What Constitutes Progress
Readers ss a topic on house buying, financing and owning. “I’d like a better understanding about the historical context of home financing/owning/buying.
1) The evolution of FHA, HUD, VA loans, etc. (And how were homes purchased prior to the invention of the 30 year mortgage?)
2) Historical down payment requirements.
3) Redlining and flight to the suburbs
4) Impact of the change when they allowed exclusion of housing capital gains instead of rollover requirements (late 90’s if I remember correctly). (Did this perhaps begin the ATM mentality?)
5) When did we adopt the “move up the property ladder” mentality instead of aiming for the goal of a lifetime home and a mortgage burning party?
6) The creation of adjustable loans (early 80’s I think).”
A reply, “You can’t have a analysis of the items you mentioned without considering how the repeal of Glass-Steagall Act in 1999 had on the financial markets. Basically getting rid of Glass-Steagall ( enacted in 1933 ) removed the separation between Investment Banking and commercial banking. In the 1930’s after the great stock market crash they figured out there was a conflict of interest between investing and lending and the two worlds should be separated. Basically the investment world will resort to faulty lending because they want the person to make the investment. Lending should be based on qualifying for the loan ,not how attractive the investment is for the future in other words, and the 2 worlds have different principals .”
“It didn’t take them more than 7 years from the repeal of Glass-Steagal to screw up the entire financial markets when the crash of real estate gained speed. People went into debt based on the wealth effect of fake real estate prices ( destined to crash ). De-coupling debt from ability to pay is crazy.”
One said, “The idea was home prices would go up 15% a year (in the bag) and ability to pay was irrelevant. What I am trying more seriously to figure out is how to either make the debts go away gracefully or inflate the money supply to cover the debts. Once people realize that the debts, at least the real component of the debts is largely held by pension funds, governments etc will allowing debt failure remain an option. If not an option, so far efforts to print money have not made it down the chain where they can do any good…”
A reply, “What, if Freddie & Fannie with the fed’s backing offered 80% financing, on a owner occupied SFR, @ 0% interest rate for 30 years…Would the market clear ??”
I asked, “Along these lines, someone suggested this week that we have a topic on what readers would like to hear or not hear from presidential candidates.”
To which was said, “Similarly, and I know this is slightly OT, how could a sane and responsible ‘third’ political party be created?”
A reply, “I don’t know that a third party could work. The two that currently exist have so much organization, money and whatever that they have to win. With a substantial third party, you are almost always going to split one of the two and throw the election to the one that isn’t split.”
“What I think you might be able to do in the age of the internet is get a few people to run for office with a pledge to not take any money from PACs, contributions of no more than $200 (or something like that) from any one person, and the staff looking after donations would not communicate to the candidate/person in office any information about you have X number of donors from industry Y so that X percent of your support was from that industry. No one who worked with donations would be allowed to get a regular staffer job. If any person or company came in to give information to the staff or candidate (or office holder) and mentioned contributions or told how much they gave or aggregated in the past, they would be asked to leave and couldn’t come back for 6 months. Every time someone got themselves kicked out, it would be tweeted and put up on the web as well as released as a regular press release. No junkets - if the candidate had to go on a trip for information purposes, he or she would pay for it.’
“If a candidate could actually get elected under those rules, he or she would have amazing freedom that the money scroungers don’t have. And a few of them just might be able to shame the rest of the Congress into behaving a little better.”
Another added, “The internet could possibly be the tool for undermining the stranglehold that the big financial interests have on our government, because these financial interests also have a large measure of control over the traditional media.”
And finally, “It doesn’t matter what the Presidential candidates say. All you need is 40 Senators in the other party and CSPAN turns into Hostage TV.”
From The Hill. “Plans to boost the stymied housing market continue to emerge, with a New York Democratic lawmaker adding his proposal that would provide incentives for real estate investment to sell 3 million existing homes into the mix. Rep. Gary Ackerman will introduce a bill when Congress returns from its August recess designed to spur home sales and ‘to decrease the glut of 3 million existing unsold, vacant, often-blighted and foreclosed properties that are currently impeding economic recovery across the country.’”
“The measure would offer 2 million qualified borrowers a matching subsidy of up to $20,000 for a down payment for single-family home purchases. The subsidy would be a loan, with 20 percent forgiven in each of the first five years of owner-occupancy.”
“To help cover the cost of these programs, the bill would use currently unrealized revenue by leveraging the first $500 billion of the estimated $1.2 trillion ‘in idle capital that U.S. companies have sitting off shore and incentivizing those companies to bring the money home by reducing the corporate tax rate on repatriated earnings to 10 percent. That revenue would cover the cost of the program,’ Ackerman said.”
“Last week, the Obama administration announced that it is seeking creative ways to revive the sluggish housing market by selling off certain repossessed properties, a move Sen. Jack Reed (D-R.I.) has said goes along with his plan to turn vacant, foreclosed homes into rental units. Reed’s proposal seeks to increase the resale value of vacant foreclosed homes for Fannie Mae and Freddie Mac by turning them into profitable rental units that could be sold to the private sector. The senator’s plan to retrofit and renovate the houses would create jobs.’
From CBS News. “Republican presidential candidate Rick Perry officially jumped in the race for the White House Saturday and is already considered a major player. Perry has a double digit lead over former Massachusetts Governor Mitt Romney, according to one poll released Tuesday. Perry is not backing down from his controversial remark that it would be ‘almost treasonous’ for Federal Reserve Chairman Ben Bernanke to try to boost the U.S. economy ahead of next year’s election.”
“‘If this guy prints more money between now and the election, I dunno what y’all would do to him in Iowa but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treasonous in my opinion,’ Perry said when asked about his views on the Federal Reserve.”
‘Bernanke, who served as a top White House economist under Bush before becoming Fed chief in 2006, has lowered interest rates and overseen a host of extraordinary measures to revive the U.S. economy which was officially in recession from December 2007 through June 2009.
US News and World Report. “Texas Rep. Ron Paul’s presidential campaign is taking a victory lap this week as he is vindicated for standing by his views on the Federal Reserve. While Paul has long been considered outside of the mainstream for his strong libertarian views, some of his predictions have come to pass—like the housing bubble’s burst and the recent economic downturn—and some of his views are now hitting center stage.”
“‘What fascinates me,’ he said with pride, ‘is we’ve been talking about and thinking about and understanding [this] for so long, who would ever have thought, you know, the former speaker of the House would come out and say, ‘Audit the Fed!’”
“And former Speaker Newt Gingrich isn’t the only other candidate focusing on the issue, as Paul pointed out. ‘Now we have this other governor—I can’t remember his name—who’s coming into the campaign,’ he joked, referring to Texas Gov. Rick Perry. ‘He realized that talking about the Fed is good too.’”
“‘But I tell you what,’ Paul continued. ‘He makes me look like a moderate. I have never once said Bernanke has committed treason. But I have suggested very strongly that the Federal Reserve system and all the members have been counterfeiters for a long time.’”
“The past two months have taught us that the Republican presidential candidates are going to try to make the 2012 election a referendum on President Obama’s first term, and one of the most effective means of attack is starting to pop up both on television screens and websites — using the president’s words against him.’
“Former Massachusetts Gov. Mitt Romney’s (R) campaign has released a series of videos over the summer in that vein. Romney’s campaign released a video presaging a visit to the early primary state of New Hampshire. Once again, neither Romney’s face nor his words shows up in the ad. Instead, it leads with the president’s promise in 2008: ‘We Democrats have a very different message of what constitutes progress in this country. We measure progress by how many people can find a job to pay the mortgage.’”
‘The implication was obvious: With a 9.2 percent unemployment rate at the time the ad ran and housing prices continuing to struggle, holding jobs and paying off mortgages were even more difficult than when Obama ran for president.”
From WTMJ. “People looking to buy or sell a home can find out more information from a national organization touring through the Milwaukee area on Wednesday. The National Association of Realtors has a bus tour which has been scheduled to make two stops in and nearby Milwaukee.”
“‘We’re here to help. We know a number of programs and resources to hep people facing the situation of foreclosure,’ said John Horning, the Chairman of the Wisconsin Realtors Association.’
“People could meet with those in the realty industry if they were facing foreclosure, a short sale, or simply if they wanted to get a better mortgage deal. Those attending could learn how to reduce loan payments, which in this market could mean being able to stay in their home.”
“The group is also making its voice heard in Washington, D.C. with federal officials. ‘There’s a lot of opportunity right now, and our message in D.C. is (not to) do any harm in the housing industry. That would harm our economy.’”
