Skip to comments.The housing menace: Fannie & Freddie must die now
Posted on 02/16/2011 2:24:05 AM PST by lowbridge
Mind you, Fannie and Freddie have cost the taxpayers $160 billion in direct subsidies since they were taken over in August 2008. The country would be better off if they shut down today.
Housing finance is incredibly simple to get right: Require 20 percent down payments and make sure the borrowers have income of at least 2½ times their monthly nut, and guess what happens? Nothing -- no defaults; no bubble.
That's how housing markets work when the government stays out of them, and it's how ours worked for the half century before the feds started twisting the arms of private lenders to make mortgage loans to the poor.
Just look at Canada. It has 20-percent-down loans and nothing like Fannie or Freddie -- and its default rate is a 20th of ours.
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Fannie & Freddie need to go but I call BS on the whole 20% down payment requirement. Buying a house with no money down wouldn’t be an issue if banks looked at the ability of a person to repay a loan vice some dumb ass law that says give them a loan because it’s their right and the US government will back the loan.
90% of these loan defaults were based on bad loans to folks who were obviously in over their head to begin with little if any chance of being able to make the payments.
Also buying a much more modest house than the “joneses” would help. Mcmansions are cool and all, but not if you cannot afford them. A lot of those type houses sprang up around where my wife used to live, and some people bought, but cannot even afford to put curtains in.
The older smaller houses make more sense for kids starting out.
My monthly nut is pitiful.
I see Obama’s call for ending F&F as a canard. Surely there is some form of replacement in the new budget or in the works for this.
I believe Fannie owns almost 200,000 foreclosed homes valued at $25 billion or more.
They don’t want to dump them on the market since it will cause a price crash, but they don’t want to hold them, either.
The first was a replay of the economic thought that also lead to the 1929 market collapse and resulting depression.
In the mid 1920’s people forgot what the stock market was about and decided that the average person could play the market and get rich. It was done by paying a small percentage of the stock's face value and then reselling it before you had pay the face value. How much different is that philosophy than what was going on in the housing market in the 1990’s?
When you forget or ignore the under laying purpose of something it will come back to bite you - HARD!
Buying a house is about providing shelter for yourself and family - not a way to make money.
The second reason is fairness. Guess what people the whole world ain't fair regardless of what political theory you follow. Our Congress Critters think, their writing laws don't change any thing - see the war on proverity and anti-gun legislation for proof of statement.
1. Canada is in a HUGE housing bubble now that will pop shortly
2. Canada has already passed a "TARP" for its banks. It is already baked into the cake.