TRUMP FORGETS THE FORGOTTEN

Mortgage insurance premiums primarily benefit the home buyers (applying the "but for" test to the transaction clearly demonstrates that the mortgage insurance enables the low-down-payment-buyer to purchase a home which they they likely would not be able to purchase without mortgage insurance). And, yes encouraging home purchases does provide benefits to persons other than the buyer. However, arguing that the other indirect beneficiaries (such as sellers, realtors, and all those who benefit from liquidity in the real estate market) should somehow bear these premiums directly is frankly asinine. South_Mountaineer, under your thought process, the same arguments for shifting of premiums to indirect beneficiaries could be made for all types of insurance including health insurance, life insurance, oil tank insurance, fire insurance, etc. Shifting of such premiums would distort the insurance market, and improperly allocate the premiums to the indirect beneficiaries rather than the direct beneficiary (in this this instance, the buyer purchasing such mortgage insurance in order to induce the lender to lend to them, low-down-payment-buyer).

South_Mountaineer said:

terp said:

Making it easier and cheaper for marginal buyers to purchase properties with very little $$ down helps home sellers much more than it does home buyers.

Leaving aside the negative spin in the quoted post -

Reducing an ancillary cost of purchasing a home, helps increase the pool of people who may be able to purchase a home.

And, of course, if more people are looking to purchase homes, that also helps the pool of home sellers (which, by the way, includes not only those "trading up", but also downsizers and families where a parent has passed away and its time to sell a family home, among others).

So people who otherwise might not be able to buy a home, and people who otherwise might not be able to sell their home, are helped.

That's sort of Econ 101.

I missed the part where anyone said that someone other than the homeowners should pay the insurance premiums.

I didn't suggest that anyone other than the buyer should pay the premiums. That's definitely not anywhere in my post that you quoted. I was just responding to a statement that the program benefited sellers, and my answer was basically, "Yes, sure, so what?"

I agree entirely with your first sentence including the parenthetical.

(Highlighting the part of the quote I'm responding to, in the first paragraph of this response.)

RealityForAll said:

Mortgage insurance premiums primarily benefit the home buyers (applying the "but for" test to the transaction clearly demonstrates that the mortgage insurance enables the low-down-payment-buyer to purchase a home which they they likely would not have without the mortgage insurance). And, yes encouraging home purchases does provide benefits to persons other than the buyer. However, arguing that the other indirect beneficiaries (such as sellers, realtors, and all those who benefit from liquidity in the real estate market) should somehow bear these premiums directly is frankly asinine. South_Mountaineer, under your thought process, the same arguments for shifting of premiums to indirect beneficiaries could be made for all types of insurance including health insurance, life insurance, oil tank insurance, fire insurance, etc. Shifting of such premiums would distort the insurance market, and improperly allocate the premiums to the indirect beneficiaries rather than the buyer in order to induce the lender to lend to the low-down-payment-buyer.

South_Mountaineer said:

terp said:

Making it easier and cheaper for marginal buyers to purchase properties with very little $$ down helps home sellers much more than it does home buyers.

Leaving aside the negative spin in the quoted post -

Reducing an ancillary cost of purchasing a home, helps increase the pool of people who may be able to purchase a home.

And, of course, if more people are looking to purchase homes, that also helps the pool of home sellers (which, by the way, includes not only those "trading up", but also downsizers and families where a parent has passed away and its time to sell a family home, among others).

So people who otherwise might not be able to buy a home, and people who otherwise might not be able to sell their home, are helped.

That's sort of Econ 101.

IMO some obvious ancillary affects of the policy you are avoiding include:

1. What the increased pool of buyers does to home prices. Furthermore, how do these higher home prices affect those who require assistance to be able to afford homes anyway, and those who have saved.
2. What supporting the purchase of homes to buyers who may not be financially ready does to the stability of the market and to their finances.

And to @lost, many of our economic problems stem from that fact that good politics is often horrible economics and vice versa.

What struck me is that out of the hundreds of things he could have done to Make America Great(tm), drain the swamp, bring back jobs, yada yada yada the first thing they do right out of the gate is reverse a policy that would have helped lower-income Americans.

yeah, but not for the reasons you think.

ETA: correct me if I'm wrong, but you still think the housing bubble crisis was mostly the fault of the buyers taking those silly loans, pulling the wool over the eyes of those poor mortgage lenders right?

Or am I mis-remembering?

terp said:

IMO some obvious ancillary affects of the policy you are avoiding include:

1. What the increased pool of buyers does to home prices. Furthermore, how do these higher home prices affect those who require assistance to be able to afford homes anyway, and those who have saved.
2. What supporting the purchase of homes to buyers who may not be financially ready does to the stability of the market and to their finances.

And to @lost, many of our economic problems stem from that fact that good politics is often horrible economics and vice versa.

You clearly have a caricature view of me like you do of most things.

drummerboy said:

yeah, but not for the reasons you think.

ETA: correct me if I'm wrong, but you still think the housing bubble crisis was mostly the fault of the buyers taking those silly loans, pulling the wool over the eyes of those poor mortgage lenders right?

Or am I mis-remembering?

terp said:

IMO some obvious ancillary affects of the policy you are avoiding include:

1. What the increased pool of buyers does to home prices. Furthermore, how do these higher home prices affect those who require assistance to be able to afford homes anyway, and those who have saved.
2. What supporting the purchase of homes to buyers who may not be financially ready does to the stability of the market and to their finances.

And to @lost, many of our economic problems stem from that fact that good politics is often horrible economics and vice versa.

did I mis-remember. Cause I don't think I did. I kind of remember that discussion pretty clearly.

terp said:

You clearly have a caricature view of me like you do of most things.

drummerboy said:

yeah, but not for the reasons you think.

ETA: correct me if I'm wrong, but you still think the housing bubble crisis was mostly the fault of the buyers taking those silly loans, pulling the wool over the eyes of those poor mortgage lenders right?

Or am I mis-remembering?

terp said:

IMO some obvious ancillary affects of the policy you are avoiding include:

1. What the increased pool of buyers does to home prices. Furthermore, how do these higher home prices affect those who require assistance to be able to afford homes anyway, and those who have saved.
2. What supporting the purchase of homes to buyers who may not be financially ready does to the stability of the market and to their finances.

And to @lost, many of our economic problems stem from that fact that good politics is often horrible economics and vice versa.

Of course you did. You are going to think the worst of me because I disagree with you. It's what you do.

yeah, I don't think so. I remember arguing with you about the role CDO's and their deregulation played in the crisis, (whose significance you discounted) and how you were blaming people for getting in over their heads as the root cause.

Kinda like you're blaming them now.

You're wrong. I never blamed the people. I blamed intervention by the Government, pseudo government agencies, and the Federal Reserve.

It is possible I said that nobody forced people to borrow the $$ when people were railing on the banks. My point is that everybody was acting drunk. The question was " who was serving the drinks". These drinks came in the form of perverse incentives by EZ credit.

Anyhoo, its easier for you to believe that I'm just a big meany. I have no idea what "I'm blaming them now" for. But whatever.

drummerboy said:

yeah, I don't think so. I remember arguing with you about the role CDO's and their deregulation played in the crisis, (whose significance you discounted) and how you were blaming people for getting in over their heads as the root cause.

Kinda like you're blaming them now.

yeah, ok. This wasn't blaming anyone.

terp said:

Making it easier and cheaper for marginal buyers to purchase properties with very little $$ down helps home sellers much more than it does home buyers.

I don't see any blaming going on.

I think there's plenty of blame to go around. I never said that the blame should be focused on the buyer. I challenge you to find a passage where I put the blame on the buyer. The passage above is clearly not blaming the buyer.

okie doke

You can't because they don't exist. I appreciate that the apology for your mean spirited and baseless accusation.

drummerboy said:

okie doke

Getting back to what people actually wrote on this thread -

First of all, I have no idea why you keep writing that other people are avoiding or ignoring something. Speaking for myself, I addressed one point – I didn’t launch into an extended discourse on another aspect which wasn’t part of the original point.

terp said:

IMO some obvious ancillary affects of the policy you are avoiding include:

1. What the increased pool of buyers does to home prices. Furthermore, how do these higher home prices affect those who require assistance to be able to afford homes anyway, and those who have saved.
2. What supporting the purchase of homes to buyers who may not be financially ready does to the stability of the market and to their finances.

And to @lost, many of our economic problems stem from that fact that good politics is often horrible economics and vice versa.

As to point 1 - of course, increased demand for homes can lead to increased prices. But that’s a very general statement. It could be that a home that otherwise would remain unsold, or sold at a loss by the owner, can now be sold. In addition, there are many factors which cause an increased demand for homes, such as interest rate levels, or perhaps increases in average wages. Increased demand for homes might not be uniform, but be affected by local economic conditions (or, say, transit improvements such as has happened in SOMA in the past). I would submit that any effect, however slight, there might be on home prices related to reducing the FHA loan rate is not, in and of itself, a reason for it to be rejected.

As to point 2 – nobody is suggesting that lending standards be relaxed. Similarly, nobody is suggesting that the lessons of the last housing value crash be ignored (such as once again lending based on the hope that the home value will rise enough to make up for the fact that the buyer can’t afford it). If you care to discuss assumptions, the assumption in discussing what choice to make on the FHA insurance rate should be that the purchasers are demonstrating an income which enables them to carry the mortgage, taxes and upkeep of the home being purchased – in other words, they qualify. Mortgage insurance comes into play if they don’t put down an amount equal to or over a certain percentage of the home’s price/value. I would submit that a household with sufficient income going forward to pay their mortgage, etc., but which also has a smaller down payment, is still financially ready – hence the existence of mortgage insurance to begin with.

whatever, but you should really reconsider your attitude towards mortgage holders who get assistance. You consistently place them in a bad light - as if they're not worthy. And you did in fact blame them for the financial crisis - at least in large part.

And that wasn't an apology.

terp said:

You can't because they don't exist. I appreciate that the apology for your mean spirited and baseless accusation.

drummerboy said:

okie doke

You are wrong. This is an unfounded personal attack. Either show me evidence of blaming borrowers or stop the childishness.

drummerboy said:

whatever, but you should really reconsider your attitude towards mortgage holders who get assistance. You consistently place them in a bad light - as if they're not worthy. And you did in fact blame them for the financial crisis - at least in large part.

And that wasn't an apology.

terp said:

You can't because they don't exist. I appreciate that the apology for your mean spirited and baseless accusation.

drummerboy said:

okie doke

South_Mountaineer said:

Getting back to what people actually wrote on this thread -

First of all, I have no idea why you keep writing that other people are avoiding or ignoring something. Speaking for myself, I addressed one point – I didn’t launch into an extended discourse on another aspect which wasn’t part of the original point.

terp said:

IMO some obvious ancillary affects of the policy you are avoiding include:

1. What the increased pool of buyers does to home prices. Furthermore, how do these higher home prices affect those who require assistance to be able to afford homes anyway, and those who have saved.
2. What supporting the purchase of homes to buyers who may not be financially ready does to the stability of the market and to their finances.

And to @lost, many of our economic problems stem from that fact that good politics is often horrible economics and vice versa.

As to point 1 - of course, increased demand for homes can lead to increased prices. But that’s a very general statement. It could be that a home that otherwise would remain unsold, or sold at a loss by the owner, can now be sold. In addition, there are many factors which cause an increased demand for homes, such as interest rate levels, or perhaps increases in average wages. Increased demand for homes might not be uniform, but be affected by local economic conditions (or, say, transit improvements such as has happened in SOMA in the past). I would submit that any effect, however slight, there might be on home prices related to reducing the FHA loan rate is not, in and of itself, a reason for it to be rejected.

As to point 2 – nobody is suggesting that lending standards be relaxed. Similarly, nobody is suggesting that the lessons of the last housing value crash be ignored (such as once again lending based on the hope that the home value will rise enough to make up for the fact that the buyer can’t afford it). If you care to discuss assumptions, the assumption in discussing what choice to make on the FHA insurance rate should be that the purchasers are demonstrating an income which enables them to carry the mortgage, taxes and upkeep of the home being purchased – in other words, they qualify. Mortgage insurance comes into play if they don’t put down an amount equal to or over a certain percentage of the home’s price/value. I would submit that a household with sufficient income going forward to pay their mortgage, etc., but which also has a smaller down payment, is still financially ready – hence the existence of mortgage insurance to begin with.

Increased demand will lead to increased prices. It's one thing when a segment of the market has a price increase due to a value add such as a rail line, or what have you. It's quite another when the government intervenes in the market place to lower interest rates, or attempt to "spread the risk" to tax payers.

Lending standards should be up to the lender. Lenders(those risking capital for the home buyer) are best positioned to know how to manage the risk. Once the government intervenes they alter and inhibit these mechanisms.

The issue I have with people who advocate for these policies is that ultimately they will cause problems. When the problems show themselves, the same people who advocate for these policies will go after the free market and the lenders who's ability to assess risk has been hampered.

terp said:

South_Mountaineer said:

Getting back to what people actually wrote on this thread -

First of all, I have no idea why you keep writing that other people are avoiding or ignoring something. Speaking for myself, I addressed one point – I didn’t launch into an extended discourse on another aspect which wasn’t part of the original point.

terp said:

IMO some obvious ancillary affects of the policy you are avoiding include:

1. What the increased pool of buyers does to home prices. Furthermore, how do these higher home prices affect those who require assistance to be able to afford homes anyway, and those who have saved.
2. What supporting the purchase of homes to buyers who may not be financially ready does to the stability of the market and to their finances.

And to @lost, many of our economic problems stem from that fact that good politics is often horrible economics and vice versa.

As to point 1 - of course, increased demand for homes can lead to increased prices. But that’s a very general statement. It could be that a home that otherwise would remain unsold, or sold at a loss by the owner, can now be sold. In addition, there are many factors which cause an increased demand for homes, such as interest rate levels, or perhaps increases in average wages. Increased demand for homes might not be uniform, but be affected by local economic conditions (or, say, transit improvements such as has happened in SOMA in the past). I would submit that any effect, however slight, there might be on home prices related to reducing the FHA loan rate is not, in and of itself, a reason for it to be rejected.

As to point 2 – nobody is suggesting that lending standards be relaxed. Similarly, nobody is suggesting that the lessons of the last housing value crash be ignored (such as once again lending based on the hope that the home value will rise enough to make up for the fact that the buyer can’t afford it). If you care to discuss assumptions, the assumption in discussing what choice to make on the FHA insurance rate should be that the purchasers are demonstrating an income which enables them to carry the mortgage, taxes and upkeep of the home being purchased – in other words, they qualify. Mortgage insurance comes into play if they don’t put down an amount equal to or over a certain percentage of the home’s price/value. I would submit that a household with sufficient income going forward to pay their mortgage, etc., but which also has a smaller down payment, is still financially ready – hence the existence of mortgage insurance to begin with.

Increased demand will lead to increased prices. It's one thing when a segment of the market has a price increase due to a value add such as a rail line, or what have you. It's quite another when the government intervenes in the market place to lower interest rates, or attempt to "spread the risk" to tax payers.

Lending standards should be up to the lender. Lenders(those risking capital for the home buyer) are best positioned to know how to manage the risk. Once the government intervenes they alter and inhibit these mechanisms.

The issue I have with people who advocate for these policies is that ultimately they will cause problems. When the problems show themselves, the same people who advocate for these policies will go after the free market and the lenders who's ability to assess risk has been hampered.

The government set up a program to provide affordable mortgage insurance. It is setting the interest rates for its program, which is not the same as “the government intervenes in the market place to lower interest rates”. Now, you may disagree with various government actions which support home ownership, but as you know the FHA insurance program isn’t the most prominent example of that.

As mentioned several times, this isn’t about relaxing lending standards, so that’s irrelevant bordering on a red herring for purposes of this discussion.

Your last paragraph is too vague to comment on. Sure, as a general principle either acting or not acting can cause problems. I guess we’ll disagree that the existence of the FHA program in 2017 will “ultimately … cause problems” as an abstract proposition.

well, I guess you win because the odds of me finding an MOL thread from 2009 are nil.

so what were the causes of the financial crisis?

terp said:

You are wrong. This is an unfounded personal attack. Either show me evidence of blaming borrowers or stop the childishness.

drummerboy said:

whatever, but you should really reconsider your attitude towards mortgage holders who get assistance. You consistently place them in a bad light - as if they're not worthy. And you did in fact blame them for the financial crisis - at least in large part.

And that wasn't an apology.

terp said:

You can't because they don't exist. I appreciate that the apology for your mean spirited and baseless accusation.

drummerboy said:

okie doke

baseless huh?

This was after searching for 3 minutes. I can go on if you want.

If Mortgage Insurance makes it easier for buyers to buy and sellers to sell and makes lenders more secure, what's the problem?

LOST said:

If Mortgage Insurance makes it easier for buyers to buy and sellers to sell and makes lenders more secure, what's the problem?

my understanding is that anyone who puts down less than 20% cannot get a mortgage without insurance, regardless of credit rating

Wow. It must really look like I have egg on my face...to anyone stupid enough to think that being against bailouts for anyone means I point the finger of blame for the housing crisis on mortgage holders.

drummerboy said:

baseless huh?

This was after searching for 3 minutes. I can go on if you want.

No problem with mortgage insurance. My problem is that the government tends to be pretty bad at assessing risk. They are answering to different forces than a market operator without government backing would. For that reason, FHA loans have much higher delinquency rates than you see across the industry.

And when the problems show themselves, the majority of the American public will ignore all of this and blame the free market.

LOST said:

If Mortgage Insurance makes it easier for buyers to buy and sellers to sell and makes lenders more secure, what's the problem?

South_Mountaineer said:

terp said:

South_Mountaineer said:

Getting back to what people actually wrote on this thread -

First of all, I have no idea why you keep writing that other people are avoiding or ignoring something. Speaking for myself, I addressed one point – I didn’t launch into an extended discourse on another aspect which wasn’t part of the original point.

terp said:

IMO some obvious ancillary affects of the policy you are avoiding include:

1. What the increased pool of buyers does to home prices. Furthermore, how do these higher home prices affect those who require assistance to be able to afford homes anyway, and those who have saved.
2. What supporting the purchase of homes to buyers who may not be financially ready does to the stability of the market and to their finances.

And to @lost, many of our economic problems stem from that fact that good politics is often horrible economics and vice versa.

As to point 1 - of course, increased demand for homes can lead to increased prices. But that’s a very general statement. It could be that a home that otherwise would remain unsold, or sold at a loss by the owner, can now be sold. In addition, there are many factors which cause an increased demand for homes, such as interest rate levels, or perhaps increases in average wages. Increased demand for homes might not be uniform, but be affected by local economic conditions (or, say, transit improvements such as has happened in SOMA in the past). I would submit that any effect, however slight, there might be on home prices related to reducing the FHA loan rate is not, in and of itself, a reason for it to be rejected.

As to point 2 – nobody is suggesting that lending standards be relaxed. Similarly, nobody is suggesting that the lessons of the last housing value crash be ignored (such as once again lending based on the hope that the home value will rise enough to make up for the fact that the buyer can’t afford it). If you care to discuss assumptions, the assumption in discussing what choice to make on the FHA insurance rate should be that the purchasers are demonstrating an income which enables them to carry the mortgage, taxes and upkeep of the home being purchased – in other words, they qualify. Mortgage insurance comes into play if they don’t put down an amount equal to or over a certain percentage of the home’s price/value. I would submit that a household with sufficient income going forward to pay their mortgage, etc., but which also has a smaller down payment, is still financially ready – hence the existence of mortgage insurance to begin with.

Increased demand will lead to increased prices. It's one thing when a segment of the market has a price increase due to a value add such as a rail line, or what have you. It's quite another when the government intervenes in the market place to lower interest rates, or attempt to "spread the risk" to tax payers.

Lending standards should be up to the lender. Lenders(those risking capital for the home buyer) are best positioned to know how to manage the risk. Once the government intervenes they alter and inhibit these mechanisms.

The issue I have with people who advocate for these policies is that ultimately they will cause problems. When the problems show themselves, the same people who advocate for these policies will go after the free market and the lenders who's ability to assess risk has been hampered.

The government set up a program to provide affordable mortgage insurance. It is setting the interest rates for its program, which is not the same as “the government intervenes in the market place to lower interest rates”. Now, you may disagree with various government actions which support home ownership, but as you know the FHA insurance program isn’t the most prominent example of that.

As mentioned several times, this isn’t about relaxing lending standards, so that’s irrelevant bordering on a red herring for purposes of this discussion.

Your last paragraph is too vague to comment on. Sure, as a general principle either acting or not acting can cause problems. I guess we’ll disagree that the existence of the FHA program in 2017 will “ultimately … cause problems” as an abstract proposition.

What are you talking about? FHA loans make loans available to people with much poorer credit history than the free market would. Here's a link talking about how great it is that standards are loosening up since the downturn. How soon we forget.

terp said:

For that reason, FHA loans have much higher delinquency rates than you see across the industry.

The latest rates I could find for seriously delinquent mortgages on single-family homes (seasonally adjusted) are from the third quarter or 2016:

Commercial banks, 4.30 percent.

https://fred.stlouisfed.org/series/DRSFRMACBS

FHA, 5.03 percent.

https://portal.hud.gov/hudportal/documents/huddoc?id=FHALPT_Sep2016.pdf

terp said:

No problem with mortgage insurance. My problem is that the government tends to be pretty bad at assessing risk. They are answering to different forces than a market operator without government backing would. For that reason, FHA loans have much higher delinquency rates than you see across the industry.

And when the problems show themselves, the majority of the American public will ignore all of this and blame the free market.

LOST said:

If Mortgage Insurance makes it easier for buyers to buy and sellers to sell and makes lenders more secure, what's the problem?

Is it the Government assessing risk? Mortgage Loans are made by private lenders. They are the ones who assess the risk. Government intervention just lowers the risk. In essence the Government is simply guarantying the profits of the private sector. That is neither "Free Market" nor "Socialism".