Administration Calls for Cutting Aid to Home Buyers

[Little Star]

The Obama administration’s much-anticipated report on redesigning the government’s role in housing finance, published Friday, is not solely a proposal to dissolve the unpopular finance companies Fannie Mae and Freddie Mac. It is also a more audacious call for the federal government to cut back its broadly popular, long-running campaign to help Americans own homes. The three ideas that the report outlines for replacing Fannie and Freddie all would raise the cost of mortgage loans and push homeownership beyond the reach of some families.

That fact is already generating opposition in Congress and among groups like community banks and consumer advocates.

But administration officials said they had concluded the country could no longer afford to sustain its commitment to minting homeowners. Better to help some people rent.


http://www.nytimes.com/2011/02/12/business/12housing.html?_r=2&hp

[rurallib]

1. Obama's a democrat, correct?

well, with fewer people owning a home there will be less need for LIHEAP.

[NutmegYankee]

4. Even renters need heat...

[rurallib]

8. a bad attempt at gallow's humor.

[Occulus]

9. No.

Obama is a Corporatist.

He's part of the hidden third party, a party which fields no candidates and airs no advertisements, yet which has nonetheless infiltrated and almost completely compromised and co-opted the worst aspects of both Democrats and Republicans.

Members of the Corporatist Party do not deserve this country, or any country. They deserve to be made into social pariahs, bereft of dignity, bereft of grace, and wholly rejected from civilized and polite company.

And to those who would take offense to my characterization of the man I so foolishly voted for, the man whose silver tongue led so many of us down the primrose path to ruin and regret, I have only this to say: may the policies of your Beloved and Canonized allow you to freeze this winter, not to the death, but to the pain, because there is nothing so painful as being intentionally left out in the cold by those in whom you have placed your greatest trust.

[Name removed]

28. Deleted message

Message removed by moderator. Click here to review the message board rules.

[emilyg]

36. +++++

[LiberalEsto]

30. We still have a two-party system

Republicans masquerading as Democrats,
and Teabaggers

Anyone who says they belong to the Democratic wing of the Democratic Party is considered part of The Left.

[neverforget]

2. The rich need their tax cuts and the mic needs to be fed. The poor

and middle class are being destroyed.

[FreakinDJ]

3. Will ADD more downward pressure on Home values

just in time for the Boomers to "Cash out and Retire"

[Poboy]

5. true.

[dkf]

19. We need more downward pressure.

It's still unaffordable, at least where I am.

[FreakinDJ]

23. Put a dollar amount on "Unaffordable" for me

I mean with houses selling for $100,000 and less here in California I find that pretty hard to beleive

[dkf]

26. Hawaii.

HONOLULU (HawaiiNewsNow) - October home sales on Oahu fell from year-before levels as the median price fell below $600,000, real estate agents report.

Easing prices and sales volume followed a trend across the islands, and realty officials said homes with "realistic" prices were selling rapidly while others sat.

Some 241 homes went to closing on Oahu in October, down 17% from 290 in October 2009. The median price, $595,750, was down from $620,000 in September and $604,500 a year earlier. Two years ago the median was $610,000.

Realtors said 310 condos went to closing in October, up from 300 in September but down from 394 in October 2009. Median price was flat: $300,000.

http://www.hawaiinewsnow.com/Global/story.asp?S=13472183

[FreakinDJ]

39. Foreign Investors have inflated the price of Home in Hawaii

Sorry - buy its not us Howleys this time

If it makes you feel any better, Foreign Investors did the same thing in my home town during the late 70s and 80s to the point I had to move away to afford a home. So the feeling of not being abel to afford a home in the town you grew up in is mutual

[barbiegeek]

29. Get Out-No Way- House in California for 100,000?? I thought they

were all like a 1/2 a million.

[FreakinDJ]

38. Distressed 2 Bd 1 Br went for $89,000 in town

By distressed I mean the former residents took all the doors, cabinets, even the fence when they left

[barbiegeek]

41. North or Southern California? WOW

[saras]

6. Besides, renting moves money UP the ladder

It's another way to keep the lower classes from accumulating wealth, which then requires annoying disruptions to society in order to steal it. Better to just make them pay their masters from the get-go.

[barbiegeek]

33. Is Rent control a national law?

[mmonk]

7. The plan has its defenders here.

You'll see soon enough.

[Name removed]

11. Deleted message

Sub-thread removed by moderator. Click here to review the message board rules.

[treestar]

16. It has people who want to find out more about it first

And what is really being advocated. Every single suggestion people don't like is immediately attributed to "obama is going to do this." Sorry this board has lost credibility on that. No way will I jump on a bandwagon until I've learned a lot more and heard from both sides.

People who just want to trash Obama find this kind of thing useful - it's easy to get the gullible on board immediately.

I am sure no DUer is expert enough on this program to know what should be done with it. Or recognize any option that is considered except the one they can most easily use to pretend that Obama is doing something like attacking the social safety net. It's happened too many times before on too many issues.

[mmonk]

20. While it is just a report so far, lenders are already making adjustments

and investors are already picking winners and losers on Wall Street. I do not know which way it will go but to pretend the administration is completely uninvolved seems a little silly. As far as the report itself, I know enough. I'm in the real estate business and also have been schooled in what we've had involving legislation related to housing and its history. That gives me at least a working perspective.

[Divernan]

34. US Bank assigns risky status to businesses doing business with state and local govts.

A little off topic, but re adjustments lenders are making:

I learned last night that the economist for one of the 5 largest banks in the US briefed said bank that the economic outlook is so dire for state and local governments that extra caution should be taken in considering lending to businesses which rely on state and local government units as customers.

[mmonk]

42. It is also affecting the outlook for state and municipal bonds.

Unfortunately, I have a lot of funds in those. I'm getting screwed by Reaganomics every damn way I turn.

[boston bean]

22. do you not know what "administration officials" are.... Tim Geithner, et al......

"Treasury Secretary Timothy Geithner said closing Fannie Mae and Freddie Mac might take five to seven years."


"But administration officials said they had concluded the country could no longer afford to sustain its commitment to minting homeowners. Better to help some people rent."

[boston bean]

10. from the article on 30 year fixed mortgages...

"Investors also may be reluctant to provide money for 30-year fixed-rate mortgages, a product that has never existed without government support."

[Name removed]

31. Deleted message

Message removed by moderator. Click here to review the message board rules.

[QC]

43. This will, of course, force more people into casino mortgages. Rates go up,

you lose your house.

Not exactly a good thing, at least not for ordinary people, but when did we ever count?

[sufrommich]

12. This will result in a glut of unsellable houses and more people

walking away from their mortgages.Personally,now that I'm retired I'd like to downscale and sell my house. If there are no buyers because of constrictions on buyers, I will walk away from it.

[Poboy]

14. I wouldn't blame you. Just as I wouldn't blame anyone who is underwater right now.

Fuck it. We are always bailing out the elite, and get shit on in return.

[dkf]

13. Do these programs make housing more or LESS affordable?

Housing prices are crazy. We need to take a look at what policies will prevent speculation and keep an orderly market that will work for the people at the lower end. I'm not sure subsidizing mortgages helps.

[boston bean]

15. It makes home ownership more expensive.

putting ownership out of the reach of millions.

no more 30 year fixed mortgages.

glorious unregulated rental monopolies.

Lovely!

[sufrommich]

17. I don't think it will spell the end of 30 year mortgages.It will

severely limit the number of people able to get mortgages though.

[boston bean]

18. from the article..... I'm sure you'll be able to get a 30 year mortgage, but not a fixed

mortgage.

[FreakinDJ]

24. It doesn't make it more affordable - just Banksters get MORE Money

Long known Market Factor in Housing : As Mortgage Rates go up / Home Prices go Down - BUT MORTGAGE PAYMENT STAYS THE SAME

[mmonk]

35. It will hurt on the transaction end. It will cost potential home buyers more

to get a mortgage in basis points and down payment requirements.

[kiva]

44. Crazy? Not in Nevada. Or California, from a poster above.

It sounds as though Hawaii may be an exception to the rule.

[grahamhgreen]

21. Of coooooooooourse!

[starroute]

25. There actually are good progressive arguments against home ownership

One is that it reduces the mobility of labor. Right now, with the economy in the worst shape it's being in for most of our lifetimes, people aren't even able to pull up stakes and go where there might be jobs because they're locked into unsaleable homes.

Home ownership and the tying of health insurance to employment are two things that have frozen up our economy and made it less able to adapt to changing circumstances, and anything that unfreezes it is a good thing.

That said, though, if there's less support for home ownership there has to be more support for renters -- and I don't particularly see that on the horizon. Given the current state of our nation, if more people are forced to rent, landlords will only become more predatory and gentrification will continue to squeeze out the poor.

What I'd really like to see is government support for affordable middle-income and low-income rental housing, combined with easy access to public transportation. And I'd rather see progressives putting their weight behind that than pushing to continue a failed subsidization of home ownership.


On edit: Another problem with the current system of home ownership is that many people are completely priced out of certain towns or neighborhoods. This means that young people looking to set up on their own may not be able to afford to live where they grew up and where their parents still live. It also means that police and firefighters are often unable to live in the communities where they work.

All of this weakens the bonds of community in multiple ways. It leads to a situation where people have no ties to their neighbors, where older people see no reason to vote for school bonds (because, after all, it's not their own grandchildren), and where public servants are not rooted in the communities they serve.

Again, simply making home ownership more difficult won't automatically correct this -- but keeping the current system locked in ensures there will never be an impulse to fix it.

[boston bean]

27. I prefer to own my own property thank you and not be at the whim of some

corrupt, unregulated bank determining my future.

that's pretty progressive, no?

I guess we could go back to the times where many lived in slums. That seems pretty regressive to me.

[barbiegeek]

32. Question: How do other Countries in Europe or Japan do it?

Everything in Japan is like a High rise due to land shortage. What do other countries with less land that are socialist do? Is an apartment classified as a home?

I find this whole debate confusing.

[ProSense]

37. Fannie Mae and Freddie Mac aren't

lenders.

Fannie Mae and Freddie Mac could be wound down

<...>

Fannie Mae was founded in 1938 at a time when millions of families could not become homeowners, or faced losing their homes, because of a lack of mortgage funds. It was a government agency until 1968.

Freddie Mac was created in 1970 to provide competition to Fannie Mae.

The firms do not lend directly to homebuyers, but buy mortgages from approved lenders and then sell them on to investors.

<...>

Over the last decade, privatization turned them into large out-of-control entities that did nothing but funnel money to financial institutions. Add to that the fact that the CEOs of those agencies were earning tens of millions each year.

<...>

It is true that pay at Fannie and Freddie used to be even more criminogenic. According to the Los Angeles Times:

In 2007, then-Freddie Mac CEO Richard F. Syron had a base salary of $1.2 million and total compensation of $18.3 million, according to SEC filings. In the same year, Daniel Mudd, the chief executive of Fannie Mae, had a base salary of $987,000 and total compensation of $11.7 million.

Those were the days, when you could in a single year be made wealthy for destroying a company and causing scores of billions of dollars of losses to the taxpayers. The title of Akerlof & Romer's famous 1993 article has never looked more prescient -- "Looting: the Economic Underworld of Bankruptcy for Profit."

<...>

The proverbial bottom line is that a global search for talent, after Fannie and Freddie's second descent into accounting control fraud bankrupted both firms, Fannie and Freddie (with its regulators' blessing, chose Witherell. (Heidrick & Struggles, which describes itself as the leading executive search firm, issued a press release praising itself for finding Witherell.) When Obama knew he had to clean up the Stygian Stables that were Fannie and Freddie -- knew that their senior managers and their regulators had failed catastrophically -- he left in charge the failed regulatory leadership team. The regulator team allowed Freddie to select as its COO one of the leaders in the creation of the liar's loans that were the greatest single contributor to Freddie's failure and the financial crisis. This was bizarre politics -- the senior regulator Obama left in power until his voluntary resignation was a Republican chosen because he was George Bush's close friend since their days together in prep school. It was even more insane regulatory policy.

<...>

Fannie and Freddie have no need to pay these high salaries to senior managers. It was the perverse executive compensation that drove the accounting control frauds at Fannie and Freddie -- as the SEC explicitly charged. Executive compensation created the perverse managerial incentives that destroyed Fannie and Freddie. This was an unanticipated consequence of their privatization. Because Fannie and Freddie were privatized, their officers designed their compensation system in the same perverse manner as most firms (Bebchuk & Fried 2004). The mangers stood to gain enormous compensation if they inflated short-term accounting income, and as Akerlof & Romer famously observed, accounting fraud is a "sure thing." Mr. Raines explained in response to a media question what was causing the repeated scandals at elite financial institutions:

link

The Proposal is going to strengthen the FHA.

Obama Administration Plan Provides Path Forward for Reforming America’s Housing Finance Market, Winding down Fannie Mae and Freddie Mac

National Community Reinvestment Coalition statement

National Housing Trust Fund Campaign statement

[mmonk]

40. They buy and sell mortgages on the secondary market.

It was a way to protect homeowners through qualifying them with set rules and have them sold to private funding sources.

[barbiegeek]

45. Please make this a post so we can learn this! :)