Courtesy of Mish.
Citing Dick Bove, Yahoo!Finance reports Government About to Destroy American Mortgages Permanently.
Mortgages as we know them are going away in the next four years, warns Dick Bove, vice president of research at Rafferty Capital. Bove, one of the most widely-respected banking analysts in the world, is certain that will have devastating consequences for housing and the rest of the American economy.
The removal of the two most important players in American mortgages – the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) – threatens the very foundation of the American economy, according to Bove.
These two government-sponsored entities – along with the smaller Government National Mortgage Association (“Ginnie Mae”, a government corporation that broke off from Fannie Mae) – issued 98% of the $1.4 trillion in mortgage-backed securities in the United States so far in 2013. These securities are sold in order to add liquidity to the mortgage market, thereby making funds available to borrowers.
“If Fannie and Freddie go away, what then happens to the mortgage markets?” asks Bove. “The answer to that question is that we no longer have things like 20-year and 30-year mortgages because banks are not going to put that type of mortgage on their balance sheets. And we won’t have fixed-rate mortgages.”
Bove says the banks he spoke with won’t be able to provide 30-year mortgages in large quantities without Fannie Mae and Freddie Mac in the markets. “I’ve called a number of very large banks – the largest issuers of mortgages in the United States – and asked them, ‘If there was no Fannie and Freddie, what would be the typical mortgage in the United States?’ And, the answer is a 10- to 15-year adjustable rate mortgage.”
The end of Fannie Mae and Freddie Mac is a major sea-change in how the government views affordable housing, according to Bove.
“It is no longer the goal of the United States government that every household should have its own home,” say Bove. “In my view, that’s a call for a return of public housing and all of the ills that went with public housing.”
Affordable Housing Nonsense
The results of “affordable housing” programs speak for themselves.
In the last decade, hundreds of “affordable housing” programs at the federal and state level did anything but make housing affordable.
Together with president George Bush’s inane “ownership society”, the price of homes skyrocketed, as did taxes on homes. And cities did not use those tax dollars very wisely, did they?
Low interest rates, declining lending standards, ownership promotion mentality, 95% mortgages, and a host of other silly ideas fueled the biggest housing bubble in history.
…
