mortgages and home ownership

[callmeslick]

......something to ponder, as we're now about to go into a re-examination of Freddie and Fannie and the role of government in the mortgage guarantee business. This shouldn't be really polarizing political stuff, but......At any rate, there are two schools of thought, it seems. The first, put forth by a group of Dems and moderate GOP members of Congress, pares back Fannie and Freddie, but still maintains a policy of Federal guaranteed home loans, but with the lenders paying a fee for Federal coverage. The second, backed by the more conservative members, simply eliminates both agencies and thus all guarantees altogether. What these proposals will both do is affect the concept of home ownership in the US. For as long as I can remember, it has been a part of middle class status to become a homeowner(excluding those in the larger cities), and for decades, the push from leaders has been to increase home ownership, for various reasons. How would this be affected by the two proposals? Both would lead to an increase in interest rates, down payment levels and fees. However, the more severe proposal(no Fed guarantees) would likely make those increases a bit worse, and also(according to every expert I've read or heard) esssentially eliminate the 30 year mortgage, as no lender would tie up un-guaranteed cash for that length of time. Therefore, and one can already see this, home purchase would become yet another investment vehicle. As it stands, up to 40% of all home purchases of sub-$200,000 properties are by investors, for rental use or other investment purposes. My questons to you all are: 1) is this a desirable way forward for our nation and 2) should we be trying to make home ownership a goal for people. Fire away!

[snoopy]

I heard/read a bit the other day about "crowd funding" for people looking to buy homes - the contributors put in a % of the property value at the time of purchase, and in turn get a similar piece of the selling price when the home is subsequently sold.... Where would this concept fit in?

As for your question, slick:

I have to say that I'm quite torn. I really don't like the pooling of wealth that seems to be happening, but I'm also generally opposed to government intervention. Would it be possible for the government to get completely out, down payment requirements to go up, but for rates and fees to stay relatively static? If that could happen, then this crowd funding concept could help with the down payment part.

I tend to take the "rates and fees will go up" as the banks making excuses to gouge the public even more than they already do. When it comes to banks losing profitability, I've got next to no sympathy. They can try to sell their hard case to me all they want, but when I see the execs getting millions and financial sheets showing massive profits, things smell a bit funny to me.

[Will Robinson]

I'm going to think outside the box on this one.

Can we murder all bankers and lawyers, name the murderers our banking regulators commission and then invite people to come up with a better system?

[callmeslick]

first off, with several generations of bankers on my grandmother's side, I'm glad no one took Will's advice(at least no lawyers in my family for generations!!). What I suspect is pissing you off, Will is the result of years of increasing entitlement in those two professions, and if one focuses(back to thread topic) on finance, IMHO things changed for the worse, far worse, when banks and brokerages and insurers were allowed to be within the same corporate entities. For years, they were mandated to be separate, and for good reason.

Now, to Snoopy's more substantial points: First off, that bit about 'crowd funding' still, essentially relegates real estate/housing to investment, albeit a creative type. Secondly, you point about 'rates going up' being merely a gouge by bankers, I would disagree. Banks lend money for the purpose of making profits. If the risk is not taken off that lent money, then they have little choice but to raise down payment minimums to mitigate that risk. Further, they mitigate the risk by upping the rates. Why do I say the 30 year fixed rate is history without Federal intervention? Because, given the uncertainties of long term interest and investment return rates, NO bank is going to wish to commit money for 30 years unless the payback is near-certain, and even that isn't something I'd wish to commit a lot of my portfolio to. Therefore, the idea of home ownership will, for more Americans, become impossible. The aspect of that that really troubles me is that home purchase, and a general upward trend over 30 year spans in real estate valuation is the biggest single factor in upward financial mobility for the middle class. Thus, if all this stuff goes down, the net result is, once again, a widening gap between the 10% or so who can trade in homes for cash or short-term borrowing, and the rest of the population.

[callmeslick]

are you all still pondering this, or no other responses forthcoming? I guess my point is that with all the brouhaha about 'Obama incites Class Warfare' and this group or that group 'ruining the economy for future generations', here you have, in your lap, a prime example of policy that purely benefits investors(read: the 'haves') at the expense of the middle class, and no commentary? I have a few more examples I've been tossing about my feeble mind, but will wait a while to formulate threads about them. Make no mistake, this sort of 'boring' stuff is CENTRAL to the ongoing economic trajectory of the nation.

[Will Robinson]

The two 'choices' you lay out are about as far apart as repubs and dems are in their responsibility for keeping the fed inefficient and cumbersome.

How far do we want the Fed to manipulate the mechanisms for home ownership as a goal for citizens and/or as an entitlement program seems really low on the list of economic concerns right now.
No jobs equals no money, equals no mortgages, regardless of the interest rates and fees.

Sorry it just seems like a trivial concern at this point. And considering how badly the Fed screwed up contributing to the creation of a bubble built on bad paper in the mortgage/banking market that they then refused to properly regulate for their own political purposes just makes it harder to get excited about saying yes to any level of their involvement.

The congress has lost any credibility in protecting our rights or in creating any legislation that isn't designed first to protect their own interests and then second used as a tool to successfully demagogue and campaign on... then finally the third part is we may or may not actually benefit from it. But that third part really doesn't concern them in the least as long as the first two components are executed properly.

They don't even write law anymore! They pass a title/concept full of placeholders to be filled in later.
If we were simply their shareholders we would have voted them ALL out years ago. But we are sheeple who bought into the rhetoric of division like high schoolers choosing which clique to join.

Your question is like asking me which shoulder blade do I want them to slip the rusty blade under!

[Foil]

...home purchase, and a general upward trend over 30 year spans in real estate valuation is the biggest single factor in upward financial mobility for the middle class.

Call me skeptical about that claim. Home ownership / value growth is a significant thing for middle class folk, but "the biggest"? Sorry, I don't see it outweighing something like opportunity from education (or the lack thereof) or employment change.

Sorry it just seems like a trivial concern at this point.

I wouldn't say that, either. The ability to put one's housing expense toward an investment (i.e. buying) instead of nothing (i.e. renting) is pretty huge in my book.

[callmeslick]

let me clarify for you, Foil, as perhaps I was not clear enough. It seems to me that the single most important investment most 'middle class' people make in their entire lives is in housing, and that the single largest component of most 'middle class' person's estates upon death is real estate, or the monies garnered from same. Perhaps I'm wrong, but if I am close to correct, that means that home ownership and the appreciation garnered from same is the single biggest driver of upward financial mobility, or at least historically has been. Much wordier, I admit, but clarifies my point. Now, Foil, what are your thoughts?

Will's steaming pile of political drivel, while exemplary of exactly the misfired claptrap that will doom the nation to a massive wealth divide and a nouveau serfdom, I will address after I get home from the office.......

[Will Robinson]

To both Foil and slick:
Do you really see slicks 'choice' as being all or nothing? Some involvement via guarantees vs letting lenders create the market fees for mortgages will really result in no home ownership for middle class without government guarantees?
I know for a fact that low cost housing has always existed for those opposed to renting. Why would that market disappear?

I think claiming home ownership will disappear is an exaggerated assertion much as slicks confidence in our current congress' abilities are.

[callmeslick]

To both Foil and slick:
Do you really see slicks 'choice' as being all or nothing? Some involvement via guarantees vs letting lenders create the market fees for mortgages will really result in no home ownership for middle class without government guarantees?
I know for a fact that low cost housing has always existed for those opposed to renting. Why would that market disappear?

that market already IS disappearing. Over 30% nationwide, and up to 60% in certain depressed markets(ex Vegas,Phoenix) of the sub 200K single family homes are being purchased by INVESTORS for rental.

I think claiming home ownership will disappear is an exaggerated assertion much as slicks confidence in our current congress' abilities are.

it isn't a 'claim', its a fact. As I said, I'll flesh out certain details when I get home, and can access data more easily.

[Will Robinson]

To both Foil and slick:
Do you really see slicks 'choice' as being all or nothing? Some involvement via guarantees vs letting lenders create the market fees for mortgages will really result in no home ownership for middle class without government guarantees?
I know for a fact that low cost housing has always existed for those opposed to renting. Why would that market disappear?

that market already IS disappearing. Over 30% nationwide, and up to 60% in certain depressed markets(ex Vegas,Phoenix) of the sub 200K single family homes are being purchased by INVESTORS for rental.

I think claiming home ownership will disappear is an exaggerated assertion much as slicks confidence in our current congress' abilities are.

it isn't a 'claim', its a fact. As I said, I'll flesh out certain details when I get home, and can access data more easily.

slick, "the market" isn't just the current inventory!
The market is the inventory, the buyers and the sellers. And the government to whatever degree they poke their nose under the tent.

I'm not saying that at this time there aren't a lot of people with money buying the inventory up while prices are at the bottom.
But that is a static blip on the board that represents the market. Your assertion that we are all headed to serfdom if not for government intervention, based on that tiny blip of the timeline, is the thing I'm taking issue with.

You have to have disposable income to buy the house...to pay the down payment and closing costs, and to make the monthly payment and insurance payment and upkeep, etc. Hence my jobs/economy comment.
So in today's economy of course only rich people are buying up property. Because they know people will need housing, and people who don't qualify for loans will rent those investment properties.
People who who don't qualify but get the government to guarantee loans anyway default!

So either way there are certain people who shouldn't have a $200,000 mortgage...and you can't change that by putting them in housing they cant afford! You have to increase their income.

There will always be a buyer for a low cost home and there will always be a builder for it. I don't believe there will not be a lender to charge an interest rate on the financing of a low cost home, whether or not the government steps in. Yes the government stepping in can increase the number of buyers by decreasing the qualification requirements to buyers and decreasing the risk to lenders by guarantees. But ultimately the system can crash if the government goes too far with their intervention.
So your hyperbole is showing in your serfdom warning.

I don't claim government can't possibly play a positive role. If they set the requirements to borrow to a reasonable level and then KEEP THEIR NOSES OUT OF IT!!
I simply stated that they cant be trusted to do so. That their recent history shows them to be so corrupt and shameless that they practically begged the recent crisis into being!

Bill Clinton even admits the faults of the democrats in congress who pushed the mortgage industry to create bad mortgages relying on the guarantees.

It was no surprise that things went BOOM, even GW Bush understood it was an issue.

Those fools in congress purposely ignored the regulators warnings that Freddie Mac and Fannie May were cooking books and causing an overload of bad credit! They even pulled out the race card in typical liberal political fashion to attack the regulators!

[callmeslick]

Will, the only thing that will preserve the EXISTENCE of a 30 year mortgage is a Federal guarantee. It's that simple. No bank would bother with them. Further, at the current time, most lenders are not lending to anyone short of a 725 credit score, no matter the income, and, without Federal involvement, I forsee few lenders putting out money without 15% or more up front, which will exclude most first-time buyers. The trend now is not a short term investment spree, the buyers are largely commercial real estate concerns in the RENTAL business. Thus, the trend forming is away from ownership for most people, and making housing a rental prospect for those people. In other words, the investing class makes the money, sees all the appreciation of capital, and the average person just pays the money and gains no wealth at all.

[Will Robinson]

Will, the only thing that will preserve the EXISTENCE of a 30 year mortgage is a Federal guarantee. It's that simple. No bank would bother with them. Further, at the current time, most lenders are not lending to anyone short of a 725 credit score, no matter the income, and, without Federal involvement, I forsee few lenders putting out money without 15% or more up front, which will exclude most first-time buyers. The trend now is not a short term investment spree, the buyers are largely commercial real estate concerns in the RENTAL business. Thus, the trend forming is away from ownership for most people, and making housing a rental prospect for those people. In other words, the investing class makes the money, sees all the appreciation of capital, and the average person just pays the money and gains no wealth at all.

Without government acting more responsibly home ownership is not any kind of guarantee of accumulating wealth. Need references for that? I can show you current homeowners appraisal reports....

[snoopy]

Will, the only thing that will preserve the EXISTENCE of a 30 year mortgage is a Federal guarantee. It's that simple. No bank would bother with them.

I'm not a banker here... so help me:

What does the term of the loan have to do with the risk associated? Is it just the thought that most people don't know what their financial situation will be for the next 30 years? If you're collecting on a fixed interest rate over the next 30 years, that strikes me as a pretty safe bet... so tell me what I'm missing.

[callmeslick]

Will, the only thing that will preserve the EXISTENCE of a 30 year mortgage is a Federal guarantee. It's that simple. No bank would bother with them.

I'm not a banker here... so help me:

What does the term of the loan have to do with the risk associated?

you're close to the problem......where the issue lies is in rates of return for banks. Other forms of investment will yield a conservative 6% return right now, with low risk and short term liquidity, and the 30 year span is SO uncertain that one cannot know with certainty if an inflationary cycle kicks in. Thus, the only reason to commit to a 30 year period of 6 percent or less is if one is ABSOLUTELY guaranteed that a default will not occur. Statistically speaking, that limits a bank to the folks with 800 point credit scores, or close to it. Most of THOSE folks aren't in the market for a starter home, so the low end market goes to the investment community, which is seeing 6-8% yields on moderately priced properties, with little risk of depreciation. An example from North Carolina:

http://www.newsobserver.com/2013/02/23/ ... ts-on.html

now, this investor has zero interest in the welfare of the local community, beyond having a pool of renters for his houses. Outbid, more people spend their lives paying rent instead of building equity, and two or three generations hence, the wealthier investment class has pulled WAY in front of the working class, even in comparison to the present.

[callmeslick]

Without government acting more responsibly home ownership is not any kind of guarantee of accumulating wealth. Need references for that? I can show you current homeowners appraisal reports....

and, those properties values 20 or 30 years ago? You'd see a clear increase. One can NEVER look at real estate as a short-term investment.....well, seldom, at least. In weird markets(like rising bubbles) you will see the 'flippers' make out, but those situations are both rare, and clear warnings for conservative investors.

[callmeslick]

slick, "the market" isn't just the current inventory!
The market is the inventory, the buyers and the sellers. And the government to whatever degree they poke their nose under the tent.

and when the buyers(the folks who are making the final highest bids) are the investors, and not individual homeowners, you have a problem, which is my whole point, Will.

I'm not saying that at this time there aren't a lot of people with money buying the inventory up while prices are at the bottom.
But that is a static blip on the board that represents the market. Your assertion that we are all headed to serfdom if not for government intervention, based on that tiny blip of the timeline, is the thing I'm taking issue with.

In case you are unclear, I am not suggesting that this is the only thing driving the nation in that direction. No, this is just another in a thousand small steps, adding to an alarming trend.

You have to have disposable income to buy the house...to pay the down payment and closing costs, and to make the monthly payment and insurance payment and upkeep, etc. Hence my jobs/economy comment.
So in today's economy of course only rich people are buying up property. Because they know people will need housing, and people who don't qualify for loans will rent those investment properties.
People who who don't qualify but get the government to guarantee loans anyway default!

despite the excesses of the recent bubble, historically the default rate is quite low, if the bankers do their jobs. As evidenced by the lawsuits coming out against a few big banks, they DID NOT during the bubble. At any rate, at the moment bond investors aren't going to buy mortgage bonds without a lot of research and at bargain rates, to boot.

.

There will always be a buyer for a low cost home and there will always be a builder for it.

and, if the investors bid the prices on those homes out of the reach of most people, so what? I see a problem.

I don't believe there will not be a lender to charge an interest rate on the financing of a low cost home, whether or not the government steps in

well, then you don't understand the banking business. I assure you, there will NOT be such lenders, because there is too much inherent risk in the pool of prospective buyers.
.

Yes the government stepping in can increase the number of buyers by decreasing the qualification requirements to buyers and decreasing the risk to lenders by guarantees. But ultimately the system can crash if the government goes too far with their intervention.

this much is true, and damned near obvious.

So your hyperbole is showing in your serfdom warning.

sadly, my 'hyperbole' is about 2 generations away, at the current trajectory. Tell your son(daughter) to make note of this, and he/she can trade notes with mine to see which of us proves right in 40 years.

actually, as an investor in Fannie(the stock is cheap), they weren't but a small, small part of the problem. Most of it came from VERY lax investment regulation, the destruction of the regulations separating banks from investment firms and insurers, and, most of all, unscrupulous bond sellers and ratings agencies doing most of the 'book-cooking'. Most conservative investors saw it coming a couple years before the crap hit the fan, and therefore, as in most financial crashes, the wealthy grew more so, and the smaller investor and workers took the hit.

[Will Robinson]

Slick the whole thing comes down to this statement you made:

"I assure you, there will NOT be such lenders, because there is too much inherent risk in the pool of prospective buyers."

Manipulation of that risk by government in the form of guarantees they make to lenders to entice them to loan to under-qualified first timers, as good as that can be for helping lower classes get a start in building equity and realizing returns due to appreciation, can also have a negative result if the government over extends itself.

What is only a guarantee to the lender becomes a tax on the lower classes when the government has to bail out the lenders who will happily take bad paper again as long as the government will promise to buy it!

So you have to have someone to draw the line as to where the inherent risk is too great to justify the program. All things financial considered, some people aren't ever going to qualify for a home loan. Find a way to decrease their numbers instead of looking for ways to lend to them in spite of the risk they pose!

Barney Frank and Maxine Waters, etc. DID NOT respect the line that was drawn to keep government from over extending itself in guarantees. They will hand out bad loans for votes every time!

If the creation of bad paper had been cut off there wouldn't have been so much of it. And without open ended guarantees to cover the bad paper those greedy bastards on Wall Street would not have bundled and passed around so much bad paper like a game of Hot Potato thinking it really didn't matter if they got caught holding the paper when the timer went off. Without Uncle Sam standing at the ready to bail them out they wouldn't have crashed the system because it would have been their money at risk instead of all the taxpayers.

Not only did they get bailed out, they then used the bailout to buy out their lesser competitors instead of opening up the lending again!

You can't just keep doing the same thing over and over again and expect different results.

[callmeslick]

you don't seem to get it, Will. The government did not create the bad loans. Nor, did they really encourage them, although Freddie and Fannie veered off course and got into the speculation business.. That was because both entities were set up as PRIVATE firms, with the same lax regulation that was given to all financial firms. And, just a hint, banking deregulation wasn't the idea of 'Maxine Waters and Barney Frank'. Please, save the political finger pointing for someone who actually finds that any kind of solution to anything real.....and that person isn't me.

[Will Robinson]

you don't seem to get it, Will. The government did not create the bad loans. Nor, did they really encourage them, although Freddie and Fannie veered off course and got into the speculation business.. That was because both entities were set up as PRIVATE firms, with the same lax regulation that was given to all financial firms. And, just a hint, banking deregulation wasn't the idea of 'Maxine Waters and Barney Frank'. Please, save the political finger pointing for someone who actually finds that any kind of solution to anything real.....and that person isn't me.

Come on slick!
I never said the government created them I said they practically begged them to happen by way of their refusal to regulate!
Turning a deaf ear to your own alarm system, publicly refusing to investigate the alarm going off isn't encouraging the the thief to break in?

Set up as a "private firm"?!? Please! They are managed by political hacks outside of any branch of government but it is far from private with money guaranteed by the Fed! That is WORSE than being purely public or private as we have now witnessed! What kind of crap excuse is that?!?
And you blame lax regulation and then try to exonerate Waters, Frank,et al?!? What the hell?

Did you not watch the video i linked where they not only ignored the regulators warning but called him a racist for pointing out the gross cooking of the books by Franklin Raines, ex Clinton cabinet member placed in charge of Fannie Mae, who had lied on the accounting so he and his fellow political hack thieves could recieve the millions of dollars in bonuses that they clearly didnt deserve!!

How can you say political finger pointing is out of place when you propose that Frank and Waters ilk be returned to oversight of the institution that was robbed by political hacks? The regulation that you cite as 'being lax' was certainly effective enough to identify the problem before it became a catastrophe IF NOT FOR it beiing completely set aside by Frank, Waters, et al!

You are one seriously twisted apologist for anything liberal politicians do wrong!

[callmeslick]

Set up as a "private firm"?!? Please! They are managed by political hacks outside of any branch of government but it is far from private with money guaranteed by the Fed! That is WORSE than being purely public or private as we have now witnessed! What kind of crap excuse is that?!?

sorry, but no....the managers are generally from the banking sector, no politics involved except for the ones who act as Congressional liasons. The money guys are straight-up, old school bankers.

And you blame lax regulation and then try to exonerate Waters, Frank,et al?!? What the hell?

like I said, finger pointing is useless, but for the record, it wasn't Democrats who pushed to deregulate banking and finance. Dems did, far too much, go along with it(I'd cite Bill Clinton there).

You are one seriously twisted apologist for anything liberal politicians do wrong!

as I said at the outset, the mortgage situation is only political in the sense that intense lobbying bent the system to benefit the wealthy. My point now, in this thread, has been to question, 'do you want housing to become a financial vehicle for investors to profit from, or a means to maintain some level of middle class stability'. By running about, placing blame and avoiding that central question, you once again, ignore the very real issues. Let's get to brass tacks here, if we may: Your Representative in Congress(Horry county, IIRC?) is one of those calling for complete elimination of all federal backing of mortgages. Does that position benefit you, or your family, going forward?

[Sergeant Thorne]

I think the real question we should ask ourselves is, would the possible short-term benefits of allowing government to continue to be involved in the housing market outweigh the long-term effects on our system of government, our society, and our then our economy. Anyone who allows themselves to be steered by short-term gain when they should be weighing more important matters on such a big issue will end up the loser.

I don't know why the government should have to be involved in guaranteeing loans. I would tend to assume that it is a result of governmental failure to begin with. The government's relationship with financial manipulators should be limited to outside scrutiny and regulation, IMO.

[Will Robinson]

Set up as a "private firm"?!? Please! They are managed by political hacks outside of any branch of government but it is far from private with money guaranteed by the Fed! That is WORSE than being purely public or private as we have now witnessed! What kind of crap excuse is that?!?

sorry, but no....the managers are generally from the banking sector, no politics involved except for the ones who act as Congressional liasons. The money guys are straight-up, old school bankers.

Franklin Raines - formerly headed the Budget Office for Clinton. He oversaw the false accounting that cooked an imaginary 9 billion in profits into the books so he could take home millions in bonuses.
"Raines' total compensation from 1998 through 2004 was $91.1 million, including some $52.6 million in bonuses, according to OFHEO. Howard earned $30.8 million during the period, including $16.8 million in bonuses; Spencer received $7.3 million, of which some $3.5 million was bonus money."

His predecessor at Fannie Mae from 1991 to 1998 - James A.Johnson former Chief of Staff for Vice President Walter A Mondale....1.9 million in bonuses he took by falsifying the records.

Now what was it you said about the 'managers coming from the banking sector'? Lol!

Maybe at one time they did but the recent problem (since 1991) I'm laying at the feet of recent political hacks, who have been in charge of the organization, regardless of your assertions to the contrary!
But you just continue to spew bullshiz excuses and outright lies.

And you blame lax regulation and then try to exonerate Waters, Frank,et al?!? What the hell?

like I said, finger pointing is useless, but for the record, it wasn't Democrats who pushed to deregulate banking and finance. Dems did, far too much, go along with it(I'd cite Bill Clinton there).

Why do you keep trying to toss that red herring into it?!?

In spite of what ever deregulating that took place.... Frank and Waters and a host of other Dem congressmen and women in that video CLEARLY are IGNORING the GOVERNMENTS REGULATORS who were warning their oversight committee that Fannie Mae and Freddy Mac are a serious problem!!
So why bother to say it isn't democrats who loosened regulations when they obviously refused to follow EVEN THE "LAX" REGULATIONS in place!?!?
All the regulations in the world wont help if the congress doesn't enforce them!!
You are just blowing a giant smoke screen there. Do you think anyone reading this is not realizing what you are doing?

You are one seriously twisted apologist for anything liberal politicians do wrong!

as I said at the outset, the mortgage situation is only political in the sense that intense lobbying bent the system to benefit the wealthy. My point now, in this thread, has been to question, 'do you want housing to become a financial vehicle for investors to profit from, or a means to maintain some level of middle class stability'. By running about, placing blame and avoiding that central question, you once again, ignore the very real issues. Let's get to brass tacks here, if we may: Your Representative in Congress(Horry county, IIRC?) is one of those calling for complete elimination of all federal backing of mortgages. Does that position benefit you, or your family, going forward?

No, and I didn't elect him/them, but returning the system to the oversight of Frank, Waters, etc. doesn't either!! Your willingness to ignore what they did and make outrageously lame excuses for them doesn't help anyone! And being such an extreme partisan hack yourself plays right into the hands of that other extreme on the right! Why believe someone like you is genuinely trying to point to a solution when you are so hell bent on lying and covering up for the democrats who are just as guilty as the repubs in this?!?

[callmeslick]

I think the real question we should ask ourselves is, would the possible short-term benefits of allowing government to continue to be involved in the housing market outweigh the long-term effects on our system of government, our society, and our then our economy. Anyone who allows themselves to be steered by short-term gain when they should be weighing more important matters on such a big issue will end up the loser.

I don't know why the government should have to be involved in guaranteeing loans. I would tend to assume that it is a result of governmental failure to begin with. The government's relationship with financial manipulators should be limited to outside scrutiny and regulation, IMO.

the sole goal was to allow banks a level of comfort with granting long-term loans to people at the low-middle end of the economic spectrum. The societal goal was to encourage more homeownership, which has both economic and social benefits(people tend to pay better attention to certain things as owners as opposed to tenants). The sole reason I brought this up wasn't to hear the usual uninformed finger-pointing sound bites over partisan politics. I wanted folks here to think about whether those bigger goals are worthwhile, and ponder the downside of throwing them away. You seem to grasp this, Thorne, with your quoted words above.

[callmeslick]

Will, both of the individuals you cite were bankers before involvement in government. Otherwise, I'm not going to waste time on your partisan rehash. If you wish to debate the wisdom of greater home ownership, or the risks of making homeownership far, far less viable for 90% of American citizens, have at it.

[CobGobbler]

Slick, why are you wasting your time?

[Will Robinson]

Will, both of the individuals you cite were bankers before involvement in government. ...

Lol! Classic!!
You'd better stop though, you are going to make yourself dizzy with all that spin!

[callmeslick]

Slick, why are you wasting your time?

except for Will, everyone else seems to at least 'get' the points I am attempting to get across....at least at some level. It would be nice if someone chimed in with their personal experience getting/paying off a long-term mortgage, because maybe I'm off. It seems, however, to me, that a goodly number of Americans, for several generations(30 year fixed rates started to appear about 45-50 years ago) have used homeownership as their primary means of accumulating capital from their earnings. Sure, savings, pensions for some, small investments served some, but I suspect only a small percentage of the families earning less than, say, $75,000 per year put more into those other things than they do to their home loans. Remove that money, and funnel it into rent forever, and I see that group of individuals sinking further from upward mobility. Why isn't that trend or even possible trend cause more alarm?

[Tunnelcat]

It doesn't help homeowners that mortgage fraud was rampant right before the 2007 housing bubble burst. Mortgage fraud by the banks, not the homeowners either. Were any of these fraudsters jailed? Few, if any.

http://www.cbsnews.com/8301-505145_162- ... age-fraud/

But we've held several mortgages over the years. When we got our first mortgage in 1980, a person had to have a squeaky clean credit rating to even attempt to get a home loan. Most banks would look at newlyweds like us without a credit rating and kick us out the door, so buying a home on loan was impossible. So how did we get our first good credit rating? We bought a car on loan first. Most car dealers gave out car loans like candy, so it was easy. Easy to get into debt, but we stuck with it and eventually paid it off. THEN we got a house loan, at a lovely 14 percent back then too! Thank God we don't have that monstrosity anymore. And people complain about loan rates of 5 percent.

[callmeslick]

It doesn't help homeowners that mortgage fraud was rampant right before the 2007 housing bubble burst. Mortgage fraud by the banks, not the homeowners either. Were any of these fraudsters jailed? Few, if any.

http://www.cbsnews.com/8301-505145_162- ... age-fraud/

I really see no way this should have hurt homeowners at all. The only victims in this type of fraud are the dupes that buy the bonds.

But we've held several mortgages over the years. When we got our first mortgage in 1980, a person had to have a squeaky clean credit rating to even attempt to get a home loan. Most banks would look at newlyweds like us without a credit rating and kick us out the door, so buying a home on loan was impossible. So how did we get our first good credit rating? We bought a car on loan first. Most car dealers gave out car loans like candy, so it was easy. Easy to get into debt, but we stuck with it and eventually paid it off. THEN we got a house loan, at a lovely 14 percent back then too! Thank God we don't have that monstrosity anymore. And people complain about loan rates of 5 percent.

your path(along with low level credit card debt with gas companies and stores, was the way I always heard folks use to build up the credit rating. Since you've done the drill, TC, does the issue I'm trying to raise(about eliminating 30 year mortgages, and making housing an investment/rental market) have any resonance with you? Have you, over your lifespan, built equity via paying down your mortgages?

[Foil]

Have you, over your lifespan, built equity via paying down your mortgages?

I have, twice, and thus I distinctly appreciate the value of middle-income folk being able to put housing expenses toward a long-term mortgage investment. If that opportunity was taken away, it would certainly be a significant hit to the average person's ability to invest.

-------

The thing which doesn't "click" with me, though, is your claim that government guarantees are the sole force allowing long-term (e.g. 30-year) mortages to exist at all.

First of all, not all lenders rely on federally-supported mortgage insurance; there are some busy private insurers out there.

Second, even if the government support dropped, I find it difficult to believe that lenders would just walk away from the 30-year-mortgage market, rather than find other ways to offset the risk. In other words, what we'd see is higher interest rates and down payments, not a disappearance of the 30-year mortgage product.

[Tunnelcat]

It doesn't help homeowners that mortgage fraud was rampant right before the 2007 housing bubble burst. Mortgage fraud by the banks, not the homeowners either. Were any of these fraudsters jailed? Few, if any.

http://www.cbsnews.com/8301-505145_162- ... age-fraud/

I really see no way this should have hurt homeowners at all. The only victims in this type of fraud are the dupes that buy the bonds.

Tell that to all those people who were foreclosed on when rates shot up. Some people were even victims of illegal foreclosures and lost everything.

http://www.abc15.com/dpp/news/local_new ... mpensation

But we've held several mortgages over the years. When we got our first mortgage in 1980, a person had to have a squeaky clean credit rating to even attempt to get a home loan. Most banks would look at newlyweds like us without a credit rating and kick us out the door, so buying a home on loan was impossible. So how did we get our first good credit rating? We bought a car on loan first. Most car dealers gave out car loans like candy, so it was easy. Easy to get into debt, but we stuck with it and eventually paid it off. THEN we got a house loan, at a lovely 14 percent back then too! Thank God we don't have that monstrosity anymore. And people complain about loan rates of 5 percent.

your path(along with low level credit card debt with gas companies and stores, was the way I always heard folks use to build up the credit rating. Since you've done the drill, TC, does the issue I'm trying to raise(about eliminating 30 year mortgages, and making housing an investment/rental market) have any resonance with you? Have you, over your lifespan, built equity via paying down your mortgages?

Put it this way. I never thought of a home as an investment. I always thought of it as a place to live. That's what the 30 year fixed mortgage encouraged, putting down roots and having ownership. The whole housing market has since become a scheme that raises prices, makes neighborhoods turn over, become unstable or unfriendly and just gives the big banks and homeowners reasons to hope for lots of turnover or flipping to just make money. We never finished paying out any loan in total either. Since we were moving around the country following our jobs, we either sold the house and paid off the loan, moved on and got a new loan for the next house, or in the end, saved up enough to pay for it in cash when we finally ended up building one. We didn't make money on the 2 first homes we owned. We even lost money on the first one because the market soured and rates skyrocketed. When we were in the housing market in the 80's and 90's, it was not a money maker for us. The third home we sold finally did made us a little extra money, that helped towards building the last home, that does not have a mortgage.

[callmeslick]

The thing which doesn't "click" with me, though, is your claim that government guarantees are the sole force allowing long-term (e.g. 30-year) mortages to exist at all.

First of all, not all lenders rely on federally-supported mortgage insurance; there are some busy private insurers out there.

sure, selling floating rate mortgages, and other tricky vehicles. What I am quite certain will disappear is the 30 year fixed rate mortgage. No lender will touch them without a guarantee, and I'll challenge you to find one that would.

Second, even if the government support dropped, I find it difficult to believe that lenders would just walk away from the 30-year-mortgage market, rather than find other ways to offset the risk. In other words, what we'd see is higher interest rates and down payments, not a disappearance of the 30-year mortgage product.

30 years is a LONG time to float an investment, in an era of high volatility and the ability of banks to be investment houses and insurance brokerages. There are too many other ways to make money. I don't mean to suggest that no one would ever write a 30 year fixed, but it would only be to someone with about a 775 or better credit score(rules out most bottom end homebuyers) with a 15 or 20% down payment(rules out those in the lower middle class especially those with children and/or student debt).

[callmeslick]

It doesn't help homeowners that mortgage fraud was rampant right before the 2007 housing bubble burst. Mortgage fraud by the banks, not the homeowners either. Were any of these fraudsters jailed? Few, if any.

http://www.cbsnews.com/8301-505145_162- ... age-fraud/

I really see no way this should have hurt homeowners at all. The only victims in this type of fraud are the dupes that buy the bonds.

Tell that to all those people who were foreclosed on when rates shot up. Some people were even victims of illegal foreclosures and lost everything.

this is where my supposed bleeding heart liberal sympathy disappears. If you can't bother to read the fine print on a floating rate loan, and buy a house you can't afford, you ARE NOT a victim, you are an idiot. What banks did was sucker idiots into such loans, and then sold the loan paper to other idiots who believed the bundle of loans was composed of very safe mortgages.

[Tunnelcat]

You try dangling a nice, juicy, easy home loan in front of any American craving to buy and own a home and they'll bite. The bankers are no different than those scammers that call on your the phone or sneak past the spam filter in your email. So who at fault? The scammer who took your credit card information, or the sap that answered the phone or clicked on a link and gave them the information. Most times in the legal world, the scammer is doing something illegal and the target is the victim. In my opinion, same with the banks. They were just bigger scammers who had the appearance of legitimacy to do what they did and who mass marketed the wholesale scamming of families who wanted the American dream and who fell for a deal that looked legit from a legit company. In the process, they screwed a whole pot of investors too and got away with it. Nice. I guess there's no honor amongst thieves. It's the oldest trick in the book and it still works, on anyone. I just have a more liberal idea of who's at fault.

[CUDA]

It doesn't help homeowners that mortgage fraud was rampant right before the 2007 housing bubble burst. Mortgage fraud by the banks, not the homeowners either. Were any of these fraudsters jailed? Few, if any.

http://www.cbsnews.com/8301-505145_162- ... age-fraud/

I really see no way this should have hurt homeowners at all. The only victims in this type of fraud are the dupes that buy the bonds.

Tell that to all those people who were foreclosed on when rates shot up. Some people were even victims of illegal foreclosures and lost everything.

this is where my supposed bleeding heart liberal sympathy disappears. If you can't bother to read the fine print on a floating rate loan, and buy a house you can't afford, you ARE NOT a victim, you are an idiot. What banks did was sucker idiots into such loans, and then sold the loan paper to other idiots who believed the bundle of loans was composed of very safe mortgages.

Its not often, but +1