A Reduced Government Role In The Mortgage Market Means Higher Mortgage Rates

[cali]

according to experts.

President Barack Obama is calling for private capital to take the lead role in the nation’s mortgage market with the U.S. government continuing to provide a backstop only against catastrophic risk.

<snip>

The president’s remarks today came during a question and answer session in Los Angeles moderated by Spencer Rascoff, chief executive officer of Zillow Inc (Z), operator of the largest real-estate information website. Yesterday in Phoenix Obama delivered a speech on housing policy.

A reduced government role would likely mean that mortgages would become more expensive as the costs of covering risk are shifted from taxpayers to borrowers. A Senate bill containing Obama’s approach would increase interest rates by between 50 and 75 basis points for a typical borrower with a 30-year fixed rate loan, a 20 percent down payment, and a 750 credit score, according to a report by Moody’s Analytics.

<snip>

http://www.bloomberg.com/news/2013-08-06/obama-says-government-still-needed-in-housing-market.html

[montanacowboy]

1. Well as long as the 1% can get a mortgage

that's all that matters

Yep, let's give that private sector more $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

[usGovOwesUs3Trillion]

8. Apparently the Gov is not too big to fail

[roamer65]

2. The economy is still too weak to stop QE.

I actually would be increasing it a bit for another year, then with gradual tapering over 5 years.

[geek tragedy]

3. It shifts the burden from renters to homeowners

A reduced government role would likely mean that mortgages would become more expensive as the costs of covering risk are shifted from taxpayers to borrowers.

[Igel]

6. That cost is $0 in most years.

And the last time there was a cost it turned out very good for the President.

The cost of keeping banks/etc. afloat was all billed to Bush II's budget while the repayments all showed up as deficit reduction under Obama.

But the reserve requirements would mean mortgages would become more expensive. Then again, I don't think Obama thinks that's a bad thing. Urbanization is more in line with what he likes for all sorts of reasons, although I strongly doubt he has any intention of disposing of his house and car and moving into high-density housing so he can use public transportation once he's again a private citizen. He probably held these views before he was President and made the choices he did anyway.

[geek tragedy]

10. Currently renters effectively subsidize homeowners

via taxpayer guarantees for the GSEs, which provide zero benefit to renters.

Just like the mortgage tax deduction benefits homeowners, with the vast majority of the benefit going to affluent households that itemize deductions.

Full disclosure: our household benefits from both federal benefits.

[SoCalDem]

4. What it means is that people will now have to go back to the way things were

They will have to have "skin in the game" when they buy a house (20% down)

and surprisingly, housing prices will drop (IMHO) because the urge to flip will go away if people cannot get their profit fast..

It will also bolster rentals because when there are less buyers, people will resort to renting out their homes instead of selling them

This is the way mortgages used to work..when people bought houses to live in and planned to pay them off....not as wacky investment schemes.

and people will have to prove they can afford the mortgage before they are asllowed to get a mortgage.

I saw a crazy woman on CNBC actually telling the host of whatever show it was this nonsense:

(paraphrasing).. "It's not a good idea for people to buy more house than they can afford...people making $40K probably should not be buying houses over $400K"..REALLY????? $40K after taxes would NEVER support a mortgage on a $400K house...or a $300K or probably not even a $200K... not even on Neptune

[1-Old-Man]

5. Oh hell yes, and it means fewer mortgages too, and it will not be the well to do who are denied.

and the poor can go live in their cars, if they can find a vacant one.

[Trailrider1951]

7. Yeah, more privatization, that's the ticket

It's worked so well in the past.........

[LondonReign2]

9. It's Ok, Republicans totally love this plan

And that's the important thing, isn't it, going along with Republican-approved plans and gaining their love and admiration?