Comments on: Abolish the 30-year fixed-rate mortgage! A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: AdrianBunk Fri, 28 Oct 2011 08:46:45 +0000 @CarlOmunificent

Your link doesn’t work, but I get your point.

My point is that such a setup is part of the problem, and each time economy and housing market go down the US tax payer will have to pay a few hundred Billion or even a few Trillion Dollars.

How much in mortgages are open on the USA? I remember numbers in the $12 Trillion range. Let 20% of the owners go underwater, and there are so many “too big to fail” triggered that Uncle Sam has to open his pockets widely (e.g. the US government cannot let any of Frannie go bankrupt).

By: ChicagoJoe Fri, 28 Oct 2011 03:43:46 +0000 My wife and I purchased a modest home last year with 5.375% interest rate. We just refinance for 4%. So, I can say I love the 30-year fixed mortgage. While I do see and agree the points made in this article, the government is now making money off these loans not only on the interest, but also on the MMI. I will pay close to 10K on insurance alone in during the next 9 years because of the new rules that were enacted last year. The system is not perfect, but what system ever will be. The way I see it if the government can make a profit by helping people fulfill a dream, all you are during is prolonging the current problems by getting rid of it due to the abundance of housing available. There may be a time to get rid of it, but now would not be it.

By: AdrianBunk Thu, 27 Oct 2011 08:29:57 +0000 @CarlOmunificent

You wrote “Borrowers are required to put up a large (20% say) down payment”.

20% is actually pretty low – don’t try to get a mortgage for a house in Germany when you have only 20% of the price yourself, you won’t get it.

The reasonable average long-term expectation for housing prices is that they are increasing by the inflation rate, and that every few decades you have to pay a larger amount for renovation of the house.

If the basic assumption throughout a country is that housing prices will go up much faster than inflation then you are likely inside a bubble.

By: OneOfTheSheep Thu, 27 Oct 2011 04:12:26 +0000 Those touting ARMs are looking for suckers! Interest will never again be as low as it is.

Anyone signing up for an ARM today will face upward ARM resets likely every other year due to the Fed’s previous and future debasement of our currency. More and more dollars with no change in what backs them up makes each worth less!

Can you imagine what a $1500-$2000/mo. mortgage PLUS rising local taxes would be in ten years? Twenty?
Think your earnings can keep up with that? No one could afford to remain in homes thus financed!

I can’t think of anything as likely to turn this into a country of renters.

By: TFF Thu, 27 Oct 2011 02:22:28 +0000 “What everyone seems to miss is that when one buys a house, they are usually really straining, financially at that time.”

Excellent point. For such households, absorbing an ARM reset to a higher rate may be impossible.

This also points out why so many new mortgages wash out. If you are already straining when you take on the loan, then you need everything to go right for the next few years. If your income falls, you quickly begin to flounder.

By: greywolfsd Wed, 26 Oct 2011 23:38:06 +0000 I meant Shelby the politiican.
Felix is an idiot! don’t listen to his rhetoric. Again this idiot is owned by Wallstreet!

By: greywolfsd Wed, 26 Oct 2011 23:32:17 +0000 Felix is bought and sold by Wallstreet. I am a senior loan officer. Felix is joke and he is dangerous! I can’t believe anyone would take this idiot seriously. Has anyone looked at the indexs that are tied to ARM’s? it was less than three years ago that ARMS were about 5%…locking in low rates…PREVENT foreclosures. Wake up America! don’t let this slick politician give you some snow job. This man should be defeated in his next election. People like him are the reason why people are protesting on Wallstreet.

By: OneOfTheSheep Wed, 26 Oct 2011 23:31:28 +0000 What everyone seems to miss is that when one buys a house, they are usually really straining, financially at that time. Back in the mid-sixties I bought a modest home using nothing down VA financing and “locked in a 6-1/4% rate. Had to buy fridge, couches, furniture on time (three-year loan, as I recall). Interest rates went up and up the whole time I owned it, selling in 1988.

Because of ever-increasing local taxes and increasing maintenance as the house and stuff in it aged, it would have been impossible for me to have kept that house without the 30-year fixed rate mortgage. But, because I bought in a good area that STAYED a good area, the house I “bought” for under $22,000 was sold for $177,000 cash.

Out of that sale, I still, after 23 years of payments, owed over $10,000 “payoff”. Needless to say the $10,000 “payoff” would not buy in 1988 what it would have bought back in 1965. While I was a “winner” in “the system”, many of my neighbors, who pulled up roots every five years to buy something “bigger and better” eventually came to grief financially.

What seems most offensive in a day when “every player gets a trophy” in school is finding out that in a capitalistic society there are REAL winners and those who loose. I guess they think that’s OK in Vegas but not in real life? NO! Welcome to reality!

By: bokababu Wed, 26 Oct 2011 21:26:45 +0000 I think its so interesting to read this super “PRO free Market” piece.
Only thing I do not get is why did we let the Govt bailout any of these “too large to fail” banks that screwed themselves with these securitized commodities and WHY has not anybody in these banks desks ever find themselves in Jail.
How are they different than Mardock.
Did they finance Obama or Bill o Riley

By: mgunn Wed, 26 Oct 2011 15:17:07 +0000 Felix, I actually agree with a large part of your reasoning but note: these loans can provide a source of stable investments IF due diligence is made (it wasn’t), and not all loans subsidized by government are bad. For example: 90+% of STUDENT loans are government subsidized. The private sector is not accustomed to looking so far forward. Indeed, one of the reasons china is so successful is because they look far ahead. I don’t believe subsidized student loans are bad for the country, in fact I think its good. If left to the private sector most students would not be able to go to college.