Americans Are Addicted
But it's not to oil or meth. It's something else (you've probably got one, it's "unique and costly"), read about it here in today's WSJ.
CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Thursday, June 17, 2010
About Me
- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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- Testifyin'
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3 Comments:
I did not see anything alarming in that article despite its tone. Those other countries with adjustable rates presumably adjust down as well as up. What is the difference to the bank?
Well personally I see Wessel is on a fool's errand...
Apparently the facts seem to matter very little to him...
Nary a word about the CRA, the whole hog insertion of the federal government into the housing business, or the fact that many home buyers weren't smart enough to buy within their means...
Wessel, total waste of bandwidth...
You're right about the government putting themselves in the housing business. There's a big difference between being in the housing business and being in the mortgage business.
If you're in the housing business, you're trying to get as many people into buying houses. If you're in the mortgage business, you want lots of good mortgages to borrowers that can pay.
Between the CRA policies and the loan brokers being compensated solely by the size and number of mortgages sold and not having compensation based on mortgage quality and in some states mortgages have no recourse, there were a lot of bum mortgages sold to people whoe should never have gotten one in the first place.
The realtors had incentive to sell the most house possible, the mortgage brokers had incentive to give out mortgages to anyone and everyone regardless of ability to pay or requiring a down payment, Fannie Mae and Freddie Mac were compensated by volumes of mortgages, not quality. Nobody in the process had any incentive to ensure the loans were prudent.
When I bought my first house, I got an FHA 30 year fixed mortgage, but getting it required a healthy 15 to 20% down payment. What ever happened to the down payment requiremen such that the house would provide collateral for the loan balance? Banks that keep their mortgages locally instead of reselling them still do this.
I think the addiction to owning your home is more an addiction to having more house than you can reasonably afford - it's good old greed dressed in a lime green polyester leisure suit.
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