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The National Housing Act of 1934 as amended, spawned endless laws , Government agencies, deposit and mortgage insurers, sponsors and guarantees to promote and support the American Dream and the businesses and jobs that support it. Taxpayers ( including direct and indirect beneficiaries of these programs) have always funded the necessary bail outs as has been required, over time.
Imagine what if the U.S. returned to a pre 1934 National Housing Act way of life, where the Government ( taxpayers) did not bolster, support, assist, insure, guarantee banking institutions or their investments in mortgages. Who but the wealthy, able to pay cash, could afford a home? If the concept of a mortgage survived, it would be impossible to offer a fixed rate mortgage, given interest rate risks and better opportunities for investment.
Would the people of Bedford Falls empty out thier sugar bowls to bail George Bailey out when he ran into a snag in 2009?
Umm....many families in the 50's scraped and afforded a home without many of the government backed institutions and tax incentives. Fannie/Freddie didn't exist and Billy Bob who was a lender at the local bank and coached little league held the 30 year mortgage to maturity.
Also, if mortgages no longer existed, there are many renting savers (more than you think) who are cash is king CD holders and would happily buy the foreclosed McMansion for 10K.
It's insane and economic suicide to advocate the creeping nationalization of the mortgage industry, no matter what the short term benefits are. I would've thought that this cycle would've proved that point, and we ain't seen nothing yet.
But that's not true. We have created a system which gives banks disincentives to hold portfolio loans. We have also provided many disincentives for people to save. Scale back the GSEs, force people to save the traditional 20% down, and let prices drop to levels the market will really bear. This will lower mortgage costs overall and put responsible people into homeownership. The alternative is to keep a diseased system going, putting people into homes who have an incentive to "walk away." Which is extremely damaging to communities as a whole.
Better to have more renters than a lot of empty, deteriorating neighborhoods full of foreclosed homes.
Let's try this.
Effective 12/21/2010:
GNMA will not insure any new mortgage other than VA.
FHLMC and FNMA will not buy or gurarantee any new mortgages.
FHA will no longer insure any new mortgage.
FDIC no longer insures deposits above/beyond premiums paid by the banking institutions.
And since we are eliminating Goverment assist in all manners related to housing, the interst paid on new mortages, incurred on or afer 1/1/11 are no longer tax deductable.
I think this would cause a ne time housing bubble to end all.
Those who missed the golden opportunity to own while taxpayer support was available, might find themselves as renters for life, despite that the cost to rent would substanitally increase to fill the demand of generations to come.
Homes probably would stay in families for generations, as they used to do here and in Europe. Banks would still lend using other people's monies and have the unlimited ability to manage the risk of default by excluding low income and otherwise economically depressed areas as well as people they don't like, for any reason. All mortgages would take into account the risk of the unknown forward interest rates.
The businesses and industries that exist to sustain new and improved homes would no longer be necessary. This would substantially improve our trade deficit and save our forests.
The substantial infrastructure that exists to support and sustain housing, builders, trades people, real estate agents/brokers, lenders, appraisers, schedulers, stagers, decorators, architechts, many lawyers, title policy people and investors/flippers would have to find real jobs.
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The old phrase "If you've got nothing, you've got nothing to lose" is why the government began a lot of these programs.
Encouraging homeownership makes more people invested in their little piece of America. If we were to become a nation of landlords, there would be a whole lot more political unrest and dissension which would make it harder for the government to control things.
Umm....many families in the 50's scraped and afforded a home without many of the government backedinstitutions and tax incentives. Fannie/Freddie didn't exist and Billy Bob who was a lender at the local bank and coached little league held the 30 year mortgage to maturity.
Also, if mortgages no longer existed, there are many renting savers (more than you think) who are cash is king CD holders and would happily buy the foreclosed McMansion for 10K.
It's insane and economic suicide to advocate the creeping nationalization of the mortgage industry, no matter what the short term benefits are. I would've thought that this cycle would've proved that point, and we ain't seen nothing yet.
Let's try this again.
VA loans enabled millions of vetrans to buy homes, post WW2 creating a demand greater than supply for single family homes.
Post war changes in the FHA provided homebuilders with financial incentives to construct single-family home developments in the suburbs.
VA and FHA insured loans were bought by FNMA ( then a Government agency) and resold in the secondary market.
S&Ls wrote about 35% of mortgages in the 50's. The FSLIC insured the deposits of S&Ls that enabled them to provide funding without risking their depositor's monies. Taxpayers bailed out the FSLIC numerous times before it was finally allowed to collapse and replaced with other Government agencies.
The so called creeping nationalization of the mortgage industry is almost 75 years old and as such, intrinsic to the economy and society.
GNMA will not insure any new mortgage other than VA.
FHLMC and FNMA will not buy or gurarantee any new mortgages.
FHA will no longer insure any new mortgage.
FDIC no longer insures deposits above/beyond premiums paid by the banking institutions.
And since we are eliminating Goverment assist in all manners related to housing, the interst paid on new mortages, incurred on or afer 1/1/11 are no longer tax deductable.
I think this would cause a ne time housing bubble to end all.
I'm not seeing the downside here. Many countries around the developed world get along without any of the things you mention above. And even *horrors* a lack of mortgage deduction has not prevented bubbles from forming. Remember, capital will always flow where there is money to be made, and a 6% return looks pretty good. In any case, it should be noted that the FDIC has nothing directly to do with the GSEs. It's a deposit insurance program, not a mortgage insurance program. The only connection there is a negative one: if the banks weren't dabbling in bad loans, the FDIC would be that much safer.
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Those who missed the golden opportunity to own while taxpayer support was available, might find themselves as renters for life, despite that the cost to rent would substanitally increase to fill the demand of generations to come.
I don't see why rents would increase when there are so many foreclosed homes on the market. These will eventually be bought by homeowners or investors, and those investors are going to rent out the homes, increasing supply, and therefore keeping rental prices fairly stable.
And the "golden opportunity to own" is part of the sales spiel that got people into trouble in the first place. If the "golden opportunity" is to make a lot of money, then you are selling a risky investment. Other than that, home ownership is a mixed bag. You get tied down, go into debt, lots of repair hassles, etc. It's not for everyone, and shouldn't be "sold" to the public as if renting where some horrible ordeal to be avoided at all costs.
Quote:
Homes probably would stay in families for generations, as they used to do here and in Europe. Banks would still lend using other people's monies and have the unlimited ability to manage the risk of default by excluding low income and otherwise economically depressed areas as well as people they don't like, for any reason. All mortgages would take into account the risk of the unknown forward interest rates.
I don't see how reining in the GSEs will somehow subvert the HUD discrimination laws. That does not follow, logically. In any case, there are community lending laws in place to limit redlining and encourage banks to go into "economically depressed" areas. These laws could be strengthened, if the electorate decided to do so. But again, this does not necessitate the continued expansion of the GSEs.
And it's not at all clear that homes would stay in families for generations. Americans move, on average, every seven years. That's why we have so much buying and selling in this country-- job mobility and divorce. In that situation, it's questionable whether buying makes any sense at all, unless you're expecting a windfall profit from bubble appreciation. In that case, buying and selling is a personal business gamble, and should not be subsidized by the taxpayer.
In any case, banks SHOULD have the ability to limit their risk to levels their shareholders can bear-- that's the whole point! I certainly don't want my bank making risky loans that could put them in trouble-- I want a stable banking system I can rely on, because I have actual cash savings to protect.
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The businesses and industries that exist to sustain new and improved homes would no longer be necessary. This would substantially improve our trade deficit and save our forests.
The construction industry would be better off without the constant boom and bust cycles that encourage the workers to overspend when they have the bucks, and go broke when they are laid off. I'm seeing the bleeding here in Oregon, big time. It's not pretty.
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The substantial infrastructure that exists to support and sustain housing, builders, trades people, real estate agents/brokers, lenders, appraisers, schedulers, stagers, decorators, architechts, many lawyers, title policy people and investors/flippers would have to find real jobs.
It's like any other business. The good ones will survive, the not so good will find other work. That's capitalism. In any case, the mortgage/title/flipper phenomenon is also part of the system that hyperinflated the bubble, so I for one won't cry as they march into the sunset.
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Imagine the possibilities.
I have. A stronger, healthier, more realistic economy based on savings, personal responsibility, and hard work. A repudiation of the "I deserve it" value system. Houses as homes rather than ATM machines. Jobs based on a balanced dollar, and a future for the next generation.
Again, it's better to restrict the GSEs than to destroy the "full faith and credit" of the U.S. just to get a few more people into unaffordablly inflated homes.
GNMA will not insure any new mortgage other than VA.
FHLMC and FNMA will not buy or gurarantee any new mortgages.
FHA will no longer insure any new mortgage.
FDIC no longer insures deposits above/beyond premiums paid by the banking institutions.
And since we are eliminating Goverment assist in all manners related to housing, the interst paid on new mortages, incurred on or afer 1/1/11 are no longer tax deductable.
I think this would cause a ne time housing bubble to end all.
Those who missed the golden opportunity to own while taxpayer support was available, might find themselves as renters for life, despite that the cost to rent would substanitally increase to fill the demand of generations to come.
Homes probably would stay in families for generations, as they used to do here and in Europe. Banks would still lend using other people's monies and have the unlimited ability to manage the risk of default by excluding low income and otherwise economically depressed areas as well as people they don't like, for any reason. All mortgages would take into account the risk of the unknown forward interest rates.
The businesses and industries that exist to sustain new and improved homes would no longer be necessary. This would substantially improve our trade deficit and save our forests.
The substantial infrastructure that exists to support and sustain housing, builders, trades people, real estate agents/brokers, lenders, appraisers, schedulers, stagers, decorators, architechts, many lawyers, title policy people and investors/flippers would have to find real jobs.
VA loans enabled millions of vetrans to buy homes, post WW2 creating a demand greater than supply for single family homes.
Post war changes in the FHA provided homebuilders with financial incentives to construct single-family home developments in the suburbs.
VA and FHA insured loans were bought by FNMA ( then a Government agency) and resold in the secondary market.
S&Ls wrote about 35% of mortgages in the 50's. The FSLIC insured the deposits of S&Ls that enabled them to provide funding without risking their depositor's monies. Taxpayers bailed out the FSLIC numerous times before it was finally allowed to collapse and replaced with other Government agencies.
The so called creeping nationalization of the mortgage industry is almost 75 years old and as such, intrinsic to the economy and society.
The Government giveth and the Government taketh.
Oh, that's ending quicker than you think
Probably with the same speed and surprise as the last runup ended.
.
. A stronger, healthier, more realistic economy based on savings, personal responsibility, and hard work. A repudiation of the "I deserve it" value system. Houses as homes rather than ATM machines. Jobs based on a balanced dollar, and a future for the next generation.
We agree on the end goal.
How does a country get from here to there, without an economic global meltdown of unprecidented proportions, given a 75 year "We the People" Government subsidy?
What might be the ramifications if HUD no longer had FNMA/FHLMC to manadate that X% of purchased mortgages be sub prime loans, to fufill their affordable housing thing? Who would buy these mortgages if not guaranteed by the U.S. Government or a sponsored entity?
Would FHA continue to insure without a structured secondary market?
GNMA ( the other sister) insures primarily sub prime loans; FHA and VA, and carries the full faith and credit of the U.S. Government. Congress determines an annual limit for new debt GNMA is allowed to insure to, in theory, limit the Government's exposure to mortgage delinquencies.
What if Congress said enough is enough and determined not to take on additional liability?
I know that people love to blame Freddie and Fannie for all of the housing problems but that they are only a part of the problem (in my opinion). There is more than enough blame to go around to all parties involved (this would include owners, speculators, mortgage brokers, assessors, lenders, Realtors).
If Fannie and Freddie didn't exist accumulation of wealth wouldn't not have happened in this nation. They are the reason that people have historically been able to purchase homes in the first place. That is (still) the primary way that wealth is made in this country. It's unfair (and inaccurate) to infer anything different.
And for the record, HUD does not require that a percentage of the loans be subprime. Never have and never will. They require (rightly so) that they purchase loans that reflect a fair lending practices. Flawed, perhaps, but in now way is it to be taken as "get as many subprime loans as possible".
Ginnie Mae does NOT primarily insure subprime loans, quite the opposite actually. Ginnie Mae ONLY secures FHA, VA, RHS and PIH (Public and Indian Housing) loans which are rarely (if ever) subprime.
How does a country get from here to there, without an economic global meltdown of unprecidented proportions, given a 75 year "We the People" Government subsidy?
No offense, but getting the NAR pac out of the business of buying Congresspeople would be a good start. After that, it's going to be a great big whacking reform package. There's nothing "intrinsic" about the GSEs. I doubt a lot of people realized they would ever get this big. Just rein this stuff way back. It's not an entitlement.
In any case, we can't "have it all." It will come down to limiting the GSEs, ag subsidies, and various other forms of pork, or killing social security and/or medicare. And there's that war in Iraq to pay off. (And the boomer wave crests in 2010, leading to further drains on social security, which the boomers now desperately need because their home/ATM is not going to pay for their lifestyle.)
We are going to get there the hard way. All the bad money, all the lousy loans, will have to be washed out of the system before this thing comes to an end. That doesn't mean, necessarily, a "global economic meltdown of unprecedented proportions." Remember, there are 6 billion people now, they all buy stuff, virtually every day. Markets for real goods are not going away. But inflated housing values certainly will. And that's not something we can or should interfere with. The markets must find their natural levels in order to work at all.
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