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Without Loan Giants, 30-Year Mortgage May Fade Away

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http://www.nytimes.com/2011/03/04/business/04housing.html?_r=1&hp

The 30-year fixed-rate mortgage loan, the steady favorite of American borrowers since the 1950s, could become a luxury product, housing experts on both sides of the political aisle say.

Interest rates would rise for most borrowers, but urban and rural residents could see sharper increases than the coveted customers in the suburbs.

Lenders could charge fees for popular features now taken for granted, like the ability to “lock in” an interest rate weeks or months before taking out a loan.

Life without Fannie and Freddie is the rare goal shared by the Obama administration and House Republicans, although it will not happen soon. Congress must agree on a plan, which could take years, and then the market must be weaned slowly from dependence on the companies and the financial backing they provide.

The reasons by now are well understood. Fannie and Freddie, created to increase the availability of mortgage loans, misused the government’s support to enrich shareholders and executives by backing millions of shoddy loans. Taxpayers so far have spent more than $135 billion on the cleanup.

The much more divisive question is whether the government should preserve the benefits that the companies provide to middle-class borrowers, including lower interest rates, lenient terms and the ability to get a mortgage even when banks are not making other kinds of loans.

Douglas J. Elliott, a financial policy fellow at the Brookings Institution, said Congress was being forced for the first time in decades to grapple with the cost of subsidizing middle-class mortgages. The collapse of Fannie and Freddie took with it the pretense that the government could do so at no risk to taxpayers, he said.

“The politicians would like something that provides a deep and wide subsidy for housing that doesn’t show up on the budget as costing anything. That’s what we had” with Fannie and Freddie, Mr. Elliott said. “But going forward there is going to be more honest accounting.”

Some Republicans and Democrats say the price is too high. They want the government to pull back, letting the market dictate price, terms and availability.

“A purely private mortgage finance market is a very serious and very achievable goal,” Representative Scott Garrett, the New Jersey Republican who oversees the subcommittee that oversees Fannie and Freddie, said at a hearing this week. “No one serious in this debate believes our housing market will return to the 1930s.”

Still, powerful interests in both parties want the government instead to construct a system that would preserve many of the same benefits, with changes intended to minimize the risk of future bailouts. They say the recent crisis showed that the market could not stand on its own.

“The kind of backstop that we have now, if it didn’t exist, we would have had a much more severe recession and a much sharper fall in home values,” said Michael D. Berman, chairman of the Mortgage Bankers Association, which represents the lending industry.

So without the taxpayer bailing out poor investment decisions the recession would have been worse.....

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50% of marriages end in divorce, huge percent of people end up disabled, job loss is real and growing every year. So sort of suicidal to lend to the average person over any long time horizon. Unless it is like 50% down.

In the 20th century you could be reasonably sure if someone lost their job they could easily replace it with a similiar paying job. In the 21st century its a different game.

That is why my contention is that lending is increasingly going to be to states and corporations. The consumer credit market is going to fade away. It will still be there just a lot smaller percent of the whole. Its like credit card debt, the big banks are trying to get out of it. Because they aren't making money on it. Soon it will be something more reserved for their premium clients.

Without consumer credit what is going to drive the economy? .. state spending. Look even in Britain in just the last 2 years the number getting housing assistance rose by 500,000.

Edited by aa3

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Guest sillybear2

Long loans + neoliberal flexible labour market = fail.

The post-WW2 settlement has been progressively undermined, so everything around it will also crumble. The next shoe to drop is Medicare and pensions, debt interest payments are eclipsing everything.

http://firstread.msnbc.msn.com/_news/2011/02/16/6066883-interest-costs-on-the-debt-will-exceed-medicare-spending-in-2018

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Long loans + neoliberal flexible labour market = fail.

The post-WW2 settlement has been progressively undermined, so everything around it will also crumble. The next shoe to drop is Medicare and pensions, debt interest payments are eclipsing everything.

http://firstread.msnbc.msn.com/_news/2011/02/16/6066883-interest-costs-on-the-debt-will-exceed-medicare-spending-in-2018

Only the state now can put in place a new settlement. And one small aspect of the system is to have the federal government insure all mortgages. And just fill in the money lost in defaults.

The banks become essentially sales agents for the state mortgage system. And a tiny private market of privately funded unusual mortgages that are non-inusred exists alongside it.

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Guest sillybear2

Only the state now can put in place a new settlement. And one small aspect of the system is to have the federal government insure all mortgages. And just fill in the money lost in defaults.

The banks become essentially sales agents for the state mortgage system. And a tiny private market of privately funded unusual mortgages that are non-inusred exists alongside it.

America amuses me, they're every bit as socialist as the old USSR, they just don't like to admit it.

"Get the government out of the mortgage market, and I also want my low rate 30 year fixed loans, with no penalties"

"Get the government out of healthcare, I want my Medicaid!"

"Stop taxing my gasoline, but also build and maintain thousands of miles of interstate highways that cost nothing to use"

"We need to live within our means, and not run up huge deficits, but no higher taxes and I want my government ponzi pension entitlements, I paid for it!" -- Sean Hannity, millionaire presenter on FoxNews.

Don't worry, I'm sure "technology" will solve all those problems. Just like how those CDO computer models solved the banks.

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Reminds me of a Tea Party video I saw. It was mainly older, wealthy white Americans.. on generous state funded benefits. They were cheering on the speakers saying that the nation had to cut back and stop the deficits.

Then one speaker made the mistake of pointing out where the cuts would have to come.. to pensions and medicare which are eating up most of the budget. The crowd lost all its enthusiam, and whenever asked those people say they are entitled to those benefits because they were promised them.

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50% of marriages end in divorce,snip

NO 1 REASON WHY JOINT INCOME CRITERIA IS JUST NUTS.

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Guest sillybear2

Reminds me of a Tea Party video I saw. It was mainly older, wealthy white Americans.. on generous state funded benefits. They were cheering on the speakers saying that the nation had to cut back and stop the deficits.

Then one speaker made the mistake of pointing out where the cuts would have to come.. to pensions and medicare which are eating up most of the budget. The crowd lost all its enthusiam, and whenever asked those people say they are entitled to those benefits because they were promised them.

Not to mention the elephant in the room, $800bn per annum for military keynesianism. Defending the nation from spendthrift communists since 1945 ;)

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Mortgages are a halfway house between freedom and feudalism.

It's going to be interesting to see which way society goes, and ofc bloody scary to be part of the process.

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Guest sillybear2

Mortgages are a halfway house between freedom and feudalism.

It's going to be interesting to see which way society goes, and ofc bloody scary to be part of the process.

These government subsidies don't actually help in the longterm, they just skew the investment market to favour "risk free" housing above other more productive sectors of the economy. Mortgage interest payments are still tax deductable in the US, it's inflationary, without all this backing everyone would still have a home, it would just mean land would sell for a lot less. Given that most of the public aren't invested in land banks, that's a good thing.

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These government subsidies don't actually help in the longterm, they just skew the investment market to favour "risk free" housing above other more productive sectors of the economy. Mortgage interest payments are still tax deductable in the US, it's inflationary, without all this backing everyone would still have a home, it would just mean land would sell for a lot less. Given that most of the public aren't invested in land banks, that's a good thing.

Theres no such thing as land.

like I said, a halfway house between freedom and feudalism.

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Guest sillybear2

Theres no such thing as land.

like I said, a halfway house between freedom and feudalism.

I guess you're a hovering orb of pure energy Injin, most of us exist on a more earthly plane.

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I guess you're a hovering orb of pure energy Injin, most of us exist on a more earthly plane.

You know full well that in this context land means the arbitary division of the earth into little boxes.

And ofc, it's always going to be a fight from then on because there are no facts with which to settle disputes. It's all pure willed obstinancy.

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I guess you're a hovering orb of pure energy Injin, most of us exist on a more earthly plane.

two orbs AFAICS

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Not to mention the elephant in the room, $800bn per annum for military keynesianism. Defending the nation from spendthrift communists since 1945 ;)

Military keynesianism is still the gold standard for stimulus spending to make up for an output gap:).

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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