More bailout proposals

[SD Realtor]

You all may want to email/call your congressmen to vote no on HR 1852…

Here is the “call to action” email I just got from NAR.

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H.R. 1852 reforms the FHA program by building on the strength and security of successfully insuring mortgages for more than 70 years. It is the immediate and significant response necessary to return stability to the mortgage market.

The amendment offered by Congressmen Frank (D-MA), Gary Miller (R-CA) and Cardoza (D-CA) raises the single-family FHA loan limits to 125% of area median home prices and permits the Secretary of Housing and Urban Development to grant additional increases if required by market conditions.
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We can keep telling ourselves that all these bailout proposals and meek amounts of money are not going to affect things (the downturn) but they sure do make me more and more nervous.

I don’t like them one bit no matter how much rationalization is on the board that they will not matter.

[PadreBrian]

What is San Diego’s 125% median?

[Bugs]

Everyone is assuming the interest rates will stay the same. I question that assumption.

A borrower who couldn’t afford the 2004 sale price at a 5.5% conventional rate isn’t going to be doing any better with a 6.5% rate, and that’s if they even have enough equity to refinance into a 90% LTV first.

That’s not to say we shouldn’t all be nervous – every time the gov’t throws money at the mortgage lenders they are contributing to inflation. And rewarding misconduct. We should all object to the bailout schemes on that basis alone, if for no other reason.

I detest the idea of paying for some MBs Hummer or some flipper’s MBZ.

[drunkle]

politicians are worthless. complaints will fall on deaf ears if only for the fact that you’d be using words that are too big for them. like, “inflation” and “morals” and “hi”.

[carlover]

Jumbo borrowers are not the issue when it comes to defaults, their default rates are still extremely low. That being the case, where is the bailout??? It’s merely allowing Fannie Mae and Freddie Mac to take reasonable risks and operate more as free market corporations. I don’t see this as a bail out but as a way to restore confidence to the market and bring jumbo rates back to a reasonable premium. Currently certain regions (non-contiguous areas of the US such as Alaska, Hawaii, etc.) get Fannie Mae and Freddie Mac loan limits that are 150% of what the rest of us get?

Making the connection that you are paying for MB’s hummer or flipper’s MB is a stretch by any means.

To give due disclosure I am looking for a mortgage right now and would greatly benefit if the conforming loan limits were raised.

My 2 cents…..

[SD Realtor]

carlover you have posted a very correct response. I am incorrectly lumping federal measures of increasing insurance to a bailout and that is incorrect. However it (increasing the FHA limit) is a knee jerk response (by the government) to the current situation and that is what I object to. I also note that your previous posts are well thought out and are sound, (that 30-40 basis point typo not withstanding…:))

I will say this, like you I am actually looking to purchase a home. I don’t want to purchase now or in the near future but I will have to for family reasons. In essence a program like this will help me immensely as well and personally it will in fact lead to me getting a much better rate and a much larger amount of money if the timeline falls in place.

Anyways, again, I don’t like it because it is a response to the current MUCH NEEDED price correction, not because it was done in fairness to anything. You are correct that the goal is to restore confidence in the secondary market but that secondary market needed a slap in the face and it needs to sting for awhile and overall it would be better for it to restore it’s own confidence by a stronger underwriting procedure put in place by originators. That would eventually happen…

Still, I don’t agree with it but thank you for the correction.

Bugs I agree rates will go higher but if there is a recession I don’t see that happening for awhile. I think we will be stuck in a 10 yr treasury range of 4.25 (dare I say 4.0?) to 5.25 for at least another year or 2 depending on how bad things get.

SD Realtor

[Bugs]

SD_R

I agree that any increases in mortgage interest rates will take place over time. For some reason, some investors still seem to think that iceberg we scraped against was merely cute.

carlover
Nothing personal…
To me, “free market” means the taxpayer isn’t getting dragged into it. It’s true that the GSEs are corporations, but their calling card is the fact that they have an unfair advantage in the form of a discounted cost of funds; it is the taxpayers who subsidize that discount. So yeah, increasing the limits the GSEs can loan does come at the expense of the taxpayers and it does subsidize the purchases made by people who shouldn’t need to rely on public assistance.

If a borrower can’t afford the market rate perhaps they shouldn’t be borrowing that much money.

[(former)FormerSanDiegan]

Home prices are not significantly higher in Hawaii and Guam than in California, so why are those places afforded higher loan limits ?

Raising FHA as well as Fannie Mae and Freddie Mac conforming loan limits based on geographically based prices is long overdue, IMO.

The current situation is simply an excuse to correct this inequity.

[Author]

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