Secret #46 – Since Our Mortgage System is Nationalized, Shouldn’t We Get a Better Deal?
If the U.S. government is going to be so incredibly involved in mortgages, should we just cut out the middlemen and have the government make mortgages directly to home buyers and save home buyers some money?
Or, at least, transition the current system to make the standard mortgage 20 years, portable, and with a Lower-Only Adjustable-Rate (LO-ARM), at least for government-supported mortgages.
And if the government (Fed) is going to own 1/3rd of all mortgage-backed securities in the country, why not require them to buy safer mortgages which would lower rates on those safer, sustainable mortgages? Why support higher-foreclosure mortgages that can destabilize households as well as the national economy?
Or should we get the government out of the mortgage business altogether and simply regulate the private, free-enterprise mortgage industry to ensure safe, sustainable mortgages that maximize free-and-clear home ownership? Emphasize safe, wealth-building mortgages, not more home sales and more mortgage debt.
It looks like the mortgage systems in some European countries, are more free market than in the U.S. The mortgage system in the U.S. seems more “socialist” than the system in Denmark, Sweden, and Hungary.
If the U.S. government is going to continue to direct the U.S. mortgage market, Americans should get a better deal.
In the words of Chandler Bing: Oh God!
I vote option 2.
You wanna see housing inflation really take off… go whole hog on governments and mortgages as proposed.
I operate under the belief that government-backed (insured) credit feeds gross market imbalance and asset price inflation. We’ve seen it already in housing with quasi-government entities like FNMA (et al) and government insured loans.
We’ve really seen it where the government has come in as direct lender like in student loans: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr733.pdf
“Like housing finance, credit plays a key role in funding U.S. postsecondary education, and most of this credit is originated through government-sponsored programs. Our paper provides complementary evidence to the conjecture that credit expansions can result in aggregate pricing effects and not just on assets purchased by credit recipients.”
It's a good point John, but we can't cut out the middle man. Then the government would have to handle all the administration of originations, processing, underwriting, et al. And that would be very messy.