"Stimulus" includes legislation to help prop up bubble-inflated home prices in high-price areas

[El Pinko]

Here's another beaut. Now that the subprime lending gravy train has dried up, they want Fannie Mae to raise the limit on CONFORMING loans from $400K to over $700K.

People, you are only delaying the inevitable. LA, SF, Silicon Valley, yes, prices there will fall. Come to grips with it.

Remember when Fannie Mae was supposed to be about helping poor and middle income people to buy homes? Guess that's all over...





http://online.wsj.com/article/SB120123250591916143.html?mod=googlenews_wsj


More Risk for Fannie, Freddie?
New Stimulus Package Promises to Change Standards on Loans
By JAMES R. HAGERTY and MICHAEL CORKERY
January 25, 2008; Page A8

...

Fannie Mae and Freddie Mac buy from lenders only mortgages that conform to their standards. Currently, that means the largest mortgage they will buy on single-family homes in the continental U.S. is $417,000. Their standards on down payments and verification of income are stricter than were those of many lenders during the housing boom.

Democrats and Republicans provided conflicting versions of how much more leeway the companies will get. The package agreed upon by Congress would temporarily allow Fannie and Freddie to buy or guarantee mortgages as high as $729,750 in cities with high housing prices, according to House Speaker Nancy Pelosi. House Republican Leader John Boehner put the ceiling at $625,000, according to a news release.

The higher allowance would expire Dec. 31, though it would be permanent for loans guaranteed by the Federal Housing Administration, the New Deal-era agency that typically helps low- and middle-income home buyers qualify for low-interest mortgages. Currently, FHA can't guarantee mortgages higher than $367,000.

....

Rising defaults pushed Fannie and Freddie deeply into the red in the third quarter, forcing them to sell preferred shares to bolster their capital. Yesterday, shares of both companies declined on the New York Stock Exchange. Fannie was down 59 cents, or 1.7%, at $34.19 at 4 p.m. in New York Stock Exchange composite trading, while Freddie was off 52 cents, or 1.6%, at $32.

[Fresh_Start]

1. I'm figuring that it transfers default risk to the taxpayer

and alleviates risk for lenders

can we say, corporate giveaway?

[Kokonoe]

2. I guess it will fall after the election.

[papau]

3. With min of 20% down - the effect is a transfer of"job loss risk into a jobless economy"(similiar to

our current one) where very high paying middle management jobs can be transitory and not replaced, as job growth is all at low wages (projected current trends gives us low wage jobs for more than 50% of the population by 2050).

The bubble will break if current job trends continue - this just moves the banking cost to the taxpayer.

[PassingFair]

4. Who could have foreseen?

"where very high paying middle management jobs can be transitory and not replaced, as job growth is all at low wages (projected current trends gives us low wage jobs for more than 50% of the population by 2050)."

Woe is us....

And people have their heads in the sand.

[area51]

5. Low wage jobs

"... projected current trends gives us low wage jobs for more than 50% of the population by 2050."

Do you have a link for this? I'd love to send it to people. From looking at the jobs offered, it's obvious that we're heading in this direction.

[papau]

6. Some more discussion below /link - but the study referenced is not on net

From Price Waterhouse:http://www.smith.umd.edu/ciber/pdfs_docs/size_of_emerging_economics_march_2006.pdf



This competition will also increasingly affect highly skilled professionals below the ‘global star’ level, who may find their ability to attract premium income levels constrained by lower cost but equally qualified graduates on the end of an internet connection in Beijing or Chennai

The E7 economies will, of course, produce their own share of global star performers in these and other areas. At this top level, there will still be plenty of money to go around, but one or two levels down from this the premium incomes currently earned by highly skilled and educated professionals from OECD countries (e.g. senior lawyers, accountants, bankers, financial market analysts and the like) will tend to be gradually eroded by an increasing number of equally well-qualified, extremely highly motivated and hard-working, English-speaking professionals from the E7 countries (at present, many of these may move to London or New York, but as rival financial and economic centres develop in Asia this may become less necessary).

===================================================================================

In 1999, the ratio of average and median household income was 1.35 in the nation.

It has gotten worse and that trend is expected to continue.

The study I saw giving the 50% number is not available on the internet (private/confidential, etc., etc.). But there may be others with the same number.