We are killing ourselves and shortening the lifespan on this planet by forgetting the one true thing that matters most…living for the moment and freeing ourselves of the past. Stop, look and listen. There is a solution to all problems but we much learn to create the space necessary to build awareness and INCLUDE everyone as one in the same.

Weather you like it or not they will make changes. Some of them will work and some wont. But the system will be improved. This is how we have built the biggest and most powerful county in the world.

I just wish all of this negativity and panic would just calm down. We have other housing downturns and over extending periods in our history that have been far more devasting on our economy. Study the housing market of the the late 1980’s and early 1990’s. Look at the consequences that were suffered and what happened after it settled down. The sky is not falling.

The housing prices in CA are going to fall. Whether or not fnma/freddie raise the conforming loan limit in CA.

And once again….I dont know if the taxpayer has ever had to pay 1 red cent bailing out fnam/freddie.

Now please lets agree to disagree.

Nor do I support the government plan, nor do I care that your plan while ‘More conservative” simply screws everyone less. Thanks heaps.

As far as your education and experience goes, fat lot of good those credentials have done the wizards that have put our financial markets in such a mess. We have some real highly-credentialed people out there generating these massive write-downs in the billions of dollars. Rank-pulling won’t fly with me.

You are correct – I want the government to keep its corrupt little hands out of the free markets other than providing regulation and oversight. They usually succeed at that. They seldom do a good job when they try to micromanage the economy.

Did you know that Countrywide (who may end up insolvent) borrowed 51B from FHLB? Where you think that money comes from? I’ll give you one guess.

Fannie and Freddie are in huge trouble, and you can rest assured that if it gets bad enough, the government will find a way to bail them out, whether it is called a bailout or not.

Since the US government is broke, more debt will be issued to fund these bailouts. This will pile even more debt on future generations, who are not even old enough to vote right now. Let them pick up the tab. You and I will likely be in the old folks home while they slave to pay off crushing debt. Nice.

You seem to think you have a “gotcha” on me because I am waiting to buy a house.
Nope. I’m waiting because I think that the economy may slide into deep recession, and want to feel that out first. I can easily afford a house right now.

You said:
I am not certain how my proposal punishes the prudent and rewards the imprudent. All I am suggesting is that some people in California deserve to pay the same interest rates as the rest of the country.

Explained above. There is no free lunch. Prices are still too high relative to incomes.
Allowing the GSEs to write million dollar mortgages will simply reduce their capital at a greater rate, and expose them to more default risk, due to the fact that there are additional price declines to come in CA.

The rate is not the problem. Let the seller drop his price enough and the net result will be the same payment. The private lending market demands the higher rate for a GOOD REASON. They expect greater risk. They are far smarter than the
government leaders who have a different agenda. Why expose the taxpayer to that risk?

You said:
You sound very angry that our President, Treasury, Central Bank, Federal, State and Local governments are actually working to resolve this crisis.
You believe in doing nothing. Let the s? hit the fan and then you can beneifit in the unnecessary collaspe.

Have you studies what happened in Japan? Endless government do-gooderism prolonged their housing decline far longer than it needed to. You really need to look into this to understand. The collapse will come either way, I promise you. It will be worse with meddling.

Your greatest assertion, that I am after my own interests in this is null and void, here’s why:

I expect every government and Federal Reserve action to make the situation worse. In fact, read the most frequent post on this very blog for some insight into just how this happens.

Therefore, if I wanted a cheaper house, I would be happy about what will be their bungling. I have cash saved up and no debt. The worse they make the problem, the better off I am. I win either way. Either justice is done, or I get a cheaper house. I prefer a just outcome to my own naked self-interest. The government will fail, as it usually does, and I will likely get a house at a price lower than I deserve. Oh well.

But I would rather that the free markets cleanse this mess out quickly – which they will if they are allowed to do so. But no, the do-gooderism will insist on spreading the pain around “fairly” (meaning everyone suffers, even if they were not involved), the banks get bailed out, a few homeowners get helped, and we once again subsidize bad behavior.

That’s the American way now. Accountability is dead. Let the grandkids pay.

I am not certain how my proposal punishes the prudent and rewards the imprudent. All I am suggesting is that some people in California deserve to pay the same interest rates as the rest of the country.

You sound very angry that our President, Treasury, Central Bank, Federal, State and Local governments are actually working to resolve this crisis.
You believe in doing nothing. Let the s— hit the fan and then you can beneifit in the unnecessary collaspe.

Again, I have absolutely NOTHING to do with Califonia. I am on the other side of the country. I do think that if the credit markets were to thaw back to semi healthy levels thats what is best for everyone. The only way I benefit is if the entire nation benefits.

Thank you for you efforts to educate me. However, I am a 20 year veteran of mortgage finance and I graduated with honors with multiple business degrees.

Again, my proposal is far more conservative than the Federal Reserve’s. However, when it comes to regulating and managing housing finance I will trust their opinions over yours Patient Buyer.

Your views are representative of everything that is wrong in America. Privatize profit, socialize risk.

Who the heck are you to judge what a “fair rate” is? The free market has decided that there needs to be a risk premium for high cost markets, because the values will likely decline further, increasing risk of default. Just as the free market has decided that prices are too high.

You try to confuse the issue by suggesting that I wish to make California subordinate to everyone else. No, I am suggesting that they do not qualify for special privileges. Let prices come down, and the conforming limit will no longer be a problem. It is the “special help” ideas that you suggest that will keep proces high and unaffordable.

And you think there isn’t a greater risk, well guess what? You are wrong. There is always higher risk when prices are higher multiples of incomes. That is economic fact.

I do not have the time or energy to give you the lesson on economics that you need.

Here is the short version, though:

*The GSEs exist to promote affordable housing.
*Affordable housing means a reasonable price and a reasonable payment
*Current jumbo rates are putting pressure on prices
*Lower prices increases affordability
*When prices drop further, those markets will be perceived as less risky
*Then lenders will offer jumbos at normal rates
*End of problem

Your proposal will punish the prudent and reward the imprudent.

And no, I don’t feel better.

Watching greedy people put their own interests ahead of everyone else never makes me feel good.

Personally, I try not to take pleasure in what is happening to the PEOPLE in this downturn, even though I am glad to see prices return to lower levels. That said, if people in the RE/Mortgage field have the propensity to think as you do, then I guess I maybe I should take some pleasure in seeing the financial sector take some well-deserved punishment.

I am proposing something more conservative than the fed is supporting. Also I am not lending in CA so it’s in my best interest to support the fed’ proposal.

Correct me if I am wrong but d I dodnt think taxpayer has ever had to bail out fnma and freddie on red cent.

The fed has to open credit markets again. Until they do that the situation will spiral further downward. Risky lending is basically gone. Underwriting guidelines have reverted back 1992 guidlelines.

Once again this proposal means that they would qualify for a conventional full doc approval to get the same rates as other people. If they qualify under the same conventional guidelines than I just dont see the risk outweighing the reward which is an improved credit market.

My answers to your questions are:

1. No — very low interest rates pushed prices up, which supported the low rates. Now that prices aren’t rising any more, the low interest rates don’t make sense.

2. No — teaser rates have low initial rates, which subsidize higher future rates. Unless prices appreciate, they don’t make sense, and prices are not appreciating.

3. Yes — Fannie and Freddie, aka the long suffering tax payer, can afford to write $1M loans. Why not, they pay for everything else? Would this let prices adjust back to reasonable levels? No. Should the average tax payer ($40K/year, does not live in California, owns a $200K house) subsidize the Californian tax payer ($80K year) so they purchase a $1M house? Also, won’t such a subsidy just flow directly to people who already own a $1M home? Doesn’t think just make life worse for that other breed of Californian, the renter?

A credit contraction to a tune close to a Great Depression is probable. This was all created by the banking system. Unfortunately, people will suffer, but it’s actually a healthy long term event because we will finally kill off some of the cancer in our economy. Any intervention such as the ones proposed by Paulson and the Fed, will only work against the exact people they pretend to be protecting.

The reason why housing prices went so high is because banks lent money to people who couldn’t afford the house. In a free market they would be punished by these reckless actions when the loans goes into default. However, because of sentiment like yours where we bail out people left and right, banks knew they were able to transfer their risk to the American Taxpayers. They knew that according to history, they can use the argument, “save us so that we can save the economy”. It’s a fallacy and you just bit and to your own admission it’s because you are biased.

How about you think long-term. The U.S. is going bankrupt. The money does not fall out of the sky, it comes from Americans becoming poorer. Moral Hazard will eventually bankrupt this country and reduce this country into a socialist state. You can slowly kiss your liberties goodbye in a socialist state.

A couple of questions:
1. Would California’s prices have gone up that high if it wasn’t for the hugh number of options arms?

2. Are prices that were supported by teaser rate interest only arms on stated income deals sustainable?

3. Can Fannie and Freddie really afford to start writing $1 million loans?

My opinions…

1. No
2. No
3. No