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Affordable housing to cost $625K
Monday, September 10, 2007
According to this Wall Street Journal report($), Senator Charles Schumer's proposed expansion of the loan limits for Fannie Mae and Freddie Mac would put the maximum loan amounts for "affordable housing" at up to $625,000."This is what Fannie and Freddie were designed for," the New York Democrat said. "To have the public purpose and use private-sector knowledge and dollars."
According to the Fannie Mae website, "We exist to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market."
...
Mr. Schumer's bill would raise the portfolio caps at each company by at least 10% for one year, while requiring Fannie and Freddie to devote half of that increase -- roughly $73 billion combined -- to helping borrowers with certain high-risk adjustable-rate mortgages refinance into more-affordable products.
Because of past accounting problems, Fannie and Freddie aren't allowed to expand their portfolios beyond strict limits set by their regulator, the Office of Federal Housing Enterprise Oversight, until they finish overhauling internal controls. Fannie's portfolio is capped at $727 billion, and Freddie's at $728 billion, though Freddie Mac can increase its portfolio 2% a year.
Mr. Schumer's bill would also allow the companies for one year to purchase loans of as much as $625,000 in high-cost areas. Currently, they aren't allowed to purchase mortgages above $417,00. Democrats have argued that Fannie and Freddie should be allowed to purchase more-expensive mortgages to provide liquidity to a broader group of housing markets.
It seems that affordable housing would expand if prices would come down rather than be propped up by this government guarantee...
"Oh well", as more and more Americans say every day, "it's only money".
11 comments:
Didn't these people use toxic ARM's because they couldn't afford the payments on a fixed interest?
So let's say you took out an ARM to buy a 400k house, only now the house is only worth 300k. And Schumer wants to help you by turning the 400k ARM into a 400k fixed, yeah that sounds like a good plan.
yeah - let's get the taxpayer on the hook for these dodo brains. ... great idea, Schumer
There is little to salvaged from these bad loans, but offering good ones to people that can afford it is a good idea so increasing the caps is a reasonable solution.
Well to speak in Chuck's defense here, in large parts of his state, and mine (NJ), you can't buy a single family house in a non crime ridden neighbor hood for less than 400k.
The 625k limit is a bit absurd though, the poor folks in South Hampton are hurting, and they NEED you help!
I swear to god Schumer was one of the guys screaming that Freddie and Fannie were getting WAY too big for the nations own good a few years ago.
What's consistency in the face of a good press conference?
Schumer has money center banks in his state that are in trouble with these mortgages. This is not about the 'little people.'
Of course this isn't about helping the home owners, it's about helping the lenders who are in danger of seeing all those bad loans they handed out go into default.
The real solution to the subprime mess, for home owners, is to roll back Bush's changes to the bankruptcy rules. You get into a situation where you can't pay your debt, you declare bankruptcy and start over. That's the way it should work, for people as well as corporations.
$73bn will just about cover Orange County. 57 more counties and California is covered. From there the remaining 49 States should be easy.
Good thing this has to get past the Republicans in the Senate and the Executive's Veto.
I know that because of people like this idiot, I would not vote for Democrats in 2008.
People get themselves into financial trouble everyday. To prove my point, I recite an old proverb: "A fool and his money will soon be parted."
That said, I think both parties are under pressure by very large and powerful institutions to "help the people" - which in my mind translates into "help the wealthy that invested in mortgage backed securities".
Mortgage backed securities are high profit and high risk investments. Well, they have certainly enjoyed the high profits for the past 5 years. Now it time for them to feel the high risk side of that equation.
I'm a "lasse faire" kinda person. The governments job is not to bail out stupid people - whether they be rich or poor.
The rich can afford to take the bite - they'll turn it into some form of tax write off. The poor will go back to renting. The middle class will go bankrupt in those McMansions and eventually move back into normal middle class housing.
It's time for a market correction. Painful now, but in the long run, it'll be good for the economy.
Why?
- Mortgage lenders will be more careful about their customers.
- Consumers will (temporarily) be better educated about the pitfalls of ARM's.
- Investors will be more careful about collateral backed securities.
- Home builders will return to building house that people can actually afford to buy.
Overall, this issue is a "tempest in a teapot". Just wait until the Baby Boomers start to retire in mass (~2015) and Soc Security begins it's collapse under the strain. Who's going to bail us out of that one?
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