Posted on 06/30/2011 6:22:02 AM PDT by Kaslin
The geniuses running things now days have come up with an excellent way to bring down foreclosure rates: Make the down payment on a house so big that only rich people, who we are going tax extra anyway, can afford to buy homes.
Talk about creating class envy. Way to go Obama! Another mission accomplished.
So let’s say that the median home price is $163,000, more or less. Under the Obama proposal- authored by top housing experts Rep. Barney Frank (D- Fannie Mae) and Senator Chris Dodd (D- Countrywide Mortgage)- one would have to put down 20 percent or $32,600, regardless of credit history or income in order to qualify for a conforming mortgage.
The alternative would be paying a risk premium to the bank.
To quote the movie Billy Madison, I think I speak for all of us in saying I’m a little dumber for having read this proposal by Dodd-Frank for solving the sub-prime housing crisis in America.
Only the guys who tried to solve the problem of the federal government being too involved in the mortgage business by making the federal government more involved in the mortgage business would try to solve the sub-prime housing crisis by making us all sub-prime borrowers.
Barney Frank's stupidity can only be matched by the people who vote for him time after time to represent them.
“We need to strike a balance between reducing investor risk and providing affordable mortgage credit. Better underwriting and credit quality standards have greatly reduced risk. Adding unnecessarily high minimum down payment requirements will only exclude hundreds of thousands of buyers from home ownership, despite their creditworthiness and proven ability to afford the monthly payment, because of the dramatic increase in the wealth required to purchase a home,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I
The way to strike that balance is by getting the federal government out of the business of making and guaranteeing home loans and letting the market determine what the down payment and credit criteria should be for loans.
But allowing lenders to think, rightly as it turns out, that whatever decisions are made, Uncle Sam will stand by you was a recipe for disaster.
This new proposal makes it a double disaster. It ensures that the only entity that will be writing mortgages will end up being the government.
It essentially tells banks that they are too stupid to make loans and that the only ones smart enough to be in the loan business are the Feds.
“Saving the necessary down payment has always been the principal obstacle to buyers seeking to purchase their first home. Proposals requiring high down payments will only drive more borrowers to FHA, increase costs for borrowers by raising interest rates and fees, and effectively price many eligible borrowers out of the housing market,” said Phipps.
If you own a home, good for you.
If you don’t, congratulations: It will take you 20 years -probably more- to save up a down payment for a new home. Just about the time your kids are grown up and going to college, you’ll get to buy your first house.
Yes, we can ration healthcare, jobs, credit and housing. After all, we’re all Socialists now.
Even the National Urban League agrees the rule is dumb.
“When coupled with an additional requirement of near pristine personal credit standards, these proposed requirements could end the standard 30-year fixed mortgage and replace it with a new class of ‘high risk’ borrowers, formerly known as the responsible middle class borrower,” said Marc H. Morial president and CEO of the National Urban League.
“Clearly, what is being proposed is anti-jobs, anti-growth, and in absolute contravention of the American Dream,” he concluded.
20% down was the norm up until very recently.
Many people have no business owning a home.
And the Aholes got you on the other end too, by putting 3.8% Medicare tax on unearned income, which includes the sales of homes...
We got into this mess because the law pretty much said that financial institutions had to give everyone a mortgage no matter how risky they seemed. That was a bad idea. So, tighten the lending rules. What's wrong with that?
Note: My preferred method is not government regulation (of which we have too much) but sound lending practices by companies that fully understand that they will go bankrupt if they make bad loans. No bailouts. No rescues. Just sound business practices.
Romney's state?
“So let’s say that the median home price is $163,000, ...- one would have to put down 20 percent or $32,600,”
Ok, so what’s wrong with buying a less expensive house? Not everyone owns a home valued at the median price. By definition, 50% of the homes are BELOW the median.
By what you can afford, so that you can build a little wealth as you go, etc.
oops; buy not by
Actually, for people with good credit, 30 year mortgages with 10% down payments could often be found. I bought my first townhouse/condo with just such a mortgage in 1972, at an interst rate of 7.5%. The developer who built the complex made a sweetheart deal with a local S&L that financed the development and then provided the bargain mortgages to the developer’s purchasers. It was a good deal for everybody. Once again, the free market did far better than the government could.
You can’t OWN something without having any equity in it...that’s called renting/leasing..
Twenty percent down used to be the standard until the feds started flooding the market with funny money and underwriting loans nobody should have made to begin with. Now the same jamokes who broke the system are proposing to regulate a return to the system that worked just fine before they broke it!
Talk about job security ...
Subcategories: Fraud, Ransom, Payola, Bribery etc.
You got that right!
Get the feds entirely out of the mortgage business.
NO federal guarantee for mortgages, excpet for families of the uniformed military. We owe them everything we can do.
All those currently with a FHA mortgage, your mortgage rate and terms would be very different if the Feds were not involved. Median house prices would go back to a more normal 2-2.5 times local median income.
Eliminate all INSANE land use restrictions. That would help to bring back true “starter homes”. No more 5 acre lot minimums.
Dramatically reduce lending business restrictions. If I want to lend you money to buy a house, it is a PRIVATE contract issue controlled by private property and liability laws.
Private property and respect for contracts helped build America. It wil help restore the housing market.
20% down and stop shoving people into house’s they cannot afford.
Look at the salary these folks are making and tell them flat out they cannot make the payments on a house that large.
Real Estate people are famous for telling people they can afford house’s they actually can never afford to pay for.
Everyone cannot afford a McMansion.
People used to be smart enough to figure that out for themselves.
I disagree with the premise here. Not everyone deserves to own a house. Not everyone can afford a house. Lenders should not lend to people who may not be able to repay the loan.
According to Dodd, Frank, Clinton and the others, applying this rock solid logic is racist. Unbelievable, isn’t it?
Building Lot 80,000.00
Materials 30,000.00
3 Carpenters 75,000.00
Total Value 185,000.00
The real fraud lies with the banks. Under no circumstances should a bank approve the purchase price for any more then the actual value of the unit being financed.
Here in the North East, a house worth 185,000.00 would be selling for 330,000.00.
This is what went wrong.
20% was pretty much standard for decades.
Ironicly, Barney Frank helped create the forclosure crisis by pushing through laws that forced banks to make loans to people who couldn’t afford to buy homes. This included abandoning the 20% rule which ended up being an almost 0% rule.
Under thw 20% rule first time home buyers purchased “starter homes”, which were truly just that. Small inexpensive homes that got you into a house at a modest cost. After a few years, when you had built up some equity, you were able to sell the starter home and move into a slightly larger home. You’d repeat the cycle a cople of more times till you worked your way up to your “dream house”.
But with the abandoning of the 20% downpayment rule, people went directly from renting to “dream house” in one fell swoop. Millions of people were able to buy houses the in no way could afford, simply because they weren’t required to put any money down. In effect, they had no skin in the game. From their perspective, if they lost the house, they didn’t lose anything, because they really didn’t have any money in the house to begin with. In effect, home ownership was turned into just another form of renting.
The reason sound lending practices went out the window, is that risk was eliminated for the lenders.
They knew they could sell any loan they made to Fannie Mae. And Fannie Mae was willing to buy those loans, because it had a government safety net.
How is this any different than what many lenders do with PMI? If you're a borrower, and can't come up with a full 20%, you pay a little extra each money for "insurance" against your loan. I assume this insurance is financed by the borrower, but the beneficiary is the lender.
Many buyers are OK with this concept, because their income level may be sufficient enough to pay for it, but their savings may not be enough to cover the full 20%. Why do we need a government rule mandating this? I think lenders have figured it out.
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