What did Einstein say about insanity?

So the administration wants to lower down payments to bring back the heady days of the mortgage market bubble. I suggested that when Mel Watt was nominated as Fannie's overseer, that this would happen.

I understand that a weak housing market is holding back economic growth but you just can't force an efficient market. If you lower down payment rules, you open the door for defaults the next time prices fall.

And now the administration complains that private lenders aren't participating in the mortgage market, after they imposed bigger restrictions through Dodd-Frank and other punitive measures.

So banks have a choice. Make mortgage loans and get fined by the government when they fail, or don't make mortgage loans and get fined for violating fair housing practices.

http://online.wsj.com/news/articles/SB10...reno64-wsj

(05-14-2014 10:47 AM)QuestionSocratic Wrote:  What did Einstein say about insanity?

So the administration wants to lower down payments to bring back the heady days of the mortgage market bubble. I suggested that when Mel Watt was nominated as Fannie's overseer, that this would happen.

I understand that a weak housing market is holding back economic growth but you just can't force an efficient market. If you lower down payment rules, you open the door for defaults the next time prices fall.

And now the administration complains that private lenders aren't participating in the mortgage market, after they imposed bigger restrictions through Dodd-Frank and other punitive measures.

So banks have a choice. Make mortgage loans and get fined by the government when they fail, or don't make mortgage loans and get fined for violating fair housing practices.

http://online.wsj.com/news/articles/SB10...reno64-wsj

So Bush was evil for causing a housing bubble, but obama is working for the middle class?

And I think you have cause and effect backwards. The weak economy is hurting the housing market. And demographics.

The housing market here in DC is still insane. Prices are high and climbing. That's b/c there are jobs here. Non-productive gov't jobs.

Stop raping and pillaging middle America, and these problems level out. Housing prices retreat here (good thing), productive jobs in Middle America (good thing), housing market there strengthens (good thing).

It's not really that complicated.

(05-14-2014 10:47 AM)QuestionSocratic Wrote:  What did Einstein say about insanity?

So the administration wants to lower down payments to bring back the heady days of the mortgage market bubble. I suggested that when Mel Watt was nominated as Fannie's overseer, that this would happen.

I understand that a weak housing market is holding back economic growth but you just can't force an efficient market. If you lower down payment rules, you open the door for defaults the next time prices fall.

And now the administration complains that private lenders aren't participating in the mortgage market, after they imposed bigger restrictions through Dodd-Frank and other punitive measures.

So banks have a choice. Make mortgage loans and get fined by the government when they fail, or don't make mortgage loans and get fined for violating fair housing practices.

http://online.wsj.com/news/articles/SB10...reno64-wsj

That eerily sounds almost like the healthcare system we're facing.

My question is whether it is the banks pushing for this or realtors?

(05-14-2014 10:58 AM)mlb Wrote:  My question is whether it is the banks pushing for this or realtors?

I could be wrong, but I would think that both would flourish. The bank can make more money and the realtor can make more money because you don't have to put such a high down payment down and people can afford houses easier. I put a $15,500.00 down payment on my house. In 2002, I bought a house and put zero down.

Great idea. I'd love the opportunity to GTF out of my house, rent, and make it someone else's problem. Buying this POS in 2007 was the worst mistake of my life.

What could go wrong?

(05-14-2014 10:58 AM)mlb Wrote:  My question is whether it is the banks pushing for this or realtors?

Good question.

Banks hold more power and influence. Realtors probably got on board as a "friend of the court."

(05-14-2014 10:58 AM)mlb Wrote:  My question is whether it is the banks pushing for this or realtors?

Although both would stand to profit, I'm pretty sure this has more to do with the White House needing something to goose the pathetic economy. Call it Stimulus 2.05

Lowering down payments by itself isnt' necessarily a bad thing, as long as the other variable are held constant. There are 5 Cs of Credit that should go into every credit decision. They are Character, Capacity, Collateral, Capital, and Conditions. Each credit is unique and some strengths have to make up for any weakness. A lower down payment will be considered a weakness so something like a higher credit score, better collateral, etc should be used to make up for the lower down payment. Will that happen who knows? However, simply requiring a lower downpayment in of itself isn't necessary bad.

(05-15-2014 07:47 AM)QuestionSocratic Wrote:  Although both would stand to profit, I'm pretty sure this has more to do with the White House needing something to goose the pathetic economy. Call it Stimulus 2.05

Follow the money. While the White House stands to gain, they probably didn't come up with the idea themselves. Most likely the banks came to them (with possibly someone from the National Realtors Association) and kept pushing them to back off on some of the new rules.

I bought a house in 2012 with $0 down. My credit score was like a 750+ though. I also qualified for no mortgage insurance.

I don't think it is necessarily a bad thing if the person has a stable job with a good income and a great credit score.

Technically I put about 5% down though because I moved into an upcoming, but still economically distressed area of the city, so they city gave me a forgivable loan worth nearly 5% of the home's value.

I would have loved to have put more down, but I didn't have much at the time and wanted to buy before mortgage rates started creeping back up, plus the mortgage for my 3BR townhome is less than rent on a 1BR condo only a couple blocks away...by about $300/mo.

(05-15-2014 09:05 AM)Niner National Wrote:  I bought a house in 2012 with $0 down. My credit score was like a 750+ though. I also qualified for no mortgage insurance.

I don't think it is necessarily a bad thing if the person has a stable job with a good income and a great credit score.

Exactly, your good credit compensated for the lack of a downpayment. I bought in 2006 but was lucky enough to have sold a townhouse right before that and used the profit for a downpayment on the new house. I also did another 30 year mortgage. I figure I can always make a 30 year a 20 or 15 year mortgage via extra payments. However, can't make a 15 or 20 year mortgage a 30 year. Did that in case I ever ran into job trouble, etc.

I am so glad I payed my morgtage off several years ago.

“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”

― Albert Einstein

(05-15-2014 09:37 AM)bevotex Wrote:  I am so glad I payed my morgtage off several years ago.

“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”

― Albert Einstein

Yep, but with interest rates so low these days even compounding interest sucks.