IF AT FIRST YOU FAIL MISERABLY & BLOW UP THE FINANCIAL SYSTEM, DO IT AGAIN

Having government entities provide low down payment mortgages to people who can’t afford to buy a house is always a good move. Keynesians like Krugman approve wholeheartedly. The housing market will get a nice boost and the working taxpayers will fund the bad debt through Fannie and Freddie. You own Fannie and Freddie. Everyone wins.

In case you forgot, the closing costs to sell a house are usually 8% of the home price. So these home buyers are immediately 5% underwater when they move in.

Sometimes I can’t believe I live in a world this fucked up. And no one notices and no one cares.

Where are the Republicans we elected to stop this shit?

 

Guest Post by Anthony Sanders

Fannie and Freddie officially approve 3% down payment mortgages (for 1st time homebuyers and lower incomes)

Here we go again! Mortgage giants Fannie Mae and Freddie Mac have now officially approved 3% down payment mortgages.

According to Brena Swanson at Housing Wire,

“The new lending guidelines released today by Fannie Mae and Freddie Mac will enable creditworthy borrowers who can afford a mortgage, but lack the resources to pay a substantial down payment plus closing costs, to get a mortgage with 3% down. These underwriting guidelines provide a responsible approach to improving access to credit while ensuring safe and sound lending practices,” FHFA Director Mel Watt said.

“To mitigate risk, Fannie Mae and Freddie Mac will use their automated underwriting systems, which include compensating factors to evaluate a borrower’s creditworthiness. In addition, the new offerings will also include homeownership counseling, which improves borrower performance. FHFA will monitor the ongoing performance of these loans,” Watt continued.

What are these compensating factors? Lower down payment mortgages required higher credit scores among other things. Also, the 3% down loans are intended only to first-time buyers, buyers who haven’t owned a home for at least a few years and those with lower incomes. Many of the loans will also require borrowers to undergo home-buyer counseling before making a purchase.

But will this work? Not unless the labor market increases substantially.

mbapinv

House price growth is slowing, but is still over 2x wage growth.

cswageF

Let’s hope low downpayment loans perform better than the last time!!!!!

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Stucky

” … the closing costs to sell a house are usually 8% of the home price.” —— article

That’s awfully high. The national average is under 3%

http://www.bankrate.com/finance/mortgages/closing-costs/closing-costs-by-state.aspx

Depends largely on the state. Long Island, for example, has a mortgage tax as a closing cost … I think it’s up to 5% now …. so those people really get fucked.

card802
card802

I know in W Mich closing costs are 6-7%.

Not only that but repairs can also be added to the mortgage. A young friend bought a house five years ago, he was able to roll in the cost of flooring, a new roof and a new furnace into the mortgage, against my guidance.
My wife and I attempted to show him he was better off paying for repairs/improvements, rather than pay the bank for the next 30 years for them. He was convinced (at that time) that the bank was his friend and they knew best. The other kicker? He was a big obama supporter, he bit on the first round of home buyer government loans, he was in the first group that had to pay that money back.
Like a deer in the headlights…..POW.

He knows different now.

Tommy

Its the ‘no one notices and no one cares’ part that I dialed in on. That’s the thing that has just turned me to stone – fucking sheep. Watched three or four hours on the rise of the third reich and the parallels were just stunning.

Stucky

“The broker commission to sell a house is 6%.” ———- Admin

OK.

But I was referring to the BUYER closing costs …. not the seller.

Wyoming Mike
Wyoming Mike

Admin wins, give it up Stuck.

TE
TE

Stuck, are you including the 1.5% “transfer tax” that was enacting Federally? NOBODY even knows it is happening, but it is and yet another facet of the reasons that housing is not being allowed to clear.

These loans have been given out for a long, long, time. This is nothing but official documentation/reporting of the fact.

In the past three years we have had THREE families moved into former upper-middle class neighborhoods.

Not ONE of the families could afford the real cost to live here, but with da’ goobermints help, here they are.

All are on other government assistance, all are in two-story colonials that are not even close to “starter” homes.

Dropping people into overpriced monstrosities with no knowledge of what it takes to maintain such a home is surely a recipe for future success.

Combine this with the FACT that the Feds will be building Section 8 apartments (future ghettos) in the middle of ANY republican voting neighborhood and wake the freak up.

Everything they do is being done to separate the middle class from this country.

We are in the minority and we are being slaughtered wholesale.

My only wish is that I had a partner that would admit reality, let go of preconceived notions and propagandized history, and get us the freak out of here while the getting is good.

Instead I sit back and realize that in order to save my daughter, and myself, there is really one option. I’m afraid I don’t have the strength for the fight. I definitely don’t have the funds for it.

Which is why I wait, I failed miserably and can’t just blow it up willy-nilly. Maybe I should have. Maybe I should have left eight years ago and gone on the welfare – as my hub’s business would have failed had I gone, so there wouldn’t be any assets or child support – and hoped for the best.

Instead I have no one to blame but myself, and a very happy child. *sigh* I can only pray that once I have the funds there will be time and energy to break away.

No fixing this shit. Not when 90% of the people believe with their whole hearts that MORE regulation and rules and laws will “fix” it.

That never changes. Freaking sheep.

Stucky

“My point was that a low income buyer today with 3% down would be underwater immediately since it would cost them 8% to sell.” ——– Admin

Absolutely.

The solution is easy enough. Never sell. In fact, they should buy MORE properties …. you know, the old make-it-up-in-volume strategy.

yahsure
yahsure

I watched this on the news and it was good for a laugh. Now to find people with jobs who are willing to buy.

Chicago999444
Chicago999444

Here we go again.

Here comes another house-price bubble- and ensuing bust. Here comes yet another wave of suckers who thought their houses would pay their bills for them. Oh, YEAH, and the HELOC machine is starting up again, too.

Here will come another few million people claiming they were “defrauded” by their lender or servicer when their loans blow up in their faces. As it is, an entire layer of HELOCS made in the 00s is now due to start amortizing, so expect increasing defaults as the payments double and even triple on these loans, many of which were IO loans.

Then we can listen to them all whine that they were “defrauded” and demand to see who is holding their note before they pay, as if it morally made any difference who bought your loan after you.

I guess I ought to be glad because this will cause my place to “appreciate”, but I’m not happy. I don’t care if it appreciates a dime as long as my property taxes don’t increase. All price inflation will do for me, is increase my taxes, and worse, endanger my equity by filling my building with over-leveraged borrowers paying grossly inflated prices with 3% down loans…. and who will subsequently default, leaving behind thousands of dollars in unpaid HOA fees. So, if we create another bubble, I’ll be forced to sell just to get out of the way, which I will quickly do.

Jim
Jim

TE–good post. I feel I am in a similar situation trapped in a micro good neighborhood surrounded by ghetto or soon to be ghettto. Not ready to move, but I can see the writing on the wall. I saw what happened in last free money home buying binge– I am now almost completely surrounded in a formerly nice inner ring suburb of Cleveland, that is now turning into a rental suburb that is being inundated with section 8. I know this is going on in countless other formerly nice suburbs across the country as well. The ony smart move i have made as far as real estate is that I did not trade up when I had the chance so my downside, although real, is somewhat limited when compared to the limousine libs who bought the old tudor mansions for a ton and are now looking at eventually getting their equity wiped out. It goes without saying that those homes that are sold to buyers with little or no money down will turn into section hovels within say 3-5 years. Good luck

TE
TE

@Jim, thanks man, and good luck to you too.

Saddest part is that we now have the ability to buy a bugout farm, not hundreds of acres or one with a McMansion sitting on it, but a farm with good lower taxed land, and someplace away from the hoards to try and survive.

He will not even consider cashing out one dime of his “investments.” Cause, you see, he has “made” so much money in the past three years that he is now an investing genius.

I would agree with his deduction of himself IF he was taking his lucky gains and investing them in REAL assets instead of promises, fiat and paper.

Ah well.

Yep, I’m with you on the “at least not as bad,” we paid 25% (or more) below market and bought the “best” house in the best neighborhood – it was a fixer upper, still is, and it was out of the norm so not appropriately valued to begin with. I’ve always liked buying the worst house in the best neighborhood to help guarantee my returns.

That isn’t going to work much longer for the majority as the non-productive, non-working, non-caring are moved in lock, stock and barrel.

This shit reminds me of the $300-$400 thousand homes that were being built right before the crash. They built the neighborhood right next to section 8 apartments.

The Section 8 residents were positively salivating over those homes. Lo and behold, the theft rate it that neighborhood is ten times what it is anywhere else in the city.

And that is EXACTLY what Washington is planning for us all. Unless we happen to live in the richest of the rich AND demoncrat hoods.

Again, good luck. Nice to see new/returning faces around here!

bb

Well ,I live in a nice neighborhood for now .No section 8 at this time.I.think after my mom goes to heaven I’ll sale everything and head for the mountains. Maybe eastern Tennessee or western north Carolina.

TE
TE

@bb, not being bitchy or anything, but how do you know that?

The Section 8’ers in my area are driving newer cars than I do. They wear newer clothes too, and as I said they are now living in Colonials that are valued $100k, or more, more than my home.

I wouldn’t know IF I didn’t stand at the bus stop everyday and listen to their conversations.

Things are no longer as they appear anywhere.

Those that realize that and apply it to their everyday lives are going to run the best defense, and offense.

Everyone else will just be blindsided. Sucks to be them.

Helen Highwater
Helen Highwater

You actually thought the Republicans would stop this stuff from happening?

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