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Do we need FHA, FANNIE MAE and FREDDIE MAC?
2009 Oct 24, 5:55pm 5,785 views 27 comments
by 4X follow (0)
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Correct. A debt based economy is doomed (as is ours). But what all this is about is controlling the masses. When you keep people in debt, you control them. Government programs, whatever they be, are about control over people. Period. And stupid people are very easy to control. We have them by the hundreds of millions in this country. When the rioting begins and the tanks roll, the people will just roll over because they will have surrendered every aspect of their lives to the government. Stupid Americans getting what they deserve.
The capacity of the FHA may have changed (though I don’t quite understand what you mean by such a generic term as “capacity,†i.e. total users, tools available, changes in personnel, etc. ),
Of course I'm referring to the FHA Expansion Act. It's a big can of worms, but it includes, among other dubious measures, lax credit rating standards for buyers (you can be fresh from bankruptcy court and still qualify), increased loan amounts, and diminutive down payments, often paid for in full by the tax credit. Low to no down payment and high LTV loan amounts are each hallmarks of subprime, and this why I think we will witness another real estate shitstorm in the coming years.
All of that is fine, however, as long as we make these cheap-o loans recourse loans. You play you pay, as they say.
but its purported goal of homeownership remains the same.
Could someone please make the definitive thesis statement as to why a stable rental is less good than an overpriced home? The more time that goes by, the more I remain convinced that it's mostly a manipulation of popular opinion. Read: FAD.
However, I do like solutions. The one you propose “gov’t co-signing rental leases†seems plausible. But, when it comes to use of tax dollars, tell me what is the difference between the government co-signing rental agreements and co-signing mortgages?
The difference is great. Just for starters, if a family did default on their 6 or 12 month lease, the tax payer wouldn't be on the hook like they are with an FHA loan default. Smaller grub stake, smaller loss to the tax payer. Good thing. It also wouldn't act as a false bottom for house prices. I might add that it helps subsidize a lot of what the recent uptick in homes sales numbers are based upon: speculators, buying up foreclosures for rental properties. Not that my heart bleeds for landlords.
As for “willing†slaves. If one is raised in slavery, taught that they are a slave, accepts the fact that this is the way of the world, is that a willing slave? I’m sure you could make a very good arguement for the return of true slavery by saying the slave was willing. Then, it is only a small step to say the slave was willing after we beat the living daylights out of him/her. The reality is that we, as a society, draw minimum standards when it comes to taking advantage of other people. We do not permit true slavery, fraud, murder, etc. We can just as easily not permit negative amortization loans. And, as of 2010, in CA they have. It’s quite easy to stick up for people, all it takes is a little sympathy and courage.
My point was that it is hard to feel sympathy for anyone who exhibits an almost masochistic sense of willing ignorance. Like my cabdriver from the other night who managed to get the mortgage on her bubble-era custom built two story home renegotiated to a 2% interest 30 year loan with a monthly payment of 1400 a month to 720 a month, and is now doubling up on payments and looking to buy a second home next year. Sticking up for her right to my tax dollars is not my first instinct. Mostly, stories like that just make me want to smash shit.
Not to worry, as there's always more amnesty reserved for fools than for the prudent or thoughtful.
The government probably determined at some point that home ownership serves the public good. Likely there were studies showing that people took better care of their homes and yards, etc when they owned them, rather than when they rented them.
Not really. Several studies show the opposite. Here's a synopsis of one such:
4X
2009 Oct 29, 3:28am
@Austinhousingbubble
The government probably determined at some point that home ownership serves the public good. Likely there were studies showing that people took better care of their homes and yards, etc when they owned them, rather than when they rented them.
Not really. Several studies show the opposite. Here’s a synopsis of one such:
This rhetoric is misleading many into believing the Goverment does not have stake in the housing markets. Rising home values have made Americans feel wealthy. And tapping into the Home Equity has been the source of purchasing power. Fuelling consumption and GDP growth. Since 1980 the Housing Valuation has exceeded GDP. Since 2000, it also appears that The Housing Bubble has not been pushing up the GDP as much, and the Gap between the two has been rising. May be the Housing Bubble is no longer effective in pushing up the GDP as much. This last bust was it’s final sprint before busting after a 40 year expansion.
The below GDP growth chart shows exactly how our government has financed GDP with equity. Why do you think Congress is fighting so hard to push these 8K tax credits?
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In 1965, the Federal Housing Administration became part of the Department of Housing and Urban Development (HUD). Since 1934, the FHA and HUD have insured over 34 million home mortgages and 47,205 multifamily project mortgages. Currently, the FHA has 4.8 million insured single family mortgages and 13,000 insured multifamily projects in its portfolio. The Federal Housing Administration is the only government agency that is completely self-funded. However, although it claims to operate solely from its own income at no cost to taxpayers, there is an implicit guarantee that the taxpayer will help them in times of need.During budget planning for 2008 HUD had been projecting $143,000,000 budget shortfall stemming from the FHA program. This is the first time in three decades HUD had made a request to Congress for a taxpayer subsidy. Even though FHA is statutorily required to be budget neutral, the GAO is projecting taxpayer funded subsidies of half a billion dollars over the next three years, if no changes are made to the FHA program. Following the Subprime mortgage crisis, FHA, along with Fannie Mae and Freddie Mac, became the source of much of the United States mortgage financing. The share of FHA mortgages went from 2 percent to over one-third of mortgages in the country. Without the subprime market, many of the riskiest borrowers ended up borrowing from the Federal Housing Administration, and the FHA could suffer substantial losses. Joshua Zumbrun and Maurna Desmond of Forbes have written that eventual government losses from the FHA could reach $100 billion.
The creation of the Federal Housing Authority successfully increased the size of the housing market. By convincing banks to lend again, as well as changing and standardizing mortgage instruments and procedures, home ownership has increased from 40% in the 1930s to nearly 70% in 2001. By 1938, only four years after the beginning of the Federal Housing Association, a house could be purchased for a down payment of only ten percent of the purchase price. The remaining ninety percent was financed by a twenty-five year, self amortizing, FHA-insured mortgage loan. After World War II, the FHA helped finance homes for returning veterans and families of soldiers. It has helped with purchases of both single family and multi-family homes. In the 1950s, 1960s and 1970s, the FHA helped to spark the production of millions of units of privately-owned apartments for elderly, handicapped and lower income Americans. When the soaring inflation and energy costs threatened the survival of thousands of private apartment buildings in the 1970s, FHA’s emergency financing kept cash-strapped properties afloat. In the 1980s, when the economy didn’t support an increase in homeowners, the FHA helped to steady falling prices, making it possible for potential homeowners to finance when private mortgage insurers pulled out of oil producing states.
The greatest effects of the Federal Housing Administration can be seen within minority populations and in cities. Nearly half of FHA’s metropolitan area business is located in central cities, a percentage that is much higher than that of conventional loans. The FHA also lends to a higher percentage of African Americans and Hispanic Americans, as well as younger, credit constrained borrowers. Because some feel that these groups include riskier borrowers, it is believed that this is part of the reason for FHA’s contribution to the homeownership increase.
As the capital markets in the United States matured, FHA had less and less of an impact on the US Housing market for several decades. In 2006, FHA made up less than 3% of all the loans originated in the US. This had some members of Congress wondering why the Government is still in the mortgage insurance business. A vocal minority of congressional leaders has even been calling for the end of FHA. But this ideal has almost completely lost sense and is barely even mentioned now as FHA has once again began to play a major and increasingly larger role in the housing market over the past 2 years by helping fight the effects of the recent deterioration in the credit markets, the mortgage melt-down, and the overall economic recession.
Now, most members of Congress support, and have been helping reform, FHA in order to make it more competitive in the for-profit industry, and to make it a greater positive force in the housing market which is crucial to the overall economy. FHA has significantly increased its mortgage relief efforts by helping at-risk borrowers avoid foreclosure with its refinance programs such as: FHA Secure and Hope For Homeowners (H4H). Specifically designed for this purpose, the FHA Secure and H4H programs have already facilitated foreclosure prevention for hundreds of thousands of distressed homeowners like: under-water borrowers, people affected by risky adjustable-rate mortgages and others experiencing temporary economic hardship.
#housing