Posted: Sun Jul 13, 2008 1:10 am Post subject: Re: Fannie, Freddie Losses Make Them `Insolvent,' Ex-Fed Pre
smallpoxgirl wrote:
MonteQuest wrote:
It would go to a 5 year loan with a balloon payment, they said on Squawk BOX
The idea being that you would finance your house with serial 5 year loans instead of a 30 year loan?
In the early 1900's when the concept of a home mortgage loan was first invented, banks demanded a 50% down payment and the loan had to be repaid in 5 years.
These loans were NOT backed by the government, so banks had to be conservative to make sure they don't lose money.
Personally I think we SHOULD go back to this system.
I'm all for the free market where government stays out.
Posted: Sun Jul 13, 2008 1:22 am Post subject: Re: Fannie, Freddie Losses Make Them `Insolvent,' Ex-Fed Pre
cube wrote:
Personally I think we SHOULD go back to this system. I'm all for the free market where government stays out.
The problem with that idea is that wealth was much more evenly distributed back then. If you did that today, 5% of people would be able to afford a house, and every one else would end up renting from them. Having the government bailing out bankrupt millionaires over and over and then telling home owners to kiss off hardly seems like a workable solution. _________________ "So while you sit and whistle Dixie with your money and your power.
I can hear the flowers a-growin in the rubble of the towers.
I hear leaders quit their lying
I hear babies quit their crying.
I hear soldiers quit their dying, one and all." - OCMS
Posted: Sun Jul 13, 2008 1:37 am Post subject: Re: Fannie, Freddie Losses Make Them `Insolvent,' Ex-Fed Pre
smallpoxgirl wrote:
The problem with that idea is that wealth was much more evenly distributed back then. If you did that today, 5% of people would be able to afford a house, and every one else would end up renting from them.
That's fine with me.
However I see what you're saying, society would not accept that.
smallpoxgirl wrote:
Having the government bailing out bankrupt millionaires over and over and then telling home owners to kiss off hardly seems like a workable solution.
Agreed.
//
BTW I do NOT believe that home mortgages make home ownership more affordable. That's just a lie perpetrated by TPTB.
Posted: Sun Jul 13, 2008 1:46 am Post subject: Re: Fannie, Freddie Losses Make Them `Insolvent,' Ex-Fed Pre
cube wrote:
That's fine with me.
It's not fine with me. I'm working like crazy to scrape together enough cash for a down payment on land as it is.
Quote:
BTW I do NOT believe that home mortgages make home ownership more affordable. That's just a lie perpetrated by TPTB.
How so? _________________ "So while you sit and whistle Dixie with your money and your power.
I can hear the flowers a-growin in the rubble of the towers.
I hear leaders quit their lying
I hear babies quit their crying.
I hear soldiers quit their dying, one and all." - OCMS
Posted: Sun Jul 13, 2008 2:26 am Post subject: Re: Fannie, Freddie Losses Make Them `Insolvent,' Ex-Fed Pre
smallpoxgirl wrote:
cube wrote:
That's fine with me.
It's not fine with me. I'm working like crazy to scrape together enough cash for a down payment on land as it is.
maybe off-topic but why? Wouldn't commodities be a better investment now?
Maybe I'm just weird but I do not have any emotional attachment to homes or land.
smallpoxgirl wrote:
Quote:
BTW I do NOT believe that home mortgages make home ownership more affordable. That's just a lie perpetrated by TPTB.
How so?
You have to pay interest on a loan so in reality if you wanted to maximize your spending power for the rest of your life (whether buying cars, homes, or anything) then you would pay upfront for everything.
there is an exception...
In a bull market when homes are going up 25% in price every year then it made sense to jump on board immediately before the price goes beyond your reach.
But now that we're in a bear market what's the rush to buy a home? The price has yet to reach rock bottom and when it does it will move sideways for the next 10 years at least before we see another bull market in real estate.
//
interesting chart on home ownership rates
Historical Census of Housing Tables
HOMEOWNERSHIP RATES
United States
2000 1990 1980 1970 1960 1950 1940 1930 1920 1910 1900
66.2% 64.2% 64.4% 62.9% 61.9% 55.0% 43.6% 47.8% 45.6% 45.9% 46.5%
Posted: Sun Jul 13, 2008 2:38 am Post subject: Re: Fannie, Freddie Losses Make Them `Insolvent,' Ex-Fed Pre
cube wrote:
maybe off-topic but why? Wouldn't commodities be a better investment now?
Absolutely commodities would be a better investment. A house is not an investment. It's a place to live. All the people that convinced themselves they were "investing" in a house are the reason home prices got so wacked out the last 8 years. "Investing" is a stupid reason to buy a house. Needing a place to live, OTOH, is a very good reason.
Quote:
You have to pay interest on a loan so in reality if you wanted to maximize your spending power for the rest of your life (whether buying cars, homes, or anything) then you would pay upfront for everything.
Yeah. That's swell and all if you happen to have $200,000 languishing in a bank account. The point of a mortgage is supposed to be that, instead of paying rent every month, you are paying towards owning a place of your own. The question for most folks isn't "pay up front vs. mortgage"....it's "rent vs. mortgage. " _________________ "So while you sit and whistle Dixie with your money and your power.
I can hear the flowers a-growin in the rubble of the towers.
I hear leaders quit their lying
I hear babies quit their crying.
I hear soldiers quit their dying, one and all." - OCMS
Posted: Sun Jul 13, 2008 3:09 am Post subject: Re: Fannie, Freddie Losses Make Them `Insolvent,' Ex-Fed Pre
smallpoxgirl wrote:
...."Investing" is a stupid reason to buy a house. Needing a place to live, OTOH, is a very good reason.
If you look at it that way then I guess it's okay.
I've talked to people who've honestly think the real estate market will "bounce back up" next year.
Anybody who says that, I raise an eyebrow.
smallpoxgirl wrote:
....
Yeah. That's swell and all if you happen to have $200,000 languishing in a bank account. The point of a mortgage is supposed to be that, instead of paying rent every month, you are paying towards owning a place of your own. The question for most folks isn't "pay up front vs. mortgage"....it's "rent vs. mortgage. "
Because we live in "this world" you must play by these rules. But back in the early 1900's people did buy homes upfront or at least with a 50% down payment.
BTW I'm not a fan of these government programs that encourage home ownership. I despise the interest rate home mortgage deduction for income taxes. I do not think that makes home ownership more affordable. If everybody got a tax cut then that just raises the price of homes so at the end of the day, a home is no more affordable then if the income tax deduction never existed. But again we live in "this world" so what choice do we have? --> none
//
BTW there's another issue, inflation.
An argument can be said that saving money is for fools because inflation guarantees whatever money you saved today will be of less value next year.
Sounds like a no win situation regardless of what path you take huh?
Posted: Sun Jul 13, 2008 3:16 am Post subject: Re: Fannie, Freddie Losses Make Them `Insolvent,' Ex-Fed Pre
This is my strategy, and NO I'm not encouraging others to do the same.
I'm currently living in a ridiculously tiny studio and throwing ALL my financial resources (minus living expenses) into commodities. In 5 years I will either look back at regret for my decision or go laughing all the way to the bank.
Posted: Sun Jul 13, 2008 4:57 am Post subject: Re: Fannie, Freddie Losses Make Them `Insolvent,' Ex-Fed Pre
smallpoxgirl wrote:
The idea being that you would finance your house with serial 5 year loans instead of a 30 year loan?
Anyway, do you really believe that most of peoples will be able to finance their homes 5 years into the future.
I doubt it very very much. You will either pay 50% or more up front and get few years long loan for the rest or you will have to rent spending most of your income to pay landlords bill.
Posted: Sun Jul 13, 2008 5:10 am Post subject: Re: Fannie, Freddie Losses Make Them `Insolvent,' Ex-Fed Pre
cube wrote:
This is my strategy, and NO I'm not encouraging others to do the same. I'm currently living in a ridiculously tiny studio and throwing ALL my financial resources (minus living expenses) into commodities. In 5 years I will either look back at regret for my decision or go laughing all the way to the bank.
With all the mess around I must say that finance system had worked very well for me.
I was saving a lot while others were spending like mad and taking credit as if there is no future.
I was paying off all debt meticulously af fast as I could, swapping properties few times, purchasing other properties to sell few months later in "arbitrage" fashion and on the end I have large debt free property in countryside at the seaside, nice plot of land, some money left and no debt to pay.
And I am not any sort of TPTB nor an evil capitalist who is milking destitute masses either.
My view is that currently collapsing financial system was good for a while and could make some rich (or at least reasonably well off) for a little effort only, but nevertheless it was abused by greedy morons and consumer zombie hordes, so it no longer works and must go bust.
Posted: Sun Jul 13, 2008 9:49 am Post subject: Re: Fannie, Freddie Losses Make Them `Insolvent,' Ex-Fed Pre
cube wrote:
This is my strategy, and NO I'm not encouraging others to do the same. I'm currently living in a ridiculously tiny studio and throwing ALL my financial resources (minus living expenses) into commodities. In 5 years I will either look back at regret for my decision or go laughing all the way to the bank.
That's more or less what I'm doing right now. I don't have the money to play in futures, but every spare dollar is going towards long positions on commodity ETFs or short positions on airlines and financials. I've only been trading for about 6 weeks, so no net profits yet, but lots of education and the losses have been tolerable.
I really want a piece of land so I can start a garden, get some bees, chickens, goats, that sort of thing. _________________ "So while you sit and whistle Dixie with your money and your power.
I can hear the flowers a-growin in the rubble of the towers.
I hear leaders quit their lying
I hear babies quit their crying.
I hear soldiers quit their dying, one and all." - OCMS
Joined: Oct 23, 2004 Posts: 5885 Location: New Jersey
Posted: Sun Jul 13, 2008 10:01 am Post subject: Re: Fannie, Freddie Losses Make Them `Insolvent,' Ex-Fed Pre
NTBKtrader wrote:
fnm and fre are in free fall again today: link Since everyone knows that fnm and fre are all ready 'backed implicitly by the federal government, i'm wondering if nationalizing the entities will only balloon the federal government's debt which i would think would scare foreign nations further away from funding our national debt? This financial crisis is becoming very fluid imo.
Well yes, this is scary, becuase the government would not only take on about $5 to $6 trillion in new debt, it would stand behind interest rate derivatives of at least several trillion $ more.
While I don't envision - yet - a sell off by foreigners, there are strong indications that foreigners want a higher interest rate on their dollar investments. Some here have referred to this as not showing up for Treasury bill/bond auctions. Actually they did show up, but their bid on the interest rate they wanted was more than average auction rate. Foreigners are still accumulating US dollar debt. Indeed they must or the US couldn't run a $750 billion and growing trade deficit.
Needles to say, higher interest rates are bad for the economy and would make the housing/mortgage crisis worse.
Is there a way out? No. _________________ It's already over, now it's just a matter of adjusting.
Joined: Oct 23, 2004 Posts: 5885 Location: New Jersey
Posted: Sun Jul 13, 2008 10:09 am Post subject: Re: Fannie, Freddie Losses Make Them `Insolvent,' Ex-Fed Pre
smallpoxgirl wrote:
cube wrote:
This is my strategy, and NO I'm not encouraging others to do the same. I'm currently living in a ridiculously tiny studio and throwing ALL my financial resources (minus living expenses) into commodities. In 5 years I will either look back at regret for my decision or go laughing all the way to the bank.
That's more or less what I'm doing right now. I don't have the money to play in futures, but every spare dollar is going towards long positions on commodity ETFs or short positions on airlines and financials. I've only been trading for about 6 weeks, so no net profits yet, but lots of education and the losses have been tolerable. I really want a piece of land so I can start a garden, get some bees, chickens, goats, that sort of thing.
There's a possibility that any F & F bailout could be highly inflationary. If this causes interest rates to rise, then the market will keep dropping. If rates don't rise that much, then the market may actually recover.
I would recommend then about half in short market funds and the other half in long energy investments. _________________ It's already over, now it's just a matter of adjusting.
Posted: Sun Jul 13, 2008 10:15 am Post subject: Re: Fannie, Freddie Losses Make Them `Insolvent,' Ex-Fed Pre
I saved a bit from each paycheck until I had $40K for a down payment.
I took a 15 yr mortgage (interest on 30 yrs was outrageous) & paid it off in <13 yrs by making a little bit extra payment on the principle each month. Some of those years I had a good income & some of those years I was in grad school. Come what may, I had to have the $$ for that mortgage payment every month, and I did. Now my property is paid for, and I heat the house with wood sustainably harvested from the property. It wasn't necessarily easy to pay off the place but if I did it anybody ought to be able to pull it off. Hence, I have no sympathy for fools who took out 30 yr. ARMS. Let 'em default & be foreclosed on. No one bailed me out & I resent my tax $$$ being wasted bailing out fools.
Posted: Sun Jul 13, 2008 10:30 am Post subject: Re: Fannie, Freddie Losses Make Them `Insolvent,' Ex-Fed Pre
DantesPeak wrote:
Well yes, this is scary, becuase the government would not only take on about $5 to $6 trillion in new debt, it would stand behind interest rate derivatives of at least several trillion $ more.
That's really an astonishing thing that I have trouble wrapping my head around. The national debt currently stands at $9 trillion. This would add 50% to that with a wave of the wand. It would simultaneously make the federal government a lien holder on most of the real estate in the US. It's hard to comprehend the scale of that change.
Quote:
There's a possibility that any F & F bailout could be highly inflationary. If this causes interest rates to rise, then the market will keep dropping. If rates don't rise that much, then the market may actually recover.
It would be inflationary by weakening the dollar, right? So that would be good for commodities. If oil prices stay high, the airlines will continue their plummet. I can see a dead cat bounce in finanacials, kinda like we saw immediately after BS, but the next catastrophe is just underneath the next rock. Lehman is still out there waiting to be a crisis. I don't guess I see either one of those sectors making a big turn. Maybe if we went into a recession bad enough that oil drops back to $100, then airlines would recover for a while. It's easy enough to cash out and rethink if that starts to happen though.
Looks to me like precious metals have finished their correction back to the 200 day moving average and are heading for a big surge over the next couple of months. An F&F bailout that trashes the dollar will certainly help them along. _________________ "So while you sit and whistle Dixie with your money and your power.
I can hear the flowers a-growin in the rubble of the towers.
I hear leaders quit their lying
I hear babies quit their crying.
I hear soldiers quit their dying, one and all." - OCMS
You cannot post new topics in this forum You cannot reply to topics in this forum You cannot edit your posts in this forum You cannot delete your posts in this forum You cannot vote in polls in this forum
News
Discussions
Resources
Members
Forum FAQ
Search
Usergroups
Profile
Log in to check your private messages
Log in
