A.J. DiCintio
Let's stop the latest mortgage madness
By A.J. DiCintio
Mitt Romney likes to say, "Washington is broken," and investment strategist Shah Gilani of moneymorning.com, "The markets are broken."
Both statements, of course, are correct, just as Mr. Gilani is right on target about three of the nation's most pernicious entities when he says the housing market was broken by "Congress. . . mortgage originators. . . [and] banks."
Add the National Association of Homebuilders to the aforementioned list of vampire squids and you've got four of the shameless monsters currently at work sticking their rapacious blood funnels not just into the public's purse but its neck. (It's impossible to thank Matt Taibbi enough for imagery that deserves to become an American classic.)
Specifically, I'm talking about this news reported by Reuters:
"Republicans and Democrats in the U.S. Congress on Monday agreed on a measure that would increase the maximum size of mortgage loans that can be insured by the Federal Housing Administration, a key funding source for U.S. home loans."
You read that right.
Instead of beginning the process of responsibly eliminating government participation in the mortgage loan industry, a course dictated by true free market principles, our leaders are doing just the opposite, conveniently oblivious of the fact that Fannie Mae and Freddie Mac, which were mired in accounting scandals years before the debacle of 2008, continue to lose billions every month despite $170 billion in bailouts taxpayers will never see paid back.
Adding insult to injury, Washington's politicians have come up with their proposal just as Fanny and Freddie's ten top executives are slated to receive a total of $12+ million in bonuses, apparently for their excellent stewardship of trillion dollar New Deal anachronisms that ought to have been terminated decades ago.
Specifically, here is the situation:
During the financial crisis, the limit for a mortgage guaranteed by Fannie, Freddie, or the FHA was increased to $729,750 from $625,500 as a stimulus for the housing sector.
However, the higher limit was scheduled to expire on October 1 of this year and revert to the previous amount, which it did.
But in the name of what can be described only as the government's phantom stimulation of the housing market, House and Senate leaders propose that the FHA be permitted to guarantee mortgages at the higher amount through 2013.
Now, this latest Washington boondoggle doesn't just harm the nation by moving the government's mortgage policy in the wrong direction; it delivers a double dose of pain by kicking the nation's struggling middle class smack in the face.
So, let's examine what raising the mortgage guarantee to more than $729,000 looks like when placed in the context of middle class reality.
To do so, we first need to consider these statistics about average household income compiled by the Census Bureau. (www.census.gov/prod/2011pubs/p60-239.pdf)
"Real median household income was $49,445 in 2010, a 2.3 percent decline from 2009. . . Since 2007, median household income has declined 6.4% (from $52,823) and is 7.1 percent below the median household income peak that occurred in 1999. . ."
Those numbers allow us to establish the boundaries of mortgages average middle class families can afford. But it's not incidental that they also reveal a good part of the ugly truth about the decline, over the past twelve years, of all but the top tier of the American middle.
Next, we move on to the Census Bureau finding that from its peak (admittedly a false one) of $262,600 in March of 2007, the median home price fell to $204,400 this past September.
Analyzing both sets of statistics as they relate to mortgages, here's what we find.
. . . If its finances are sound and it has 20% to put down, a family at median household income ($49,445) can afford to purchase a home in the $140,000 range, a price 30% below that of the current national median home price.
. . . To qualify for a mortgage on a home at the current median price ($204,400), a financially sound middle class family must earn $70,000 annually, a figure 41% above the current median family income.
. . . Finally, even middle class families that earn two or three times the median income but live in areas of very high housing prices are finding themselves mortgage strained.
Combined, the families mentioned above account for 75 to 85% of the American population; and, here's what Washington's politicians are telling them:
"We insist you guarantee the mortgages of people who can afford to purchase homes that cost as much as $729,000, a price 3.5 times the national median."
Talk about perversity.
However, that's not the end of the story, a reality that will come as no surprise to everyone who understand that the propensity of politicians to behave diabolically approaches infinity.
Therefore, with thanks to Mr. Gilani for his insights about who benefits from the proposal, here's what else Democratic and Republican big shots are saying to America:
"And let there be no doubt about it, John and Jane Q. Public, the guarantees we're talking about have nothing to do with individuals but apply exclusively to big banks and other huge investors who purchase enormous bundles of our 'conforming' mortgages."
To conclude, this latest of Washington's insults offers yet another instance of proof that the Founders were right to regard government not as the most sublime human invention and politicians not as Hamlet's "quintessence of dust" but both as rapacious, repulsive, monstrously dangerous bloodsuckers.
What can we do about it?
In the short-term, we can contact the politicians who represent us and tell them to vote against the proposal to increase the limit for guaranteed mortgages.
But to increase the effect of our message as well as look to longer term solutions to the nation's problems, we should let politicians know we are so tired and sick of the rottenness that characterizes Washington's political class that we increasingly agree with Peter Schweizer, whose excellent book urges us to Throw Them All Out.
© A.J. DiCintio
November 19, 2011
Mitt Romney likes to say, "Washington is broken," and investment strategist Shah Gilani of moneymorning.com, "The markets are broken."
Both statements, of course, are correct, just as Mr. Gilani is right on target about three of the nation's most pernicious entities when he says the housing market was broken by "Congress. . . mortgage originators. . . [and] banks."
Add the National Association of Homebuilders to the aforementioned list of vampire squids and you've got four of the shameless monsters currently at work sticking their rapacious blood funnels not just into the public's purse but its neck. (It's impossible to thank Matt Taibbi enough for imagery that deserves to become an American classic.)
Specifically, I'm talking about this news reported by Reuters:
"Republicans and Democrats in the U.S. Congress on Monday agreed on a measure that would increase the maximum size of mortgage loans that can be insured by the Federal Housing Administration, a key funding source for U.S. home loans."
You read that right.
Instead of beginning the process of responsibly eliminating government participation in the mortgage loan industry, a course dictated by true free market principles, our leaders are doing just the opposite, conveniently oblivious of the fact that Fannie Mae and Freddie Mac, which were mired in accounting scandals years before the debacle of 2008, continue to lose billions every month despite $170 billion in bailouts taxpayers will never see paid back.
Adding insult to injury, Washington's politicians have come up with their proposal just as Fanny and Freddie's ten top executives are slated to receive a total of $12+ million in bonuses, apparently for their excellent stewardship of trillion dollar New Deal anachronisms that ought to have been terminated decades ago.
Specifically, here is the situation:
During the financial crisis, the limit for a mortgage guaranteed by Fannie, Freddie, or the FHA was increased to $729,750 from $625,500 as a stimulus for the housing sector.
However, the higher limit was scheduled to expire on October 1 of this year and revert to the previous amount, which it did.
But in the name of what can be described only as the government's phantom stimulation of the housing market, House and Senate leaders propose that the FHA be permitted to guarantee mortgages at the higher amount through 2013.
Now, this latest Washington boondoggle doesn't just harm the nation by moving the government's mortgage policy in the wrong direction; it delivers a double dose of pain by kicking the nation's struggling middle class smack in the face.
So, let's examine what raising the mortgage guarantee to more than $729,000 looks like when placed in the context of middle class reality.
To do so, we first need to consider these statistics about average household income compiled by the Census Bureau. (www.census.gov/prod/2011pubs/p60-239.pdf)
"Real median household income was $49,445 in 2010, a 2.3 percent decline from 2009. . . Since 2007, median household income has declined 6.4% (from $52,823) and is 7.1 percent below the median household income peak that occurred in 1999. . ."
Those numbers allow us to establish the boundaries of mortgages average middle class families can afford. But it's not incidental that they also reveal a good part of the ugly truth about the decline, over the past twelve years, of all but the top tier of the American middle.
Next, we move on to the Census Bureau finding that from its peak (admittedly a false one) of $262,600 in March of 2007, the median home price fell to $204,400 this past September.
Analyzing both sets of statistics as they relate to mortgages, here's what we find.
. . . If its finances are sound and it has 20% to put down, a family at median household income ($49,445) can afford to purchase a home in the $140,000 range, a price 30% below that of the current national median home price.
. . . To qualify for a mortgage on a home at the current median price ($204,400), a financially sound middle class family must earn $70,000 annually, a figure 41% above the current median family income.
. . . Finally, even middle class families that earn two or three times the median income but live in areas of very high housing prices are finding themselves mortgage strained.
Combined, the families mentioned above account for 75 to 85% of the American population; and, here's what Washington's politicians are telling them:
"We insist you guarantee the mortgages of people who can afford to purchase homes that cost as much as $729,000, a price 3.5 times the national median."
Talk about perversity.
However, that's not the end of the story, a reality that will come as no surprise to everyone who understand that the propensity of politicians to behave diabolically approaches infinity.
Therefore, with thanks to Mr. Gilani for his insights about who benefits from the proposal, here's what else Democratic and Republican big shots are saying to America:
"And let there be no doubt about it, John and Jane Q. Public, the guarantees we're talking about have nothing to do with individuals but apply exclusively to big banks and other huge investors who purchase enormous bundles of our 'conforming' mortgages."
To conclude, this latest of Washington's insults offers yet another instance of proof that the Founders were right to regard government not as the most sublime human invention and politicians not as Hamlet's "quintessence of dust" but both as rapacious, repulsive, monstrously dangerous bloodsuckers.
What can we do about it?
In the short-term, we can contact the politicians who represent us and tell them to vote against the proposal to increase the limit for guaranteed mortgages.
But to increase the effect of our message as well as look to longer term solutions to the nation's problems, we should let politicians know we are so tired and sick of the rottenness that characterizes Washington's political class that we increasingly agree with Peter Schweizer, whose excellent book urges us to Throw Them All Out.
© A.J. DiCintio
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