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.
“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.”
P.S. What happens when a government-issued “portable” mortgage becomes non-dischargeable under bankruptcy laws and follows the individual around like student debt? What is the housing equivalent of a debt-financed $150k Ph.D. in Gender Studies of Icelandic sea squirts that can’t be realistically repaid with a $40k per year call center gig?
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.
In theory it’d be nice if the gov took full control over mortgages.
This would leave private industry to take on the riskier loans, and those loans to only remain affordable by competition in risk management and securitization.
The reality is I think banks would simply choose to unwind their exposure in the mortgage market. If the government isn’t there to give assurance on riskier loans. No one will make those loans.
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.”
P.P.S I misquoted Chandler. It is actually… Oh! My! God!
P.S. What happens when a government-issued “portable” mortgage becomes non-dischargeable under bankruptcy laws and follows the individual around like student debt? What is the housing equivalent of a debt-financed $150k Ph.D. in Gender Studies of Icelandic sea squirts that can’t be realistically repaid with a $40k per year call center gig?
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.
In theory it’d be nice if the gov took full control over mortgages.
This would leave private industry to take on the riskier loans, and those loans to only remain affordable by competition in risk management and securitization.
The reality is I think banks would simply choose to unwind their exposure in the mortgage market. If the government isn’t there to give assurance on riskier loans. No one will make those loans.