem with Darwinian capitalism WRT those industries. But a country’s natural resources (esp ones that are considered “needs” by the contry’s citizens) should be owned, controlled, or regulated by the govt, and that includes land (with the exception of a single, owner-occupied residence and possible exemptions for businesses).

Not saying we will ever come to an agreement, as we likely come from two very different perspectives and have different beliefs about capital, labor, and ownership of natural resources. This is just my personal opinion, as I think it would be in the best interest of society, as a whole.

[Author]

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