[turtle777]

I think most people agree by now that the main issue of the past housing bubble was that people who couldn't (shouldn't) afford a house got easy, cheap mortgages. And since they had no skin in the game, walking away and defaulting on the loan was an easy choice - and created the turmoil we're in.

So, WTF does the Obama administration continue to push a policy of cheap mortgages ?

Again, people who shouldn't afford a house are lured into buying, and walking away is made easy, thanks to government policies.

FHA currently requires 3.5% down. Remember that (contrary to the Realtard's assertions) all home purchases are instantly underwater by approximately 8% from their "purchase price" at closing, because typical Realtor commissions are 6% and closing costs, including title transfer, title insurance and doc stamps typically consume about 2% of the deal price. A home that must be immediately resold thus instantly "consumes" about 8% of the purchase price, and this deficiency persists over time, rising market or not.

So, in short: as soon as people close on this FHA loan, their mortgage is already 4.5% higher than the value of their home.

Corruption: FHA Is Dying, Will Anyone Stop It? - The Market Ticker

It doesn't make any sense.

Default rates will continue to rise, and tax payers will foot the bill, because the FHA will go broke soon.

-t

[msuper69]

It's easy to understand.

Just consider the source (the administration named in your thread title).

Ayn Rand must be turning over in her grave.

[hyteckit]

Eh?

What?

Doh!

Cheap mortgages?

How so?

[turtle777]

Because people's down payment of 3.5% does not adequately cover the risk for the mortgage.

The government guarantees those FHA mortgages, hence, the risk is taken by the tax payer, in form of a government bailout that will be required for the FHA.

Therefore, the risk is shifted to the tax payer. The new home owner has no risk, because he has practically no skin in the game.

-t

[hyteckit]

FHA doesn't make loans.

I don't know why the site you link to says FHA make loans.

FHA is the public option to companies like AIG that insures loans.

[turtle777]

Originally Posted by hyteckit 

FHA doesn't make loans.

I don't know why the site you link to says FHA make loans.

FHA is the public option to companies like AIG that insures loans.

The loans are securitized through Fannie and Freddie. Guess who owns / runs those?

-t

[hyteckit]

Originally Posted by turtle777 

The loans are securitized through Fannie and Freddie. Guess who owns / runs those?

-t

Barnie's Frank?
Fannie's Fanny?
Freddie's Mac?

[turtle777]

yes.

-t

[hyteckit]

So they're not really cheap(er) loans/mortgages.

They are just a higher risk loan to the lender and insurer.

A 5% interest rate is still a 5% interest rate. The only between between a 20% down payment and a 3.5% down payment is that the 3.5% down payment is at higher risk since the lender is out more money if they lender defaults say 1 year into the loan and the insurer is insuring a larger loan.

[turtle777]

Originally Posted by hyteckit 

So they're not really cheap(er) loans/mortgages.

They are just a higher risk loan to the lender and insurer.

A 5% interest rate is still a 5% interest rate. The only between between a 20% down payment and a 3.5% down payment is that the 3.5% down payment is at higher risk since the lender is out more money if they lender defaults say 1 year into the loan and the insurer is insuring a larger loan.

Technically, yes, because I didn't even touch upon the fact that the interest rates are also under market price.

How do we know that ?

Well, 90% of all loans go through Fannie, Freddie or Ginnie. Only 10% of the mortgages are now done by non-government entities. And even those have back-stops in place, which make them lend at rates that don't cover their risks.

The whole mortgage market is rigged, because the government doesn't want the housing market to collapse further. Problem is, it's all paid for by you and me, either through taxes (direct) or inflation (indirect).

-t

[BadKosh]

The cost of the home should reflect actual value of it. Asking a little more than the last similar house in your neighborhood sold for is what got us into this. House values going down in your neighborhood because someone defaulted, and now the house sits empty shouldn't lower your houses value. Just because they hosed up doesn't mean all the work you've done to improve your house is worth less.

The Home inspectors seem to be a scam as well. I found more than a few things that weren't up to par that he claimed were just fine. The sewer lines for one. The A/C for another.

[finboy]

Originally Posted by turtle777 

The loans are securitized through Fannie and Freddie. Guess who owns / runs those?

-t

You and I run those, or at least pay for them to stay in business

It's happening all over again. Or, more properly, it's never stopped happening. Congress continues to "encourage" higher loan limits on condos and for refinancings. It won't change until the money runs out, and it looks like it isn't right now.

At least someone's blown the whistle on Acorn and their ilk. Thankfully.

[ort888]

Originally Posted by turtle777 

I think most people agree by now that the main issue of the past housing bubble was that people who couldn't (shouldn't) afford a house got easy, cheap mortgages. And since they had no skin in the game, walking away and defaulting on the loan was an easy choice - and created the turmoil we're in.

Er, no. I don't think most people agree on that at all. I would say the main problem was that the banks were able to turn around and sell the bad mortgages without having to worry about taking on any of the risk.

I'll hang up and listen.

[turtle777]

Originally Posted by ort888 

Er, no. I don't think most people agree on that at all. I would say the main problem was that the banks were able to turn around and sell the bad mortgages without having to worry about taking on any of the risk..

Yes, this contributed to the problem.

But we should not forget who purchased and guaranteed those loans that the banks originated: government backed entities (Fannie, Freddy), or now the Fed buying all those crapy loan packages, and giving the banks freshly printed money.

So in the end, you come back to the Fed / Treasury financing the whole mess.

-t

[el chupacabra]

Originally Posted by turtle777 

So, WTF does the Obama administration continue to push a policy of cheap mortgages ?

Again, people who shouldn't afford a house are lured into buying, and walking away is made easy, thanks to government policies.




It doesn't make any sense.

Default rates will continue to rise, and tax payers will foot the bill, because the FHA will go broke soon.

-t

Maybe you should stop and think about the fact that maybe it's you who doesn't get it.. We have to keep housing prices high, a house is suppose to go up in value for ever and ever. that way everyone can sit and think they're making money doing nothing, isnt that what everyone wants? everyone will be happy. What part of that don't you understand?

people are living longer these days so we also need to being moving the direction of longer loans, soon it will be 40 year home loans then 50 year, then 60 year; this is the best way to stimulate the economy and get more money into the banks so that they can give more loans.

Anyone who can't see the benefits in this is a total re..

[turtle777]

Originally Posted by el chupacabra 

Anyone who can't see the benefits in this is a total re..

For a moment I thought you were serious.

-t

[nonhuman]

Originally Posted by BadKosh 

The Home inspectors seem to be a scam as well. I found more than a few things that weren't up to par that he claimed were just fine. The sewer lines for one. The A/C for another.

I think that depends on the inspector. Ours (Mark George, in the Boston area) was absolutely fantastic.

[sek929]

Originally Posted by BadKosh 

The Home inspectors seem to be a scam as well. I found more than a few things that weren't up to par that he claimed were just fine. The sewer lines for one. The A/C for another.

Not to go OT, but a friend of mine recently bought a house and used one of these Inspectors, and I can say the guy is either a complete retard, or he is paid not to care.

The wiring isn't grounded, and is done improperly in many rooms. The foundation and beam-work that hold up the house are extremely sub-par and in many cases not attached with any nails or other fasteners. The columns that carry the load of the house are not on top of concrete footings, but rather the thin concrete slab that makes up the basement floor. The stairway leading upstairs has a head clearance of less than 6 feet (code is 80", or 6 foot 8 inches).

All in all this guys job could have been done by a cat with a pen taped to it's tail.

[finboy]

Originally Posted by ort888 

Er, no. I don't think most people agree on that at all. I would say the main problem was that the banks were able to turn around and sell the bad mortgages without having to worry about taking on any of the risk.

And why was that allowed to happen? Because we couldn't lower standards for lending without putting stops in there for the banks. Why? Because the FDIC/Fed didn't want to guarantee all the subprime and fuzzy logic loans and end up with a meltdown.

Accordingly, Moody's and S&P started issuing suspect ratings on Freddie and Fannie stuff (because, you know, it's Freddie and Fannie) and then folks created/sold/bought credit default swaps to protect themselves b/c the ratings were useless.

The long term effect is that we can't believe ratings any more. Congress was there, they knew what they were doing, and they didn't give a sh*t what happened next.

As for the inspection/appraisal thing, it's a racket too. People started to complain that homes in disadvantaged neighborhoods got systematically lower appraisals than those in better neighborhoods, community activists got involved, and appraisal standards changed, first in one direction (everyone get certified) and then in the other (just roll over and play dead). Been there, done that.

It all goes back to the irrational need to redistribute wealth.

[turtle777]

So, guys, tell me, the homebuyer credit has just been extended, now it even includes buyers that previously owned a home.

This means the government gives everyone buying a home $ 8,000.

Why stop at $ 8,000 ? If this is a good policy, shouldn't we give$ 20k ? Or even better, give everyone $ 300k, so everyone can buy a nice, big home.

I think we should also give every car buyer $ 30k towards the purchase of any car, and $ 5,000 towards the purchase of a nice home theater system.

We also should give people $ 15k for a nice vacation each year, and $ 10k for nice new clothing each year.

Right ? RIGHT ?

-t

[The Final Dakar]

Are you familiar with the concept of incentive?

[Shaddim]

Incentive? The US is broke. We're seriously considering a move before the bottom completely falls out, Bermuda looks tempting.

[Snow-i]

Originally Posted by finboy 

It all goes back to the irrational need to redistribute wealth.

And the bleeding heart that takes the bait. I have 1st hand experience in the housing industry. Shut down the family business last year because of the housing market, including several appraisals which seemed to be based on everything but what the house is worth. My dad ran that business since the 80s...what a shame.

[Snow-i]

Originally Posted by Dakar

Are you familiar with the concept of incentive?

Incentive indeed. whats the incentive to work harder when the gov't is gonna open its wallet anyways?


So i'm going to work harder, pay more taxes, so someone else can buy a house? Haha! There is a basic misunderstanding on the true meaning on incentive and how our society was built upon it.

It is all being undone now. Let me know how the weather down there in bermuda is, please.

[finboy]

Originally Posted by Snow-i 

So i'm going to work harder, pay more taxes, so someone else can buy a house?

You got it! Why am I going to do ANYTHING that just goes to anyone else?

Sooner or later, folks will start harboring ill-will for people who are different from them. Then we gots trouble.

Or maybe that's the point to all this.

[The Final Dakar]

Originally Posted by Snow-i 

whats the incentive to work harder when the gov't is gonna open its wallet anyways?

Why don't you just quit your job and get a free ride by going on welfare? The answer to your question lies in the answer to mine.

Originally Posted by finboy 

Why am I going to do ANYTHING that just goes to anyone else?

How many years have you been paying taxes? What's changed that now you've had enough?

[Snow-i]

Originally Posted by The Final Dakar 

Why don't you just quit your job and get a free ride by going on welfare? The answer to your question lies in the answer to mine.

Please elaborate.

[/QUOTE]

[finboy]

Originally Posted by The Final Dakar 

How many years have you been paying taxes? What's changed that now you've had enough?

1.) 26, and

b.) Plenty has changed since I started paying taxes, and little of it for the better. Now the federal government controls outright the banks, Wall Street, health care (more all the time), the school systems, higher education, you name it. (And if you say anything about it...well, you might be a racist, clinging bitterly to religion and/or guns.)

Plenty is different in just that short period of time; we should be very afraid of the next 5 years in this country. There's little I can do differently, personally, because I've already made my choices. But folks who will be making choices (invest v. don't invest; create jobs v. don't create jobs; work v. don't work) will not make the correct choices given the set of incentives provided to them, and we're all going to be stuck with the outcomes. That's the trouble -- the next set of choices. People are leaving Calif and NY because of the hostile business/entrepreneur environments, we'll see the same nationwide. No way around it.

[Snow-i]

I'm starting a new business...

Based on Al gore's business model.

The big scare now is political climate change. Everyone must purchase methane credits from me to offset their politician's methane footprint every time they speak. Seriously, i can't tell which end its coming out of anymore. We need a panel to figure it out, and i need your money to research it. I will call it yap and trade, and i have consensus from the IPPCC so you can't argue against me. Start coughing it up.