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Why the 30-Year Mortgage Could Be Coming to an End

By New Renter following x   2013 Aug 16, 5:50am 6,818 views   25 comments   watch   sfw   quote     share    


http://www.thestreet.com/story/12010622/1/why-the-30-year-mortgage-could-be-coming-to-an-end.html?puc=yahoo&cm_ven=YAHOO

The 30-year mortgage is a U.S. consumer institution, affording families a path to full homeownership at reasonable monthly payments (although banks and lenders make out like bandits on the high interest payments.

#housing

1   Homeboy   ignore (2)   2013 Aug 16, 5:55am   ↑ like (1)   ↓ dislike (0)   quote        

The article seems to suggest that if interest rates rose 3%, that it would spell the end of 30-year mortgages. That doesn't make any sense. Rates were much higher than that in the past, and 30-year mortgages didn't cease to exist.

2   HydroCabron   ignore (1)   2013 Aug 16, 5:59am   ↑ like (1)   ↓ dislike (0)   quote        

5,000-year loans, no money down, will keep this train running. When the borrower cracks, just replace him with a fresh victim. It's mathematically indistinguishable from renting, but the government will fund the "buyer's" rent payments through tax deductions (money taken from other taxpayers).

Yes, it's kicking the can down the road, but there's no law which says the road has to end.

Financial innovation means looking beyond the usual sexually-confused Chindian billionaires as saviors.

3   HydroCabron   ignore (1)   2013 Aug 16, 6:01am   ↑ like (0)   ↓ dislike (0)   quote        

Homeboy says

The article seems to suggest that if interest rates rose 3%, that it would spell the end of 30-year mortgages.

The article assumes that Fannie & Freddie will no longer be backstopping mortgages. There have never been 30-year mortgages issued in the United States absent government guarantees.

4   HydroCabron   ignore (1)   2013 Aug 16, 6:53am   ↑ like (0)   ↓ dislike (0)   quote        

There were 40-year mortgages near the bubble peak.

Some Japanese buyers obtained 100-year mortgages during their housing bubble in the mid-1990s.

5   tatupu70   ignore (0)   2013 Aug 16, 7:52am   ↑ like (0)   ↓ dislike (0)   quote        

HydroCabron says

There have never been 30-year mortgages issued in the United States absent government guarantees.

That's ridiculous. Fannie and Freddie don't guarantee every mortgage--if that were the case, then banks wouldn't have failed and been insolvent...

6   APOCALYPSEFUCKisShostikovitch   ignore (32)   2013 Aug 16, 8:13am   ↑ like (3)   ↓ dislike (0)   quote        

FUCK YOU, DUCK FUCK! We're going to end up with 1000 year mortgages you inherit and your great grand kids finally pay off with they sell your shack for 1,000,000,000,000,000 what you paid for it and buy the sun and threaten to turn it off unless they get 50% of the GDP of the FUCKING WORLD in ransom.

Let's be reasonable.

7   HEY YOU   ignore (7)   2013 Aug 16, 9:04am   ↑ like (0)   ↓ dislike (0)   quote        

LOL, I be loving me some APOCALYPSEFUCK!

8   Homeboy   ignore (2)   2013 Aug 16, 9:41am   ↑ like (0)   ↓ dislike (0)   quote        

HydroCabron says

There have never been 30-year mortgages issued in the United States absent government guarantees.

Really? I thought the government only started guaranteeing loans from private lenders after the 2008 crash.

9   HydroCabron   ignore (1)   2013 Aug 16, 10:11am   ↑ like (0)   ↓ dislike (0)   quote        

Homeboy says

HydroCabron says

There have never been 30-year mortgages issued in the United States absent government guarantees.

Really? I thought the government only started guaranteeing loans from private lenders after the 2008 crash.

My impression, perhaps mistaken, stems from an article on either Calculated Risk or Irvine Housing Blog (now ochousingnews) several years ago.

Maybe the term "guarantee" is too strong, but read on. It's beginning to look like the proper term.

30-year mortgages over the past several decades are largely exclusive to the United States, due to the FHA in the 1930s:

The popular U.S. 30-year mortgage with a fixed rate, which makes possible low monthly payments and a more certain future, is an oddity.

How did Americans develop such a peculiar financial practice? The New Deal.

Basically, FDR established the FHA, which, thought not technically backstopped by the taxpayers, was a government-founded organization which set up an insurance pool, paid into by lenders, which distributed the risk of lending and made longer-term loans possible.

The FHA’s plan was a revolution in finance. No longer would homeowners borrow on balloon notes for a few years. Instead they could borrow for 15 or 20 years (a length of time that bankers had previously thought was immorally long).

Participation was voluntary, but the benefits of spreading risk were such than not joining made little sense for most lenders.

So the government was not technically guaranteeing these loans under Roosevelt, but the guarantee was implicit - the FHA is too big to fail, because too many lenders are tied into the system - and the time for a bailout now looks to be near, as in "early 2014."

It's pretty clear that, having spawned the FHA, the government was unlikely to let it ever collapse of its own weight in a crisis; the implicit guarantee of taxpayers coming to the rescue has been ever-present. If you create a mutual insurance pool that big, its collapse is a good-sized catastrophe.

10   Heraclitusstudent   ignore (1)   2013 Aug 16, 10:26am   ↑ like (0)   ↓ dislike (0)   quote        

HydroCabron says

There were 40-year mortgages near the bubble peak.

Some Japanese buyers obtained 100-year mortgages during their housing bubble in the mid-1990s.

One should know that interests on a mortgage are compounded, and so increase exponentially as a function of time. A 100 yr mortgage even at low rates will multiply many times the initial cost of the house.

11   Heraclitusstudent   ignore (1)   2013 Aug 16, 10:31am   ↑ like (0)   ↓ dislike (0)   quote        

HydroCabron says

There were 40-year mortgages near the bubble peak.

Some Japanese buyers obtained 100-year mortgages during their housing bubble in the mid-1990s.

The wet dream of banksters is a mortgage you never fully pay back: you buy the unit, pay the mortgage, then sell it when you retire and pay back the rest of the mortgage.

This way the banks could essentially rent homes they buy with essentially printed money. (since loan money is newly created money).

12   Homeboy   ignore (2)   2013 Aug 16, 10:56am   ↑ like (0)   ↓ dislike (0)   quote        

HydroCabron says

So the government was not technically guaranteeing these loans under Roosevelt, but the guarantee was implicit - the FHA is too big to fail, because too many lenders are tied into the system - and the time for a bailout now looks to be near, as in "early 2014."

I still don't follow. Yes, the government guarantees FHA loans, but aren't those separate from conventional private bank loans? I thought FHA loans were only a percentage of the total loans out there. I distinctly remember having a choice between a regular 30 year loan or an FHA 30 year loan, with different interest rates. If ALL loans were FHA loans, why would there be a distinction? Again, I thought the phenomenon of the government backing ALL loans began after 2008.

13   HydroCabron   ignore (1)   2013 Aug 16, 11:07am   ↑ like (1)   ↓ dislike (1)   quote        

You're right; I'm wrong.

I could try arguing that the government intervention in the mortgage lending market has made the 30-year mortgage possible, but that is debatable.

Edit: Now I'm not sure. Aren't all non-FHA loans connected with Fannie or Freddie? Has this only been the case (for 30-year) mortgages, or just recently?

I understood that 30-year mortgages were a creation of the U.S. government, and were unlikely without the government in the background. Is this bullshit, or not?

14   RealEstateIsBetterThanStocks   ignore (0)   2013 Aug 16, 1:51pm   ↑ like (0)   ↓ dislike (0)   quote        

your news source is "the street" ? doesn't sound very credible.

15   Homeboy   ignore (2)   2013 Aug 16, 1:53pm   ↑ like (0)   ↓ dislike (0)   quote        

I don't know; that's why I'm asking. I thought it was a recent thing where the government started guaranteeing ALL loans, not just FHA loans. But this article and others seem to be implying that's not the case, that they always did. I can't find any source that really explains it clearly.

16   New Renter   ignore (11)   2013 Aug 16, 2:33pm   ↑ like (0)   ↓ dislike (0)   quote        

Heraclitusstudent says

The wet dream of banksters is a mortgage you never fully pay back: you buy the unit, pay the mortgage, then sell it when you retire and pay back the rest of the mortgage.

Enter the interest only loan...

17   New Renter   ignore (11)   2013 Aug 16, 2:35pm   ↑ like (0)   ↓ dislike (0)   quote        

Mark D says

your news source is "the street" ? doesn't sound very credible.

This is an editorial, not a news source. That's why the title says
"Why the 30-Year Mortgage Could Be Coming to an End"

rather than

Why the 30-Year Mortgage IS Coming to an End

18   casandra   ignore (0)   2013 Aug 16, 2:54pm   ↑ like (0)   ↓ dislike (0)   quote        

Long term loans. How nice you buy a home, your kids take on the payments, and hopefully your grand kids will make the final payment and live rent free.

19   Robber Baron Elite Scum   ignore (0)   2013 Aug 16, 3:47pm   ↑ like (0)   ↓ dislike (0)   quote        

APOCALYPSEFUCK is Shostakovich says

FUCK YOU, DUCK FUCK! We're going to end up with 1000 year mortgages you inherit and your great grand kids finally pay off with they sell your shack for 1,000,000,000,000,000 what you paid for it and buy the sun and threaten to turn it off unless they get 50% of the GDP of the FUCKING WORLD in ransom.

Let's be reasonable.

Now you're talking my language. What you proposed is EXTREMELY reasonable.

Anyone who doesn't find this reasonable is an ASSHOLE!

+1 ApocalypseFuck... I need to introduce you to some of my buddies in Wall Street.

20   Homeboy   ignore (2)   2013 Aug 16, 4:17pm   ↑ like (0)   ↓ dislike (1)   quote        

How much is the sun listed for? You could probably talk them down.

21   bob2356   ignore (1)   2013 Aug 16, 4:38pm   ↑ like (0)   ↓ dislike (0)   quote        

HydroCabron says

You're right; I'm wrong.

I could try arguing that the government intervention in the mortgage lending market has made the 30-year mortgage possible, but that is debatable.

Edit: Now I'm not sure. Aren't all non-FHA loans connected with Fannie or Freddie? Has this only been the case (for 30-year) mortgages, or just recently?

I understood that 30-year mortgages were a creation of the U.S. government, and were unlikely without the government in the background. Is this bullshit, or not?

There are 30 year mortgages all over the world. The fixed rate 30 year mortgage only exists in the US. This is because of Freddie and Fannie.

22   Robber Baron Elite Scum   ignore (0)   2013 Aug 16, 5:12pm   ↑ like (0)   ↓ dislike (0)   quote        

Homeboy says

How much is the sun listed for? You could probably talk them down.

Go fuck off, peasant.

23   Quigley   ignore (0)   2013 Aug 17, 2:13am   ↑ like (0)   ↓ dislike (0)   quote        

Mark D says

your news source is "the street" ? doesn't sound very credible.

C'mon mark, haven't you heard of "street cred?"

24   Homeboy   ignore (2)   2013 Aug 17, 6:13am   ↑ like (0)   ↓ dislike (0)   quote        

Call it Crazy says

Could it be that any loan not bought by Fannie, Freddie or FHA is sold to the FED for "Bennie Bucks" (you know, that 85 Billion a month), so indirectly, most loans are owed by the Gov't....

Bennie is buying all the toxic mortgage crap from the regular banks....

Right, so wouldn't that be a recent thing?





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