Re: Government aid for US mortgages
One nice primer I have found regarding the Fannie Mae Freddie Mac operations http://www.cbo.gov/showdoc.cfm?index=13sequence=2 -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
Government aid for US mortgages
It is actually more complicated since the US Federal Reserve directly influences the cost of bank funds that are resold to consumers directly through the Federal Reserve discount rate (currently 1%) . Also, the regulation (or lack thereof) of the sale of mortgage-backed securities on the secondary markets by such "blended" federal-private mortgage companies like Fannie Mae and Freddie Mac increases the availability of home mortgage loans to consumers (essentially flipping loans for origination fees with minimal risk in the process) and shifts the risk of rising home foreclosures and falling investment yields on home mortgage-backed securities to the Federal Government (when insurance fund reserves are depleted) and institutional investors and individual pensioners. The investment risk of peaking US housing market prices (buttressed by historically low debt service levels) is globalized through the sale of these mortgage-backed securities in international markets such as London and Japan. Hence, low interest rates fuel higher home values which contribute to the consumer borrowing cycle via higher home equity loans which are deductible from Federal income taxes. Robert D. Manning joanna bujes [EMAIL PROTECTED] wrote: The chief govt support in the US for mortgages (that I know of) is thatinterest paid is tax deductible.joannaChris Burford wrote:Gordon Brown and the British government have been looking enviably atthe US mortgage market where long term fixed mortgages play a part ina mixed economy.Mortages in the UK are almost all short term. Arguably fluctuations ininterest rates for national and international economic reasons, have abig impact on a key electoral constituency, and in turn cause shortterm swings in housing.In the preview of a studiously academic report to be published inLondon this morning, the BBC commentator noted that of coursethere is government support in the US for long term mortgages.What is this? and what is its murky economic and political history?ThanksChris BurfordLondonDo you Yahoo!? Yahoo! Mail - More reliable, more storage, less spam
PEN-L] Government aid for US mortgages
It is actually more complicated since the US Federal Reserve directly influences the cost of bank funds that are resold to consumers directly through the Federal Reserve discount rate (currently 1%) . Also, the regulation (or lack thereof) of the sale of mortgage-backed securities on the secondary markets by such "blended" federal-private mortgage companies like Fannie Mae and Freddie Mac increases the availability of home mortgage loans to consumers (essentially flipping loans for origination fees with minimal risk in the process) and shifts the risk of rising home foreclosures and falling investment yields on home mortgage-backed securities to the Federal Government (when insurance fund reserves are depleted) and institutional investors and individual pensioners. The investment risk of peaking US housing market prices (buttressed by historically low debt service levels) is globalized through the sale of these mortgage-backed securities in international markets such as London and Japan. Hence, low interest rates fuel higher home values which contribute to the consumer borrowing cycle via higher home equity loans which are deductible from Federal income taxes. Robert D. Manning joanna bujes [EMAIL PROTECTED] wrote: The chief govt support in the US for mortgages (that I know of) is thatinterest paid is tax deductible.joannaChris Burford wrote:Gordon Brown and the British government have been looking enviably atthe US mortgage market where long term fixed mortgages play a part ina mixed economy.Mortages in the UK are almost all short term. Arguably fluctuations ininterest rates for national and international economic reasons, have abig impact on a key electoral constituency, and in turn cause shortterm swings in housing.In the preview of a studiously academic report to be published inLondon this morning, the BBC commentator noted that of coursethere is government support in the US for long term mortgages.What is this? and what is its murky economic and political history?ThanksChris BurfordLondonDo you Yahoo!? Yahoo! Mail - More reliable, more storage, less spam
Re: Government aid for US mortgages
Robert Manning wrote: snip The investment risk of peaking US housing market prices (buttressed by historically low debt service levels) is globalized through the sale of these mortgage-backed securities in international markets such as London and Japan. Hence, low interest rates fuel higher home values which contribute to the consumer borrowing cycle via higher home equity loans which are deductible from Federal income taxes. Doesn't this kind of sound like a Ponzi scheme? Paul P
Government aid for US mortgages
Gordon Brown and the British government have been looking enviably at the US mortgage market where long term fixed mortgages play a part in a mixed economy. Mortages in the UK are almost all short term. Arguably fluctuations in interest rates for national and international economic reasons, have a big impact on a key electoral constituency, and in turn cause short term swings in housing. In the preview of a studiously academic report to be published in London this morning, the BBC commentator noted that of course there is government support in the US for long term mortgages. What is this? and what is its murky economic and political history? Thanks Chris Burford London
Re: Government aid for US mortgages
The chief govt support in the US for mortgages (that I know of) is that interest paid is tax deductible. joanna Chris Burford wrote: Gordon Brown and the British government have been looking enviably at the US mortgage market where long term fixed mortgages play a part in a mixed economy. Mortages in the UK are almost all short term. Arguably fluctuations in interest rates for national and international economic reasons, have a big impact on a key electoral constituency, and in turn cause short term swings in housing. In the preview of a studiously academic report to be published in London this morning, the BBC commentator noted that of course there is government support in the US for long term mortgages. What is this? and what is its murky economic and political history? Thanks Chris Burford London
