Saturday, February 12, 2011

Really - they're not

If you are still prone to wondering about who is on what side, consider that besides expanding the "national security" prerogatives of the Executive branch, cutting aid to the poor, "containing" Social Security benefits, and never never raising taxes on the rich, there is something else on which the wackos and the White House agree: Fannie Mae and Freddie Mac
should be left to die and that their support for the housing market should wither away. ...

Federally backed Fannie and Freddie buy mortgage loans and guarantee them against default. This government guarantee has lent certainty and stability to the housing market, keeping funding available and interest rates low, at a time of severe stress. Fannie and Freddie, combined with the Federal Housing Administration, which supports low down-payment loans, have been behind more than 90 percent of new home loans in recent years.
In other words, they have expanded the possibility of home ownership to moderate- and lower-income people who never could have afforded a house otherwise and helped to secure the housing market against collapse until the greed of the bankers was too much to bear so when the giant investment houses went down, the undertow took Fannie and Freddie with them. The wingnuts have always hated them precisely because of the leverage they gave to ordinary workers and other members of the non-elite, so when the opportunity to (falsely) blame them for supposedly causing the 2008 financial meltdown arose (it would be more accurate to call them victims or at worst accessories after the fact), the wackos of course took it. What PHC's reason for agreeing to kill the firms off is less clear.

Oh, wait, maybe it's not:
"I think it's absolutely the case that the U.S. government provided too much support for housing, too strong incentives for investment in housing," Treasury Secretary Timothy F. Geithner said Friday during a speech at the Brookings Institution.
So to correct that egregious interference in The Free Market (pbui),
[t]he Obama administration wants to raise fees for borrowers and require larger down payments for home loans as part of a long-term effort to restructure the nation's housing market. ...

[T]he administration said it intends to wind down the federal mortgage giants Fannie Mae and Freddie Mac and curtail the Federal Housing Administration to help reduce the government's outsized role in mortgage funding.
Significantly, as it did it admitted that the plan
could boost mortgage rates and make it harder for home buyers to secure the 30-year fixed-rate mortgage, a mainstay of American home buying for decades.
So, in sum, the plan is for higher fees, bigger down payments, higher interest rates, and fewer fixed-rate mortgages. All to correct the supposed mistake of having helped ordinary schmucks like us buy a house by, it certainly appears, making it harder for us to get one.

This despite the fact that people who have the biggest mortgages, those in excess of $1 million, are far more likely to be delinquent than those with smaller loans (1 in 7 versus 1 in 12) and a 2008 study by the Local Initiatives Support Corporation found that
[m]ortgage defaults stem from loan products not income level....

Delinquency and foreclosure rates for subprime borrowers were comparable across all income levels, according to Michael Rubinger, LISC president/CEO.
Even Timmy G. says that part of the problem was that
the government "allowed a huge amount of basic mortgage business to shift where there was no regulation or oversight"
and even the Wall Street Journal, for pity's sake, referred to "lax lending and speculation" as inflating the housing bubble and unless you know a bunch of blue-collar or middle- and lower-income families who are housing speculators, that wouldn't seem to be directed at us.

Doesn't matter. The problem in their minds is still that all those déclassé people were helped to buy houses, when they should be grateful for the opportunity to pay someone else for the privilege of living where they do, as
[t]he report emphasized the importance of rental housing for low and moderate-income communities.
Now let me be clear: I have nothing against rental housing. I have rented and I have owned and while overall I prefer owning, the place my wife and I lived before here, a place we had hoped to live in for a long time, was a rented apartment. Rather, it's that I agree with
John Taylor, president of the National Community Reinvestment Coalition, [who] said his group supports the effort to expand affordable rental housing, but he feared the plan's effect on working-class home buyers who couldn't afford the higher upfront costs.
And what enrages me is the attitude, the attitude that, despite the facts of the matter, the facts that indict Wall Street avarice, corporate corruption, and financial speculation as the drivers of the burst bubble, the attitude that the real problem with the housing market is that too many non-wealthy people were able to be in it. The self-blinding hubris is breathtaking.

Fortunately, there is some pushback coming from "some influential interest groups." (Are the banks ever called an "interest group?")
They include small banks, real estate agents and consumer groups, who all say that Fannie and Freddie, or something similar, are crucial for sustaining the struggling housing market. ...

Some business groups, such as small banks and credit unions, are worried that the demise of Fannie and Freddie would allow large financial firms to dominate the mortgage market,
an even bigger concern than you may realize, considering that according to a study by researchers at Ohio State University which was released last month,
[e]ven the riskiest borrowers tend to have an easier time dealing with their home loan obligations if they got their mortgage from smaller local banks.... If two homeowners with similar credit ratings get a loan for the same amount and at the same interest rate, the one that went to their local bank will default far less often.

“The door you walk into when you’re looking for a loan matters a lot,” said Stephanie Moulton, assistant professor at OSU’s John Glenn School of Public Affairs. “Local banks seem to offer some protection to homebuyers, particularly those with low incomes who may be seen as risky borrowers.”
Which makes PHC's* plan a double whammy: harder-to-get loans from places less willing to work with you afterwards.

Bottom line:
"The administration today has laid out a series of options that could lead to the abandonment of a nearly 70-year commitment to affordable homeownership by working American families," Barry Zigas, director of housing policy for Consumer Federation of America, said in a statement. "American consumers need policies that will foster affordable, long-term fixed rate mortgages, as well as a stable supply of capital that will be available to lenders of all sizes, including community banks and credit unions."
Which is exactly what PHC would see us denied.

Footnote: Timmy G. does not want to completely abandon a federal role in the housing market. He said that
whatever path lawmakers choose for Fannie and Freddie, there must in the future be "some capacity for the government to step in and protect the economy from the collateral damage that can come from that sort of crushing deleveraging, big withdrawal of private capital that happens in crises."
That is, whenever the banks fuck up again (and they will) we taxpayers will have to jump in again in "shared sacrifice" to save their stinking asses so they never have to suffer - Perish the thought! - from their bonehead greed fetish.

*PHC = President Hopey-Changey

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