Courtesy of Mish.
The Outside the Box MarketWatch Opinion of Damian Maldonado is Millennials Can Finally Afford Homes with New Mortgage Rules.
Let’s start with a look the new rules.
New Rules
- The administration earlier this month cut the premium that borrowers with a Federal Housing Administration loan must pay for mortgage insurance to 0.85% from 1.35%. The half a percentage point reduction will reduce the cost of the average FHA loan by about $1,000 per year.
- Fannie Mae and Freddie Mac last month dropped the minimum down payment to 3% from 5% on some of its mortgages. FHA requires a 3.5% down payment.
- Grant programs, such as CHFA in Colorado, allow home buyers to purchase a home with as low as a $1,000 down payment.
Hoop Jumping
Maldonado jumps through all sorts of hoops to justify the new rules, pretending that “new regulations, should stop the problems that led to the subprime mortgage crisis“.
He concludes “Perhaps this will be the year this generation will leave their expensive rentals, or their parents’ basements, and move into their own homes and live the American Dream.“
I propose that after this relentless rally in home prices, the above “new rules” are too risky. Low down payments would have made more sense actually at the bottom of the market, when standards tightened.
This is typical regulatory BS, lowering lending standards when they should be tightened, and tightening them when arguably they could be lowered.
The cure in this case is to get rid of Fannnie Mae, Freddie Mac, and the FHA, all useless organizations that have done nothing but raise the cost of housing by promoting houses as the “American Dream”.
Nonetheless, I offer this musical tribute.
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