Tag: Mortgage industry of the United States

How to destroy your city’s housing market

It looks like a bunch of delusional leftards that think laws of economics can be trumped by those of “social justice” and big government meddlers, have decided to make sure nobody in Richmond can get a new mortgage again. Of course, this was all sold as a noble plan to save the poor people fleeced by the evil mortgage companies.

See, the fact that practically every city in CA, where government meddling and regulation of the housing market is so insane that prices are orders of magnitude higher than in other parts of the country where saner policy rules the day, got hammered when the artificially high property values these rules, regulations and building restrictions caused, came tumbling down, is the fault of everyone but the idiots in government that think they can meddle with the laws of supply-demand and economics, or the fools that actually thought they were getting a good deal buying property in CA.

So now the city of Richmond will use imminent domain to confiscate property, then, and this is a big supposedly, turn around and force someone to issue a new mortgage for these homes that are now worth less than the mortgage on them, and in the process somehow make a profit. Wait a minute? Make a profit? Ain’t that evil?

But don’t worry, when this idiotic plan results in nobody wanting to issue mortgages in Richmond, or the few that do demanding exorbitant interest rates, the town can again just confiscate the house and redo it all over! No foreseen or unforeseen consequences at all. This is progressivism in a nutshell: government saves people from making stupid choices, by meddling, causing more imbalances that lead to even more stupid choices, restrictions, rules, and regulations that drive up costs, availability, and access, which then necessitates even more government meddling to address these new problems and issues. And the circle keeps going on and on, with people losing more and more freedoms, government growing bigger and assuming more responsibilities, the inefficiencies and costs skyrocketing, and in general, things getting worse. But don’t tell progressives, either those in government or those looking for the free shit, that. They meant well, and that’s all that counts.

Look, I have no sympathy for the mortgage industry. But I understand them and what they are doing. I also understand the big government types and what the things they have done have caused. And while it might not be clear to everyone, to me the big government types have done far more harm than any of these evil profit making entities they constantly claim to be fighting for the little guy. The fact that the little guy ends up squeezed more and more very time, especially those that do the right thing in the first place and then end up paying for the ones that don’t, seem to remain immaterial to the conversation that we should be having. If you dare to point out that you are getting screwed by those that reward bad behavior, you are made out as the bad guy. Go figure.

Winding Down the FM’s

Gee, it only took him five years to get where everybody else was:

[President Obama] proposed to “wind down” Fannie Mae and Freddie Mac, for the first time outlining his approach to overhauling the two giant mortgage-finance companies that were taken over by the government when they failed nearly five years ago. The companies, which Mr. Obama described in an appearance here as “not really government, but not really private sector,” recently began to repay taxpayers.

Since early 2011, the administration has voiced support for overhauling Fannie Mae and Freddie Mac, which long benefited from an implicit government guarantee. Years ago the companies came to symbolize a self-dealing Washington culture beneficial to both parties, and especially Democrats, but Mr. Obama’s remarks on what comes next were his most specific. For several years, the administration held back from revamping the mortgage-finance system for fear of rattling a weakened market.

Mr. Obama on Tuesday endorsed the thrust of bipartisan legislation from a Senate group that would “end Fannie and Freddie as we know them.” The so-called government-sponsored enterprises for decades bought and sold mortgages from financial institutions to provide money for the banks to keep lending to home buyers.

Under Mr. Obama’s principles, which he said were reflected in the Senate bill taking shape, Fannie Mae and Freddie Mac would further shrink their portfolios and lose the implicit guarantee of a federal government bailout. Instead, private investors would be most at risk, with the government a secondary guarantor.

I would prefer to do away with them all together, but shrinking them and ditching the government guarantee would be a good first step.

Still, it’s worth pointing out that conservatives and libertarians were mocked and jeered for years when they called for precisely this policy. In fact, we were branded as economic idiots when we called for reforming the GSE’s before the financial crisis hit. I guess acknowledging the deep problems created by the GSE’s is OK now that Democrat is doing it.

Meet the New Standards, Same as the Old Standards

Well, knock me over with a feather:

The government is establishing new rules for mortgages that will make it harder for some borrowers to qualify but that are designed to prevent the kind of risky lending that nearly caused the housing market to collapse during the financial crisis.

The Consumer Financial Protection Bureau on Thursday will roll out the first of several far-reaching changes to the nation’s mortgage market, limiting upfront fees and curtailing practices such as interest-only payments that can leave homeowners stuck with unsustainable loans. The agency also will set standards for how much income a consumer must have to obtain a mortgage.

To obtain a qualified mortgage, a borrower cannot have a debt burden that amounts to more than 43 percent of income. That may make it more difficult for people with lower incomes to qualify. In real estate markets such as Washington, where prices are high, prospective buyers could run up against the cap as they stretch their finances to purchase homes.

In return for complying with the standards, a bank would be immune from most lawsuits. However, I’m sure that, if another collapse happens, the government will bail out the banks who don’t play by these rules as well.

Gee. It’s almost like someone realized that simply handing out sacks of money to anyone who walks in the door isn’t such a hot idea! After years of pushing banks to lend, lend, lend, the government is finally asking them to do what they should be doing anyway.

The pressure on banks to make stupid loans in the last decade were simply enormous. You had the CRA, the implicit guarantee of Fannie Freddie and the enormous pressure from the CDS and CDO markets to produce more tradable mortgages and damn the fundamentals. You then had a bailout which took only the downside risk of bad lending practices.

So having thrown all their weight — through CRA, Fannie/Freddie and bailouts — toward encouraging banks to make riskier and riskier loans, the Feds are now stepping in and saying, “Hey, you shouldn’t make risky loans! Ha-ha! Glad we finally reigned in you capitalist idiots. Why if it weren’t for us, you’d forget to lock your vaults at night.”

Here’s a prediction: these standards will pass. And in a few years, the government will start pressuring banks to make risky loans again. They will do this because securities brokers have lobbyists too. They will do this to promote home ownership, even among those who can’t afford homes. They will do this for “fairness”. But whatever the excuse and whichever party is in power, they will do it.

Because the mantra of the Nanny State always holds: whatever is not forbidden is mandatory. And preferably both.