The responsible renter bailout?

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http://online.wsj.com/article/SB122833771718976731.html



The plan, which is in the development stage, would temporarily use the clout of mortgage giants Fannie Mae and Freddie Mac to encourage banks to lend at rates as low as 4.5%, more than a full percentage point lower than prevailing rates for a standard 30-year fixed-rate mortgage.



...



The lower interest rate would be available only to borrowers who are buying a home, not those refinancing a mortgage.



In addition, borrowers would have to qualify for a mortgage guaranteed by Fannie, Freddie or the Federal Housing Administration. Those guarantees apply to loans where borrowers can document their income and afford their monthly mortgage payments, steering the government away from backing loans considered risky.
 
I was posting on this on the headlines thread.



Where will the Treasury get the money to make the loans? My guess is that if they try to sell MBS, there will not be a lot of takers at 4.5%.



And why 4.5%? If the government can just solve a credit problem by lowering interest rates on mortgages, why stop at 4.5%? Why not 3%, 2%, 0%? Better yet, why not pay me to buy a home?



I am truly having a difficult time imagining that Bernanke and Paulson are this stupid? Or are they just desperate?
 
Why exactly is this a responsible renter bailout?



If I did something called a responsible renter bailout, it would go like this:



1. Rent a bank owned or government owned house. Join the Renter Homestead Program.

2. The rent is set initially at market rent, and increases with inflation. You can move, but you can't sublet. The property can't be sold out from under you while you live there.

3. If you go five years without a missed rental payment, the house is yours for the lower of the appraised value when you moved in, or the appraised value at the end of five years. Miss any payment by 30 days and the clock resets.

4. If the Federal Government wants to give subsidies, give a lower interest rate or an FHA low downpayment loan.



This would fill a lot of vacant homes pretty quickly with responsible people. However, the apartment owners might get upset.
 
[quote author="awgee" date=1228388947]I was posting on this on the headlines thread.



Where will the Treasury get the money to make the loans? My guess is that if they try to sell MBS, there will not be a lot of takers at 4.5%.



And why 4.5%? If the government can just solve a credit problem by lowering interest rates on mortgages, why stop at 4.5%? Why not 3%, 2%, 0%? Better yet, why not pay me to buy a home?



I am truly having a difficult time imagining that Bernanke and Paulson are this stupid? Or are they just desperate?</blockquote>


I thought the purposes of the proposal/program of the day were: to test out effectiveness and/or public opinion, and to lower the rate of price decline by giving people hope that eventually one of these programs would help them.



No?
 
[quote author="MalibuRenter" date=1228389315][quote author="awgee" date=1228388947]I was posting on this on the headlines thread.



Where will the Treasury get the money to make the loans? My guess is that if they try to sell MBS, there will not be a lot of takers at 4.5%.



And why 4.5%? If the government can just solve a credit problem by lowering interest rates on mortgages, why stop at 4.5%? Why not 3%, 2%, 0%? Better yet, why not pay me to buy a home?



I am truly having a difficult time imagining that Bernanke and Paulson are this stupid? Or are they just desperate?</blockquote>


I thought the purposes of the proposal/program of the day were: to test out effectiveness and/or public opinion, and to lower the rate of price decline by giving people hope that eventually one of these programs would help them.



No?</blockquote>


I dunno what the purpose of the proposal are.

But, if it is public opinion they are looking for, here is mine.

Get the flock out of the way and let home prices decline to a level of affordability determined by market forces. All the government involvement can do is add inefficiency and cost.
 
It is becoming more and more obvious these guys have been working without a net or a clue from the get go.



The more they say the more scared I get.
 
[quote author="Daedalus" date=1228393441]No net, no clue...no worries! There's a T-shirt op here somewhere.</blockquote>


No net, no clue

no worries!

I got a $110 Million payout!
 
I just read that the 10yr treasury yeild is 12+ standard deviations from its 50dma and 7+ standard deviations from its 200dma based on a data set dating back to 1962.
 
[quote author="awgee" date=1228429668]I just read that the 10yr treasury yeild is 12+ standard deviations from its 50dma and 7+ standard deviations from its 200dma based on a data set dating back to 1962.</blockquote>


The writing in on the wall. Home debtors all bailed out and got foreclosed cuz they took home loans at 5X, 6X or 10x their income.



The US Government has $11 Trillion in debt and are throwing money around like mad. They have an 'income' of $2 Trillion a year. Every State is doing the same.



They're all going to be bankrupt because they won't be able to service their debt and maintain programs without crushing the economy to a standstill with new taxes and program cuts.
 
[quote author="awgee" date=1228389913][quote author="MalibuRenter" date=1228389315][quote author="awgee" date=1228388947]I was posting on this on the headlines thread.



Where will the Treasury get the money to make the loans? My guess is that if they try to sell MBS, there will not be a lot of takers at 4.5%.



And why 4.5%? If the government can just solve a credit problem by lowering interest rates on mortgages, why stop at 4.5%? Why not 3%, 2%, 0%? Better yet, why not pay me to buy a home?



I am truly having a difficult time imagining that Bernanke and Paulson are this stupid? Or are they just desperate?</blockquote>


I thought the purposes of the proposal/program of the day were: to test out effectiveness and/or public opinion, and to lower the rate of price decline by giving people hope that eventually one of these programs would help them.



No?</blockquote>


I dunno what the purpose of the proposal are.

But, if it is public opinion they are looking for, here is mine.

Get the flock out of the way and let home prices decline to a level of affordability determined by market forces. All the government involvement can do is add inefficiency and cost.</blockquote>


I think the gov should actively try to push the price of houses down to affordable/rental levels. This would help the mortgage industry , realtors and myself.
 
[quote author="No_Such_Reality" date=1228431705][quote author="awgee" date=1228429668]I just read that the 10yr treasury yeild is 12+ standard deviations from its 50dma and 7+ standard deviations from its 200dma based on a data set dating back to 1962.</blockquote>


The writing in on the wall. Home debtors all bailed out and got foreclosed cuz they took home loans at 5X, 6X or 10x their income.



The US Government has $11 Trillion in debt and are throwing money around like mad. They have an 'income' of $2 Trillion a year. Every State is doing the same.



They're all going to be bankrupt because they won't be able to service their debt and maintain programs without crushing the economy to a standstill with new taxes and program cuts.</blockquote>


Martin Wolf's take on this

<A href="http://www.ft.com/cms/s/0/027b1efc-c0a4-11dd-b0a8-000077b07658.html">http://www.ft.com/cms/s/0/027b1efc-c0a4-11dd-b0a8-000077b07658.html</A>
 
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