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Trapping People That Might Not Otherwise Have Made That Decision

A weekend topic starting with Market Watch. “There’s new hope to phase out Fannie Mae and Freddie Mac from the housing sector, a Heritage Foundation research fellow said at the annual Conservative Political Action Conference. Heritage’s Joel Griffith said while state zoning and environmental regulations are affecting the housing supply, the federal government is driving up prices by subsidizing loans with Fannie Mae and Freddie Mac.”

“The goal is to gradually take it back to where the market was before the creation of these two agencies in 1968, Griffith said. ‘If you phase it out,’ Griffith said, ‘you’ll see housing prices gradually return to those norms.'”

“He said slowly eliminating some functions of the two government-run housing loan institutions would stop putting taxpayers on the hook for loan defaults, and Americans will see the large gap between housing and incomes shrink.”

“Griffith suggested raising down payment requirements and lowering the maximum loan amount, which is currently about $484,000. For many places, he said, that’s not a middle class home anymore.”

“He was also critical of lawmakers from both political parties for supporting housing loans that encourage people to put less down and go with a longer loan, usually for about 30 years. ‘You end up trapping people that might not otherwise have made that decision,’ Griffith said.”

From the Wall Street Journal. “The mortgage rate someone lands when they buy a house depends on many things, including their credit score, debt load and the particular lender. But a new study by online mortgage marketplace LendingTree reveals there’s another factor that plays a surprisingly significant role in the rate they lock in: which state they live in.”

“An even bigger surprise? The state that emerged as the bargain of the bunch. Currently, the national average for a 30-year, fixed-rate conforming loan is 4.84%. But California—emblem of all that is expensive in every other aspect of real estate—has the lowest average mortgage rates in the nation, clocking in at 4.74%.”

“The next best performers, rate-wise, include other states not particularly known for real-estate steals: New Jersey, Washington and Massachusetts, in that order.”

“‘The differences in the states are driven by local competition and business costs,’ said Tendayi Kapfidze, chief economist for LendingTree. While LendingTree’s study analyzed conforming loans, ‘it would be logical to assume that jumbo loans would follow this pattern,’ he said.”

“Many fixed costs to originate a loan—the financial analysis, signature-gathering and processing—are the same whether the loan is for $100,000 or $1 million, said Mr. Kapfidze. The average conventional loan size in California is $313,508, 68% higher than in Oklahoma, one of the states with the highest average rates, according to LendingTree’s data.”

“Competition also drives down price. There were nearly 100,000 people based in California who were licensed to engage with consumers in some aspect of mortgage lending in 2017, according to the Nationwide Multistate Licensing System, a registrar of non-depository financial services. That’s nearly twice as many as in Texas, the state with the next-largest number of people licensed to work in real-estate lending.”

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  1. ‘Competition also drives down price. There were nearly 100,000 people based in California who were licensed to engage with consumers in some aspect of mortgage lending in 2017, according to the Nationwide Multistate Licensing System, a registrar of non-depository financial services. That’s nearly twice as many as in Texas, the state with the next-largest number of people licensed to work in real-estate lending’

    So the number of these non-bank loan hustlers lowers the rate? On what logical planet does this exist?

    ‘Many fixed costs to originate a loan—the financial analysis, signature-gathering and processing—are the same whether the loan is for $100,000 or $1 million, said Mr. Kapfidze. The average conventional loan size in California is $313,508, 68% higher than in Oklahoma, one of the states with the highest average rates’

    Notice that risk has been turned upside down. Hmmm…

    1. Notice that risk has been turned upside down.

      Indeed! Higher risk should be associated with a higher rate.

    2. “So the number of these non-bank loan hustlers lowers the rate? On what logical planet does this exist?”

      Think dry cleaner effect. The greater the number of non-bank loan hustlers there are the more competition they will have between them in garnering suckers, er, customers.

      1. The boom sucked ’em in and the bust will shake ’em out. True with realtors, true with mortgage brokers.

        1. Please correct me if I’m wrong but the fundamental problem is that these loan originators are packaging and selling off their risk as mortgage-backed securities guaranteed by the US government.

          1. This may be true but what I am referring to is the amount of money mortgage originators make from the originations of mortgages. If the boom is over then the mortgage originators take hits in two ways:

            1. There are fewer customers thus the wealth is spread more thinly among the existing mortgage originators and

            2. Because the wealth is spread more thinly the mortgage originators are forced to compete with each other via lowering their commissions.

      1. The current FB paid $419k for it in 2017. That’s the thing I am noticing with a lot of the inventory out there – it was purchased at the peak and they’re trying to bail. A bunch of infestors are going to get burned to a crisp.

    4. In the adjacent 80113, this “Beautiful high-end brand new duplex located in the RED-HOT South Broadway neighborhood” starter home can be yours for $699,999:

      https://www.zillow.com/homedetails/3018-S-Lincoln-St-Englewood-CO-80113/2086391546_zpid/

      There are panhandlers on intersections that didn’t have them two years ago (you didn’t used to see that many south of Evans).

      The local King Soopers (Kroger) now has a security guard stationed outside the customer restrooms. The Wells Fargo walk-up ATM lobby has been locked overnight since a few years ago.

      It’s not safe to let your children play outside if you live here 🙁

      1. I grew up on this street exactly 7 blocks north, about 2 blocks away from where my great-grandparents lived in their cute little brick bungalow. I heartily concur that the “SOBO” crap is pure realtor drivel designed to make transplants in hideous scrape-offs feel like they got more than just an overpriced and underdesigned hunk of plywood junk.

    6. Newly built Iron Works Village in the adjacent 80110 priced from $377,000 to $575,000:

      https://www.zillow.com/homes/for_sale/Englewood-CO-80110/house,condo,apartment_duplex,mobile,townhouse_type/36425_plid/93242_rid/pricea_sort/39.667721,-104.982262,39.658917,-104.999149_rect/15_zm/

      Note that this is one of the most polluted neighborhoods in South Denver, only steps away from BNSF freight railway that carries 20 coal trains a day, and just across the South Platte River from West Dartmouth industrial area.

      Wash your car and park it outside, and a day later it will be coated in fine particulate pollution. Live here and your kidz can breathe that every day 🙁

  4. ‘Griffith suggested raising down payment requirements and lowering the maximum loan amount, which is currently about $484,000. For many places, he said, that’s not a middle class home anymore’

    This is what you are up against with guberment. You wind up in la-la land with everybody defending the absurd. Meanwhile, we read about how most people don’t have 500 bucks in savings. And they put Mel “pedal to the metal” Watt in charge of this multi-trillion dollar disaster for almost a decade.

    1. Yeah, what was it, over 50% of the American public can’t even come up with $400 cash for an emergency? Heckuva job, Obama, Bernanke, Yellen and Co…

  5. From the first link:

    ‘The White House has said it’s working on a housing finance reform plan, and Senate Banking Chairman Mike Crapo has put out an outline on how he’d like reform to play out. House Financial Services Chairwoman Maxine Waters has said it’s important to address the fates of Fannie and Freddie as long as they include core principles such as maintaining access to the 30-year fixed rate mortgage and ensuring enough capital is in place to protect taxpayers.’

    Senate Committee Hearings on Fannie Mae & Freddie Mac 2004

    https://www.youtube.com/watch?v=UIjoW_IXos4

    From the comments:

    ‘this is 2 hearings one from 10/6/2004 the other is 9/25/2003 both can be seen in full at c-span video.org’

    ‘Some facts here, Republicans new about this as far back as 2001, you can find Bush giving a speech talking about it. (you will have probably seen it has a viral email sent by conservatives claiming that Bush was warning the Democrats, in spite of the fact Democrats were not in control of anything) These hearings were 2003 and 2004. Republicans had complete control Congress and the presidency from 2000 2006. The housing market crashed 18 months after Republicans lost the House and Senate? They still had the presidency p, who vetoed anything he didn’t like? You actually think the things done by the Democrats cause the economic collapse? You can say Democrats supported bad ideas but Democrats were not in any position to fix anything or to cause anything. And of course you all miss Bush or want to go back to somebody just like him, great.’

      1. 5:10 – Mad Max “Under Franklin Raines…everything has worked just fine…Innovation has flourished, from desktop underwriting to 100% loans.”

        1. 6:05 – Frank “I have seen nothing in here that suggest safety and soundness are an issue.”

          2. Home sales plummet across Bay Area from December to January
            Silicon Valley Business Journal-16 hours ago
            The December-to-January sales drop was highest in San Francisco at 34.4 percent, followed by a 30.1 percent drop in Alameda County.

          3. Midtown Doral faces $11M foreclosure lawsuit
            South Florida Business Journal-18 hours ago
            The Midtown Doral condominium and retail project has been hit with an $11.34 million foreclosure lawsuit. The complaint targets about 112 unsold condos and …

          4. Where condo values are rising — and falling — in South Florida …
            South Florida Business Journal-19 hours ago
            There were also median sales price declines in many of South Florida’s largest condo markets, including Brickell, Miami Beach, Sunny Isles Beach, Hallandale ..

          5. Ex-Dallas City Council member pleads guilty to taking bribes
            Seattle Times-20 hours ago
            Carolyn Davis, a member of the council’s Housing Committee, took tens of thousands of dollars from the developer between November 2013 and June 2015,

          6. First-time buyers purchased more homes in 2018 since housing crisis
            National Mortgage News-21 hours ago
            Rises in the amount of low down payment loans and private mortgage insurance due to tight affordability led to the most first-time homebuyers since 2006, …

          7. There aren’t too many genuine heroes to come out of the banking disaster, but Armando Falcon is one of them. You have probably never heard of him, but his testimony Friday before the Financial Crisis Inquiry Commission, available on the commission’s website, is must reading for anyone trying to figure out why U.S. taxpayers had to bail out companies to the tune of hundreds of billions of dollars.

            https://www.truthdig.com/articles/the-whistle-blower-they-ignored/

          8. All about buying the votes of the Free Sh!t Army…

            +++

            Instead his agency was denied serious regulatory power by Democrats in Congress including liberals such as Reps. Barney Frank and Maxine Waters, both of whom assumed he was undermining public support for more affordable housing.

          9. It was more Democrats than the other but these corporations were the two largest in the world at the time. They bribed everybody. In the fall of 2004, the DOJ open a criminal case against Fannie executives. It just went away, under a Bush presidency. In the spring of 2005, the senate held a Congressional investigation into the GSE’s. The chairman, a senator from Alabama, was a Republican. He came out publicly saying he wouldn’t close them up. Even with open letters from appraisers saying the whole system was crooked as hell.

            The short story is, this whole housing bubble is by design, then and now. And the entire DC structure has been lining their pockets for decades. Massive amounts of cash have been involved. Like the guy in the video said, they even hired lobbyists to not work against them. I remember they were lobbying (bribing) congress while they were under investigation! And everybody knew it. This is the biggest non-secret in DC. Of course, the MSM doesn’t touch it.

          10. “Ex-Dallas City Council member pleads guilty to taking bribes
            Seattle Times-20 hours ago
            Carolyn Davis, a member of the council’s Housing Committee, took tens of thousands of dollars from the developer between November 2013 and June 2015,”

            “It’s the land!” bray the DebtDonkeys.

            Nope.

            “It’s the labor!” clucks the HousingHens.

            ‘Its the materials!” declare the DegenerateGamblers.

            Nope.

            It’s fraud top to bottom and east to west as I’ve told you all for years. There’s a reason why $50/sqft construction cost magically get doubled. Brown envelopes.

            Brown envelopes are how the residential construction business is conducted. It is also for that very reason “developers” never bid public money projects. It’s Garanteed prison sentences if you’re caught and you will be caught.

    2. “House Financial Services Chairwoman Maxine Waters”

      Let that sink in for a minute….

      Thanks American voters of 2018.

      1. Fear not, my friend. While Maxine Waters’ record of corruption and sleaze rivals that of Crooked Hillary, we middle class taxpayers have a champion in Senator Running Deer. Honest Injun.

        Oh, wait….

        1. “Waters is accused of intervening to help OneUnited secure a meeting with Treasury officials, even though her husband owned stock in the bank and previously served on its board. After a months-long investigation, the House ethics committee charged Waters with three counts of violating House ethics rules. The committee’s report also said Financial Services Chairman Barney Frank (D-Mass.) warned Waters about the conflict of interest and then advocated on behalf of OneUnited himself.

          Waters denied any wrongdoing, mounted an aggressive defense and has opted to make her case in a public trial to take place sometime this fall.”

          https://thehill.com/homenews/house/119099-bank-at-center-of-waters-controversy-got-12m-bailout

        1. My apologies. It’s simply “bat$hit.” No hyphens. No capitals. Maybe a space between “bat” and “$hit.”

    3. “Clinton – this is unbelievable.”

      It looks like democratic lawmakers want to have another look at Epstein Island. There has to be a stack of “dirt-dossiers” sitting in a safety box somewhere.

    4. Can we really trust conservative think-tanks such as Heritage Foundation and AEI to have the best interest of the working class and middle class in mind? It sounds all good to get rid of Fannie and Freddie, but will that really make house prices fall, or will it just morph into another scheme to enrich the top 0.1% and make even more regular people into a permanent underclass of renters?

      It is even possible that the proponents of these changes are honest conservatists, but that they do not undertstand that once the Republican party gets control of the scheme then it will become jus another scheme to enrich the already rich.

      1. Can we really trust conservative think-tanks such as Heritage Foundation and AEI to have the best interest of the working class and middle class in mind?

        Nope.

        It sounds all good to get rid of Fannie and Freddie, but will that really make house prices fall, or will it just morph into another scheme to enrich the top 0.1% and make even more regular people into a permanent underclass of renters?

        That depends. If we get the govt out of it and make sure nobody else thinking about lending thinks that they will get a bailout when things go south, interest rates should go up a lot. That will definitely make prices fall.

        It is even possible that the proponents of these changes are honest conservatists, but that they do not undertstand that once the Republican party gets control of the scheme then it will become jus another scheme to enrich the already rich.

        As opposed to the way it works right now? I’m with you on the cynicism. But I think it applies equally to both parties.

  8. Housing and The Economy: Are we already in a recession?
    Posted on March 02,

    Escalating Home Prices: A recipe for disaster for some and a spending frenzy for others?

    What does this all mean? Housing is already in a recession, and really never fully recovered from the last bust. While it may not improve quickly, it probably will become as bad as it was 10 years ago.

    From the trenches,

    Roy D. Oppenheim

    Oppenheim Law | Real Estate & Foreclosure Attorneys Fort Lauderdale

    https://blogs.lawyers.com/attorney/real-estate/housing-and-the-economy-are-we-already-in-a-recession-53789/

    1. Are we already in a recession?

      Nothing says Recession like a massive borrowing spree.

      Anyone who has ever shared finances with a spendthrift knows this.

      1. Ms. De Lea is being quite liberal with the terms ‘homeownership’ and ‘buyers.’ A more accurate title would read: “US mortgagor rate hits multi-year high, buoyed by young debtors” But ya gotta trick more suckas into buying at the all-time high and catching knives.

  10. Breadline Bernie about to announce his candidacy live on C-SPAN.

    Shaun King speaking now as part of the intro, a “black” man who has two white parents, LOLZ.

  11. They are scraping the bottom of the barrel right now to find warm bodies to sign loan documents. Just google “no income mortgage” and you could spend all day investigating all the options. It seems inevitable there will be another wave of underwater junk loans we will be on hook for. So I suspect Fannie and Freddy will expand rather than contract. Cynical, yes, but no matter how cynical I get I still can’t keep up with reality.

    1. Sign up to listen to the AEI housing reports. It’s free. They’ve been chronicling the “race to the bottom” at the GSE’s in depth for years. Risk layering, it’s all there. I personally know of several USDA loans with seller paying the closing costs. This means the buyer is paying not one penny in the deal, and the closing costs are basically financed. The appraisals hit the number to the dollar. And USDA loans are restricted to subprime borrowers only.

      3. I hope the USDA-approved meat I buy at the grocery store is safer than the loans they guarantee.

      4. Thanks Ben. There is a good video summary of recent GSE and shadow banking lending data here starting at about minute 14. In November of 2018, the percentage of FHA backed loans exceeding the recommended debt to income limit hit 60%. We are where we were in 2007. So the stringent lending standards we’ve heard so much about, and have been told preclude the existence of a housing bubble, are just another industry myth. Hard to derive any satisfaction from being in the right about this as it almost certainly guarantees yet another massive bailout of the real estate/lending complex in our not too distant future.
        https://m.youtube.com/watch?v=CPy6NKfjACA

  12. The big news from my hood in AA MI is that the dioxane plume started in the 80s by a local businessman illegally dumping industrial toxins, who until he died recently was still an esteemed member of this allegedly earthy crunchy Sierra club liberal educated up the wazoo town, has finally reached the drinking water , woohoo! The city government is trying to minimize and deflect and when people who cared more about acceptable drinking water than home values proposed trying to get EPA Superfund status many “stAkeholders” wanted no part of it, so here we are with it in our tap water. Glad I didn’t buy here recently— all the 400$ a sf homes better sell quick before people get past the suppressed news reports and learn that not only do we have PFCs in the drinking water but also dioxane! Plus we have been told by the state that we need to do something more to get rid of friggin parAsites — cyclosporidium— in the finished water!!! Like third world water supplies!!! Sure, mr realtor, sell me a 500k 50 year old shack conveniently located near once- an- hour bus line to the university and downtown collection of overpriced cafes serving the new tech startups ! 25 minutes drive out of town past the sprawl are lakes you cannot eat fish from because the PFC levels are too high and don’t let your dog swim in it but it should be ok for boating!

      2. Even that article is optimistically indicating it won’t anytime soon hit the intake pond and end up in the drinking water, mere months before it finally actually did , d’oh !!! The latest article somehow doesn’t show up easily when you google it ; it’s weird.
        https://www.google.com/amp/s/www.mlive.com/news/ann-arbor/2019/03/dioxane-detected-in-ann-arbor-drinking-water-from-barton-pond-for-first-time.html%3foutputType=amp
        And so much of the PFCs contamination issue is also repressed. The local news as you might imagine used to be utterly dependent on RE advertising. The current replacement for it— mostly online now and aggregated with bigger companies — is also tied to realtor advertising I assume and there are many pretend local ‘news’ sources that write fluff pieces minimizing the water issues. When you dig into what these outlets really are you find that they are run by cabals of local realtors and chambers of commerce or hired gun PR firms posing as news outlets. There is a very scary set of media tools for creating hype about places to lure investors and potential migrants from elsewhere in the nation and it works together with municipal entities like the sold out hypocrites who have run Ann Arbor for decades now, to screw so many people for fun and profit.

        1. Below a certain concentration, your local officials are not required to be much concerned. The main problem is that it isn’t easy to remove this crap from the drinking water.

  13. “He was also critical of lawmakers from both political parties for supporting housing loans that encourage people to put less down and go with a longer loan, usually for about 30 years.”

    Erm, what…?

    30-year fixed rate mortgages used to be a standard, responsible practice in this country.

    1. ‘a standard, responsible practice’

      Have you ever seen a 30 year loan that didn’t have government backing? There’s a reason.

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