2 Responses to “Fannie and Freddie ‘Need to Go’” »»

1. rich
   Comment by rich | 07/30/10 at 6:10 am

   However Fannie and Freddie get restructured, there needs to be sanity reintroduced in the home loan qualification process. Allowing folks making $90K per year to take out $500K mortgages is just nuts.

   In addition, the limit for conforming loans should be lowered and not raised. High limits simply add yet more unnecessary risk to the mortgage financing system.

2. balor123
   Comment by balor123 | 07/30/10 at 8:17 am

   The cost of buildings has come down considerably over the past century – there is no longer a need for government to support 5x leverage to buy a home when most of that money goes into land. A simple solution, then, is simply to stop adding leverage to land purchases. That leverage doesn’t increase affordability it just makes the land owners wealthy while increasing risk to the borrowers and those who lent them money. It’s like giving weapons to all sides fighting a war and then being surprised that more soldiers are killed.

   Of course, the implication of this change would be that $400k lots in Waltham would quickly become worth at most a downpayment. At 20% down, that means lots would be worth no more than $100k and with FHA loans like $10k. With downpayment requirements on the remaining loan those values would drop even further.

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