Interesting statistic 95% of Mortgages in the 4th quarter were funded by the Federal Government

[AllentownJake]

http://www.huffingtonpost.com/2010/02/19/paul-volcker-says-mortgag_n_469415.html

Great article, but this little part stood out to me.

The federal government was responsible for up to 95 percent of all new home mortgages in the fourth quarter of 2009, said Guy Cecala, publisher of Inside Mortgage Finance, a leading industry publication.

Interesting when you put that in prospective of the bonuses at the banks. They are doing virtually no lending in the mortgage market, collecting fees from the origination of the loans, and passing the risk of default onto the federal government.

Looks like we did nationalize the banks, we just let the investing public keep their equity and the executive class keep their bonuses.

[Kurt_and_Hunter]

1. Fannie Mae, Freddie Mac, the Federal Housing Administration and the Veterans Administration

"There were $390 billion in new mortgage originations, including home equity lines, in the last quarter of 2009, according to Cecala's firm. Excluding the home equity lines, Fannie Mae, Freddie Mac, the Federal Housing Administration and the Veterans Administration stood behind up to 95 percent of those mortgages. Just a few years ago the government was responsible for about 40 percent of all new home mortgages, Cecala said."

[AllentownJake]

3. Yep

The entire mortgage market is supported by the federal government. I assure you though the banks are still collecting and working on new ways to hit consumers with higher origination fees which are tacked onto the balance of these loans.

[Robb]

2. Wait till you find out what the terms of those mortgages were.

Fundamentally a re-boot of subprime, low-down loans with a different name, only this time fronted by the government.

[AllentownJake]

4. I'm sure this is going to end well nt.

[laughingliberal]

22. What could, possibly, go wrong? nt

[PSPS]

5. You're right about that -- now the government (taxpayer) is making these "zero down" mortgages

About the only thing that's different is, today, you at least have to document your income. There are no more liar's loans. But it is still a big mistake to write a mortgage where the borrower has no stake in it because they make no down payment.

[AllentownJake]

6. They are desperate to inflate the value of housing

We just had burst bubble and the overall earning power of the nation has contracted for a majority of the people, keeping housing prices where they were, is not really in the long term best interest of anyone.

This is like trying to prop up Amazon.com stock to it's highs during the tech bubble blow-up right after the blow-up to prevent a further decline in Amazon value to reality, which it will have to go to eventually to prevent investors who bought on margin from taking a loss.

It might go back to where it was, but when you buy an asset during a bubble, you are going to lose money, and when you issue loans to buy assets during a bubble you are going to have losses.

The Government is trying to prevent this reality.

[azul]

7. The FED is now mortgage holder for many Americans.

The FED is finishing the purchase of $1.25 trillion of mortgage securities, and may buy more if no one else will.

http://www.washingtonpost.com/wp-dyn/content/article/2010/02/04/AR2010020404363.html

Just make your mortgage payments out to the FEDeral Government, in effect?

[AllentownJake]

8. Well to the Federal Reserve

Which is another one of these private quasi government operations that seems to be getting us into so much trouble.

[Kurt_and_Hunter]

10. I disagree somewhat.

The magnitude of the real estate bubble wasn't so much about the multiples of "real" value as the sheer scale of the real estate market.

The internet bubble could never be fixed by time (inflation, accumulation of demand) because the valuations were often 100 times any rational measure of worth. (Sometimes infinity, since some of those companies had no revenue and few prospects.)

The real estate bubble created valuations that were unsustainable but not as crazy as internet stocks and tulip bulbs because the underlying asset has real utility. Internet stocks and tulip bulbs were valuable ONLY as investment vehicles so the sooner they collapsed the better. But the real estate bubble was investment frenzy laid over a base of practical value.

For instance, say a house went from 100K to 200K then shed 40% to have a current (difficult to realize) valuation of 120K. Propping up that valuation at 120K offers the possibility of the real market catching up with the valuation someday. (5, 10, 15 years, not centuries)

Meanwhile, much more of the system is tied up in and triggered by real estate valuation. There are big systemic costs to letting real estate find its "real" value.... domino stuff.

And Amazon shares didn't keep rain off people's heads. (Or provide the bulk of tax base for localities.)

I'm bearish on real estate but I am not at all offended by artificial supports to slow the rolling price-discovery process that affects the whole system so powerfully.

What we really need, though, is some inflation to get nominal prices more in line with outstanding debt. (Bad for banks, but fuck 'em.)

I could probably argue the other side too, but my instinct is that there is zero possibility of bubble reflation for decades and we are really talking about slowing the ongoing defaltion.

[AllentownJake]

11. I'll agree to disagree on that issue

However, I think we both can agree, that given this statistic, it is rather laughable when the administration claims to have a tough fight with the banking interest.

They can pretty much launch a nuke in the form of cutting them off and take one out to make an example of them if they resist systematic reform too much.

I'm guessing it would get the others to pay attention rather quickly, and what is the GOP going to say? We object to you not giving that bank more money? :rofl:

[bear425]

13. There are no zero down loans in my neck of the woods.

Are they available in yours?

[AllentownJake]

14. Depends on the market and the condition the market is in

The worse shape your market, the more favorable and looser the lending terms is what I'm reading. I could be wrong just anecdotal evidence I read.

Like I said, the goal is to keep prices from falling. If you have a market that is depressed, the logical thing is to pump money into that market to un-depress it.

Which is why there was a new proposal to give extra help to the 5 states that were hit the hardest.

[Robb]

15. You can get there with the tax credit.

5% down FHA loans on a $160K condo become zero down loans when your refund comes back. :shrug:

[bear425]

16. I see what you're saying, but still, it's not the same

as when banks (and predatory lenders) were writing actual zero down loans. FHA loans are quite strident in the qualification process. From my perspective in South Florida, loans are difficult to come by and usually require at least 20% down payment and good fico scores. Things have changed here for sure.

[Robb]

17. They don't seem that tough to get:

Per CNN, a credit score of 580 qualifies you for the 3.5% down payment program. They've raised the amount you pay for mortgage insurance, but at 3.5% down a mortgage insurance premium of 2.5% is pretty palatable. :shrug:

[AllentownJake]

18. You don't get people buying homes again

by restoring pre-1980s standards that require people to save in order to have equity.

What is the definition of insanity again?

When you have a 70% consumer based economy, you aren't going to jump start that failed experiment again by telling people they should save money to buy things they want.

[bear425]

20. I was mainly speaking of conventional loans

regarding the "zero down". I don't claim to be a loan expert, but I have a friend who is a lender and is have a great deal of difficulty qualifying her clients in our market - FHA or conventional. Perhaps, it's simpler in other markets.

[AllentownJake]

21. Depends on where you live

How much support is needed to keep houses at the prices they want.

I'm no genius, but I figure if you dump money into a bust town after the bust and the resource that made it boom is gone, you are going to have a loss in your future.

Someone is selling that house, whether it be a foreclosure or someone getting out of dodge, so someone is being suckered into investing into the bust area.

[xchrom]

9. Recomm

[glowing]

12. Which is why the banks should be forced to re-negotiate a mortgage.

Its our money really.. Govt backed loans with no risk to the bank... yet the banks will not negotiate. Its absolutely ridiculous.

[AllentownJake]

19. Well in reality it is the Federal Reserve who won't negotiate

The banks are quickly becoming the front men as 1.25 trillion in mortgage backed securities have been transferred off bank balance sheets and onto the federal reserve balance sheet. Most likely for a premium paid to the banks, we'll never know, what they pay for the assets is double secret and not for the public to find out, ever.

If your theory is that if housing values fall further, there will be more foreclosures etc, and you need to boost the housing market, why the hell would you do something that would recognize people's losses in income or value of their home as far as the outstanding balance of a loan is?

Much easier to foreclose and hold the asset off the market to control the inventory and yes, when they make these discussions, people are numbers on a spreadsheet.

[laughingliberal]

23. K & R nt

[Viking12]

24. I need more details, "responsible for" does not necessarily = "own"

The $8000 new home buyer credit could be considered to be "responsible for" people buying houses and assuming mortgages from private lenders. Just sayin'.