FNM/FRE to discontinue jumbo-conforming

[an]

[quote=esmith]
I am not very familiar with the 80s and 90s. But FHA has been around since the 30s and 3% downpayments on FHA loans may have existed for a very long time.

I’m also not sure about 20% being the norm. The oldest data point I could find is that the median first-time-buyer downpayment in 1997 in SoCal was around $10,000. Median home price was in high 100’s.

The story of 20% and 3x being the norm is probably a myth. In coastal California, anyway, (in my opinion) prices have not been so low and down payments have not been so large for many decades.[/quote]
I know some people who bought their first house in the 80s. They tell me back then, it was very hard to find a loan if you put down less than 20% and it was nearly impossible to get a loan if you put down less than 10%. That’s what they told me of their experience back then, so I tend to believe them since they were on the borrowing side of the equation. They could be wrong and you didn’t need more than 3% down, but I wouldn’t know for sure, since I don’t have a time machine. What we can talk about is what to do now. Your argument is to not require 20% down because it’s hard. My argument is, it’s doable if you put your mind to it. Why are you so against asking people to put more skin in the game?

[Eugene]

FHA used to have strict maximum loan limits. In the early 80s, the cap was less than $100k. It may have been nearly impossible to get a loan with less than 10% down if you were shopping for a high-end house.

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.

[Eugene]

FHA used to have strict maximum loan limits. In the early 80s, the cap was less than $100k. It may have been nearly impossible to get a loan with less than 10% down if you were shopping for a high-end house.

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.

[Eugene]

FHA used to have strict maximum loan limits. In the early 80s, the cap was less than $100k. It may have been nearly impossible to get a loan with less than 10% down if you were shopping for a high-end house.

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.

[Eugene]

FHA used to have strict maximum loan limits. In the early 80s, the cap was less than $100k. It may have been nearly impossible to get a loan with less than 10% down if you were shopping for a high-end house.

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.

[Eugene]

FHA used to have strict maximum loan limits. In the early 80s, the cap was less than $100k. It may have been nearly impossible to get a loan with less than 10% down if you were shopping for a high-end house.

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.

[patientrenter]

[quote=esmith]……It should be okay to give 3% down loans to low-income homebuyers.[/quote]

Why?

[patientrenter]

[quote=esmith]……It should be okay to give 3% down loans to low-income homebuyers.[/quote]

Why?

[patientrenter]

[quote=esmith]……It should be okay to give 3% down loans to low-income homebuyers.[/quote]

Why?

[patientrenter]

[quote=esmith]……It should be okay to give 3% down loans to low-income homebuyers.[/quote]

Why?

[patientrenter]

[quote=esmith]……It should be okay to give 3% down loans to low-income homebuyers.[/quote]

Why?

[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.

[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.

[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.

[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.

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