So, it begins...
@Anonymous wrote:Out of the things he needed to do, I really don't understand why he did this.
I guess he's trying to do the most harm in the shortest possible time.
@Anonymous wrote:
@SouthJamaica wrote:
@Anonymous wrote:Out of the things he needed to do, I really don't understand why he did this.
I guess he's trying to do the most harm in the shortest possible time.
Some people are arguing it is best for the country. But then I question, for whom exactly.. Wall Street I guess with no regard to how it affects the middle class or low income earners. Just ridiculous.
I don't think you'll hear too many people argue 'it is best for the country'.
@cem13 wrote:@SouthJamaica wrote:
I don't think you'll hear too many people argue 'it is best for the country'.
Well let me be the first. I am not sure if any of the great people on the board understand how the FHA system works. Basically the purchaser has to pay a "tax" to the FHA pool. This pool is used to pay back banks in case of default.
So by cutting the rate, or the amount of the "tax" the pool gets less money. So there is a risk of the taxpayers footing the bill if there is a large number of defaults.
I am 100% in favor of not reducing the rate. I have an FHA loan and I pay $350 per year rolled into my monthly payment (~$30). It is not fair to the taxpayers if I default on my mortgage and the taxpayers pick up the tab.
Do I want to pay NOTHING in the PMI? Sure. I could spend that $30 every month on a nice, cold Sam Adams. However, I also understand, first hand, how the FHA process works.
While I am on a roll, I might add this little nugget; I hope that we eliminate Fannie Mae, Freddie Mac, and FHA and turn it over to the private sector. It is economically efficient. FWIW: My Econ Professor would be proud of me for this last statement.
These have been cash cows for the government in recent years; also that's a f-ton of assets tied up there, not sure how a transition would really work but it'd re-landscape the market over night privatizing it all.
It's also a huge stabilizing and arguably regulatory force over the industry just by it's nature; ending the government conservatorship would be a start, but not sure if they could just be sidelined without massive repurcussions, and unintended ones at that. I'd also argue that everything being private doesn't always lead to an efficient market 
Good point about the FHA cut though.
@Revelate wrote:It's also a huge stabilizing and arguably regulatory force over the industry just by it's nature; ending the government conservatorship would be a start, but not sure if they could just be sidelined without massive repurcussions, and unintended ones at that. I'd also argue that everything being private doesn't always lead to an efficient market
Great discussion. I have to dust off my economic text for this one. FWIW: This is an economic not political discussion.
By definition, anything the government does is inefficient; however, I get your point. Let me take a different view. The FHA "pool" could be run by many insurance companies. The insurance company could get into the details of each borrower's situation and asses the risk. As we all know, when it comes to mortgages, FICO score is not enough to assess risk. Insurance companies are experts as assessing risk. My daughter is an Actuary so I understand risk from her point of view.
FICO score, job outlook, location of property, and also age/education of borrower (amongst others); factor in. So if a large bank does not want to take the risk, they could request PMI from a private insurance company. Then competition would take over and the market becomes efficient.
For example, we all know Chase and Wells Fargo are conservative companies. So if they stay true and only write mortgages at FICO 720; there will be others (Cap1 maybe) that would write FICO 650-720. Then those below FICO 650, would require PMI from Allstate or State Farm.
Everyone does not "deserve" to buy a home in an efficient market. Although American politicians seems to think that is written in the US Constitution. I read the sacred docment over the weekend and I cannot find it anywhere.