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> What I am saying is that now some lenders — banks — are under rules so tough they can’t support equality-enhancing mortgages

What is an equality-enhancing mortgage? My guess is that it's akin to an equal opportunity / affirmative action campaign. The thing is, actuarial tables aren't oppressive - they're merely reflective of reality. If a particular group presents a higher risk profile than another, the only sane course of action is to be more restrictive when lending to members of that group.

The alternative is for banks to give out easy money again like in the leadup to 2008 and that didn't work out well. I'm sorry that some people can't get mortgages but the answer is not to aggregate out their financial problems onto those of us who do, in fact, pay our bills.

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> What I am saying is that now some lenders — banks — are under rules so tough they can’t support equality-enhancing mortgages

What is an equality-enhancing mortgage?

My wife works at a community bank which has been cited as an important institution for social justice on the west coast. Equality enhancing mortgages could well be mortgages accessible to under-served populations who have the financial means to pay them back, but who face cultural barriers or ethnic discrimination.

Community banks have been railroaded out of the home mortgage business. There are now a lot of timing-dependent requirements and really stiff penalties in the banking regulations. It was sold to the public as a curb on the big banks, but what really it means, is that only banks large enough to write their own software or wealthy enough to license custom software can stay in the home mortgage business. Basically, we the public were sold flowery rhetoric by politicians on the wave of sentiment following the banking crisis, while big banks lobbied to write into law an even bigger advantage.

> could well be

Do you have any evidence of that - the discrimination part? Is there evidence that lending institutions choose to lend based on criteria other than ability to repay? Also, do/did smaller lenders fare as well or better than the big lenders during the financial crisis? Or were their loans more risky? I think that would be the strongest evidence either way.

Your second paragraph is really interesting, and creating an expensive barrier to entry is always a tactic big business implements to stifle competition. I just wonder what the way out of that is?

Do you have any evidence of that - the discrimination part?

The various Chinatown community banks wouldn't even exist (and have greatly succeeded for awhile) if some form of cultural barrier didn't exist. The barrier isn't all the fault of one side or another. However, it's simply historical fact that big banks left a lot of money on the table -- in a way which could be characterized with gross demographics -- which smaller banks made their bread and butter for a few decades.

Is there evidence that lending institutions choose to lend based on criteria other than ability to repay?

Of course community banks choose to lend based on criteria other than ability to repay. Basically, community banks must use their advantage in local intelligence to distinguish between prospects who look a bit marginal but who are really strong, versus prospects who might look a bit marginal to normal but who constitute a risk. Basically, the big banks swoop up almost all of the "normal" customers and leave the smaller banks scrambling for the best of the odd ones left over.

Your second paragraph is really interesting, and creating an expensive barrier to entry is always a tactic big business implements to stifle competition. I just wonder what the way out of that is?

An informed electorate.

Thanks to Dodd-Frank regulation, banks now don't offer "semi doc loans". Basically, the pendulum swung back to tougher underwriting standards. Before Dodd-Frank, banks and underwrites had huge discretion. So, that discretion was abused.

Now it is almost tough for self-employed, small business owners, to get mortgage through normal channels. When one doesn't get mortgage through normal channels, one goes to a FI(financial institution) that keeps these mortgages on their books. Such FIs charge extra interest rates, demand more downpayment like 30%, etc.

> It was sold to the public as a curb on the big banks, but what really it means, is that only banks large enough to write their own software or wealthy enough to license custom software can stay in the home mortgage business. Basically, we the public were sold flowery rhetoric by politicians on the wave of sentiment following the banking crisis, while big banks lobbied to write into law an even bigger advantage.

This is a characteristic of nearly all federal regulations since approximately the Nixon administration, across all industries with incumbents large enough to fund lobbying at that level.

The industry does something outrageous, or whips up a media storm about some non-issue, so that calls to regulate come. Then the industry itself pulls a thousand page bill out of a drawer whose title sounds like it's going to do something good but whose details are all written by the industry's lawyers.

The average voter doesn't have the time or domain expertise to understand a thousand pages of dry legal text, so the bill passes and nobody figures out what's actually in it until a decade later when the evidence of what it allowed the industry to do starts to surface. Then we get a renewed call for laws to fix the "unexpected" disaster and the cycle repeats.

Hopefully at some point people are going to figure out that the answer is to remove federal regulations and pass local laws that purposely favor small local businesses with local ownership and ties to the community.

To be fair even if it literally is 100% reflective of reality that doesn't mean it lacks unjust feedback loops. If after generations of past policies the stats say 100% of people with red hair are bandits and the longstanding policy is that they are to be shot at on sight only redheads with plans to rob or kill you will approach within rifle range.

I think the best that can be hoped for is rigorous justification of lending criteria in non pure correlative ways. As opposed to discrimination laundering bullshit like sentencing based on the size of their yard. Judge them via their neighborhood foreclosure rates as opposed to ethnic make up. There are antidiscrimination in real estate laws on the books but I don't know enough to comment upon the current implementation and its pros and cons.

> the best that can be hoped for is rigorous justification of lending criteria in non pure correlative ways

OP's point is government has better tools for enacting social policy than lending regulations. Improving low-income borrowers' finances, instead of pushing banks to stretch to them, seems saner. Unfortunately, we have a broad segment of the population that enjoys "sticking it" to the banks, thereby perpetuating the cycle.

> To be fair even if it literally is 100% reflective of reality that doesn't mean it lacks unjust feedback loops.

if you're worried about feedback loops, maybe don't lend based on any criteria other than the best possible estimate of ability to pay the loan back.

if you loan somebody money for a house that they can't pay back, they're going to 1) end up with even worse credit and 2) lose the house, which they made other emotional and financial investments in.

Or, alternatively, 3) - they sell the house for a profit, and everyone (who matters) wins.

The assumption of 3) was what drove 2008.

So how do you measure "the best possible estimate of ability to pay the loan back"? Because I think that broad assumption is a lot more complex and interesting than a simple FICO score.

For a crude example, pick health history. The leading cause of bankruptcy in the US is medical bills due to a health crisis. This of course spills over into mortgage foreclosure. But someone might have excellent credit, and a high cancer risk. They get cancer, byebye loan. Are you accounting for that?

Someone has excellent credit, but works in a dying industry and has no skills to move to an equal-paying job in another industry. Their job goes away in five years, byebye mortgage. I can go on with these. But my point is, I don't know if you realize just what a difficult point you're making with your simple answer.

Likewise, if you watch "Abacus, Small enough to Jail," you can see an Asian community bank president talking about lending to small business owners because he can go to their restaurant and see how crowded it is, all the time. There are actual 50-something Chinese businessmen who make over a million a year but who work 80+ hour weeks and man their own forklift to save on money. There are people with little empires of alternative health businesses, who keep some large portion of their money in the proverbial mattress because they've had experiences in the past where a different government confiscated their or a friend's holdings, and there are some people like that who try to apply for loans by sending in screenshots of their bank's web apps.

And banking industry consolidation has cut into those community ties that can change lending patterns. If we want to do something with regulatory policy, I'd think trying to keep banks small and local would be a fine start.

How did smaller banks fare during the crisis? I think that's the issue at the heart of whether encouraging them or not.

I think the problem with using money lending as a tool for social justice and equality was laid bare during the crisis. The downsides - lack of mobility for workers, pushing the risk from wealthy people (investors) to poorer people and the fact to function the system needs loans to be paid back at some percentage approaching 100 - all conspire to make this a really poor tool for change.

I think that something like the Australian approach - with enforced retirement savings set at 9% of income (where you earn $50K, and your employer pays $4.5K into super) - is a saner approach to wealth creation for the poorer groups than lumbering them with mortgages.

I think the problem with using money lending as a tool for social justice and equality was laid bare during the crisis.

There's a big difference between a community bank using community ties as a source of superior intelligence, and a big company acting as a mortgage mill trying to maximize throughput "countrywide" until the bubble bursts. Before the community banks existed, Asian community groups would arrange private lending within the community.

It sounds good on the surface. I'd let people opt-in on that, though.

I think the problem with using money lending as a tool for social justice And equality was paid bair during the crisis

That’s not what happened. It wasn’t poor people who caused most of the defaults - it was investors working with mortgage brokers, real estate agents, and appraisers who were all part of the take. Poor people weren’t doing most of the no doc/negative interest or other types of “non conforming mortgages”. The investors walked away, did strategic defaults, and were free and clear within 3 years - ask me how I know....

I can think of at least one instance from an earlier crisis (the 1980s S&L crisis) in which a community bank - in this case, Harlem Bank - had large government deposits suddenly withdrawn in order to shore up a "Too big to fail" bank, causing the collapse of the small, community-oriented bank. This matters. Government is a major cash depositor in many banks, and so government policy of cash placement affects the health of banks and the kinds of banks they support with their business.

> if you're worried about feedback loops, maybe don't lend based on any criteria other than the best possible estimate of ability to pay the loan back.

That is itself the tightest of feedback loops, because the best estimator is either current wealth, or past performance of loans. It is massively exclusionary so I don't think your point is very well made.

To be fair even if it literally is 100% reflective of reality that doesn't mean it lacks unjust feedback loops.

If you study immigrant minorities across history, around the world and going back 1000's of years, certain patterns emerge. Immigrant minority groups who can pool their resources and become participants in the economic life of the host country find a way to prosper, somehow. Before the 20th century, this pattern of prosperity could result in confiscation. With the widespread ideas of Human Rights, this has become less of a problem. (Though it can still be a problem.) Likewise, minority groups who remain in isolation tend to remain poor. Often, this is by the machinations of the elites of those groups, who use this isolation to remain in a position of relative power.

That's an interesting concept. Can you name a couple of examples, or a link to further reading?

http://a.co/cKeH8oK

> If after generations of past policies the stats say 100% of people with red hair are bandits and the longstanding policy is that they are to be shot at on sight only redheads with plans to rob or kill you will approach within rifle range.

The only reason that happens it that you're using exactly 100%.

If it's 98% then the top 2% in that group get approved, which gives you new data on that group that tells you your old numbers are inaccurate and a lower percentage of the group defected than predicted, so in the next generation you approve the top 10% in that group and so on.

This is the exact opposite of a feedback loop. As time passes it amplifies the signal, not the noise.

If what you are describing were anything like reality, the battle for Civil Rights would have been over a hundred years ago and we wouldn't be having this discussion, at least with respect to discrimination in mortgage loans and other financial instruments.

All it takes is a cursory glance at almost any mass migration in the US to show why that amplifying effect doesn't exist: when the [x]% finally get the money to move in, everyone else usually moves because of prejudice, driving the value of the neighborhood down and the [x]% into bankruptcy or financial destitution. I can even name a few towns in California where this has happened in my lifetime.

That's the kind of feedback loop we're talking about. No one bases their prejudices on actuarial tables.

> If what you are describing were anything like reality, the battle for Civil Rights would have been over a hundred years ago and we wouldn't be having this discussion, at least with respect to discrimination in mortgage loans and other financial instruments.

Jim Crow laws were enforced until 1965. They existed in the lifetimes of part of the current generation of would-be homeowners, and that is one thing you can't lay at the feet of the banks.

> All it takes is a cursory glance at almost any mass migration in the US to show why that amplifying effect doesn't exist: when the [x]% finally get the money to move in, everyone else usually moves because of prejudice, driving the value of the neighborhood down and the [x]% into bankruptcy or financial destitution. I can even name a few towns in California where this has happened in my lifetime.

The events you're describing should have the opposite effect. The first family to move in is obviously screwed, but screwed in a long-term sense where they lose the value they paid for their home which only happens in some decades when they want to sell it. Until then their mortgage payment is the same one they budgeted for to begin with. And all the racist white people who are leaving are in the same boat, but right away -- they want to leave but no one will buy their house for what it was worth last year.

Meanwhile there is suddenly a whole neighborhood where housing prices have plummeted and a bunch of white people who would otherwise come in and bid the prices back up are opting out. Doesn't that just make it easier for other black people to buy those homes for a discounted price?

Equality-enhancing mortgages WERE subprime mortgages. Congress pushed the banks into doing them in the early 2000s to extend credit to marginalized populations!

oh man, here we go again! I wonder if Y Combinator will fund my Collateralized Equality Enhanced Swap

> Congress pushed the banks into doing them in the early 2000s to extend credit to marginalized populations!

...but didn't push banks to lever the loans 10x, securitize, sell and repeat over and over again. Fault for those days lied in a lot of places, and sub-prime mortgages aren't inherently a bad thing.

When you have over 50% delinquencies, it is a bad thing.

> When you have over 50% delinquencies, it is a bad thing.

They didn't.

The banks levered up so much that 7% of delinquencies was enough to crash the global economy.

> 7% of delinquencies was enough to crash the global economy

The delinquencies ended up being less of a problem than the uncertainty around them. 7% delinquencies didn't kill anyone. Investors' fears that 7 would become 20 did.

No, on subprime portfolios, the delinquencies were as high as 50% sometimes worse.

Can you provide a source?

https://www.chicagofed.org/~/media/publications/profitwise-n... quotes average default rates in the 30+% range on subprime mortgages.

yes, it looks like you are correct.

The Collateralized Debt Objects reduced this risk down by being bundled with better credit worthy debt servicing.

No, that is not how CDOs work.

The way that securitization works is that you take many thin streams of cash from individual loans, and bundle them into a giant river of money. That river will dry up at some point, and what point depends on how much defaulting there is. You then take horizontal chunks out of that river and sell them off. The first few slices are low risk - they will pay off even if lots of people default. The last one is very high risk indeed and are only worth pennies on the dollar, if that.

The principle is that it is safe not because it is bundled with better debt, but because those bonds still pay even if lots of people default. They may pay late, but they should pay.

However the models quantifying the risk assumed that there was a lot less correlation in defaults than there actually was. So when the housing market moved against the loans at the same time as people lost jobs in the financial crisis, investments that were supposed to be safe suddenly weren't.

I could believe 7% as the losses in bonds that originated as AAA bonds. But not as the losses in AAA bonds.

That’s right, but perhaps I can give a stab at a more technical explanation.

An RMBS is a portfolio of mortgages financed by multiple bonds, with an order of subordination between them. When a loss occurs on a mortgage, it is allocated to the most junior bond first, until it is fully written down, then the next junior bond, etc. So if you own the most senior bond (often rated AAA), you are really exposed to high default rates and high correlation. Ie if the portfolio of mortgages is diversified (low correlation) some mortages will default but not all at the same time, and there will always be enough mortgages that do not default to avoid a loss on the most senior bonds.

The big fuck up in the financial crisis is that the correlation was misestimated. There had never been a large, US wide, real estate crisis since 1929 and therefore everyone assumed a US wide portfolio was well diversified. That turned out to be wrong in 2006-2007, and delinquencies (ie balances of loans not paying interest or principal) shot up. This led to losses (not 100% of a defaulted loan, the house still had some residual value) that ultimately hit the AAA bonds.

A CDO is the same structure but using bonds in the portfolio instead of residential mortgages. But when people refer to large losses on CDOs in the financial crisis they usually refer to CDO of ABS, which basically uses junior RMBS bonds in the portfolio, so effectively you leverage the mortgages twice, first through an RMBS, and then another time through a CDO.

In those you are even more exposed to correlation. The portfolio is made up of junior RMBS bonds from multiple RMBS transactions originated by multiple subprime lenders across the country, so these structures were playing on not all of these RMBS going bad simultaneously, which is exactly what happened.

So the TL DR is that these portfolio of subprime mortgages and RMBS bonds were of a similar credit quality, but correlation is what got really badly mispriced, they were assumed to be diversified but what we got is a large US wide real estate crisis that hit everybody,

A lot of subprime issues from 2000 had to with diligence on the originator. There was widespread fraud on income, and employment reporting to meet the demand for CDOs and other mortgage-backed securities. Subprime has its place to loan out money to people who have the capability of repaying the loan but might not have the credit history/score to get a standard loan.

This is a mantra repeated by everyone who is not business of making loans.

There's enormous competition for people with capabilities of repaying a loan but no thin credit files/scores. Those are credit scores between 575 and 650. There are government programs that target these people administered via Freddie, Fannie and FHA for automatic underwriting. Those are done? No matter, USDA(!) would guarantee loans in rural areas! Banks themselves do manual underwriting for people who barely qualify or on a cusp of qualifying at prime + rates. Those were not the subprime loan customers.

Subprime loans were originated with the same rationality as the loans covering Buy Here, Pay Here car loans: they were originated with a total knowledge that the buyer will fail to make payments and will be foreclosed on - no matter! Buyer would make payments for first 6-7 months, default, get foreclosed on and the house would be sold to someone else for higher amount than the defaulted loan. Housing was an appreciating asset when these loans worked fine on depreciating assets ( cars ).

Structural inequality or not, people who have shitty jobs and shitty financial position typically make shitty financial decisions over the long term. 30 year mortgage is a very long term financial play.

Perhaps I am misunderstanding your point, but that still sounds like a fundamental problem with the originator.

If you are lending money with the unspoken understanding that the note is likely doomed to be a loss unless the real estate market continues to go up, then you are not really in the loan business anymore. You are putting letting your capital ride on the real estate roulette wheel, while enjoying the fat fees in the short term. The fact their were enough greater fools around to move your capital from new bad loans to newer bad loans may let you bank a few more fees, but it still means the originator is choosing to screw up while hoping to be rescued by real estate market forces completely beyond his control.

> and sub-prime mortgages aren't inherently a bad thing.

Correct.

> ...but didn't push banks to lever the loans 10x, securitize, sell and repeat over and over again.

Yeah, but I'm not going to pretend like I wouldn't. Worst case scenario is that my failed bets get paid out by the future productivity of the entire working population, and the distressed assets get transferred to the balance sheets of special purpose vehicles also funded by taxpayers.

And I get to keep all the performance fees.

If "I would screw over my entire society in exchange for performance fees" isn't the definition of immoral, what is? Why would you do that?

Ask those that did, and did not go to prison. Our society rewards greed over conscience.

Unfortunately, that behavior was not against the law at the time. Even more unfortunately, that behavior is still not really against the law.

A lot of actual crimes occurred then that were not prosecuted. Sarbanes-Oxley violations, for one obvious example.

The way markets work is that there is a certain opportunity work $X based on the actual (not idealized) consequences of setting up a series of transactions. If incentives are such that there is a market opportunity worth $600B by selling subprime mortgages and socializing the risks, then eventually somebody is going to capitalize on that market opportunity, regardless of how immoral it is. If only one person does it, they make $600B. If 10,000 people do it, they each make $60M, modulo inequality within the market. The only thing that being moral gets you - other than warm fuzzies, which unfortunately you cannot eat - is larger wealth inequality that happens to benefit the person who is most immoral. (In fact, I wonder if one of the other drivers of inequality today is that by-and-large, most Americans are nice, decent, moral, hardworking people, which means that the market opportunities available to scumbags are only capitalized on by a tiny minority.)

The only way to avoid immoral behavior is to fix the incentives so that it doesn't pay off. In this situation, that means either make it uneconomical to sell (perhaps by penalties like jail time), or to not allow the sellers to socialize the risks (perhaps by not bailing them out when they failed). The former means that low-income borrowers can't buy homes; the latter means that the financial system would've imploded. Personally I think Obama would've been better off taking the latter course and letting the banks fail, but the point is TANSTAAFL and whichever course you to take will require some sacrifices, whether in equality, stability, or trust.

Saddling someone with (or allowing him to take on) an unpayable debt raises him to a state more equal with people who were previously better off?

How? Doesn't buying a house (at market price) have an approximately zero effect on your net worth?

> How? Doesn't buying a house (at market price) have an approximately zero effect on your net worth?

As of the closing date, sure. However, closing on a home allows a renter to become an owner for about the same monthly cost (plus produces some significant tax benefits typically only available to the wealthy). After 30 years of paying a mortgage, if holding all else constant, one probably owns the property. After 30 years of paying rent, holding all else constant, one still owns nothing.

This is okay as long as you are in one of the locations where mortgage is roughly equal to rent. In some places it’s closer to double, unless you want a 100 year mortgage.

If you live in a place where a mortgage is double rent, you're basically a temporary resident.

Our rent: 700NZD pw

Our calculated repayment on a 20 year mortgage with a 300k down payment on the estimated CV of this house: $1370 NZD pw

Yep!

Also, interest-only loans are a thing in some parts of the world.

Beijing is a good example of a place where rents are way lower than sale prices, so you can totally wind up paying $1000/month to rent something that is on the market for $1 million.

That only makes sense for absurdly aggressive speculators or people with the political connections to borrow money for 1% or less.

I have a fixed 15 year loan at 2.75%, which seems like a pretty good deal to me. Know where I can borrow a few hundred thou at 1%?

The interest rate isn’t only important, so is the principal.

Yes, sometimes buying makes sense, but sometimes renting makes sense as well.

In UK mortgage usually works out a lot lot cheaper than renting. I could cut my rent by about 25% by buying a place, the only issue is I need a deposit in the first place.

I didn't do the math, but know people who did and got that the initial deposit is a real game changer.

Assuming we pay the same for mortgage and rent, who wouldn't want to pay rather mortgage?

But remember, to pay the same, there was a huge downpayment. If you were to invest that rationally, long term returns could be worth it, even while paying rent.

OTOH, rational investing (in a balanced fund portfolio) is hard, and mortgage forces you to save.

YMMV, do your math.

There's lots of other factors to take into account though. I guess I was really unlucky, and had to move relatively frequently in the last 8 years(on average once a year) - the cost of moving is easily £1500-2000, just in agency fees and moving fees and everything else. That makes renting even more expensive.

And then I definitely want to own my house before brexit, as an immigrant I will not risk not being able to rent if things go tits up.

> After 30 years of paying rent, holding all else constant, one still owns nothing.

Nothing except all the money saved on property taxes, maintenance and repairs, home insurance, etc. And, as another poster noted, this assumes mortgage payments similar to rental prices. The math on home ownership is not a slam dunk in favor of owning in every region and should be considered carefully.

Yeah, but a mortgage payment stays constant through those 30 years, assuming you didn't get an adjustable rate. Rents rise every year.

If your rent doesn't cover the property taxes, maintenance and repairs, and home insurance, the owner is going broke.

yes, but that doesn't mean that someone could buy a house right now and provide the same deal as the existing owner. The existing owner could have bought while interest rates were higher and prices were lower and refinanced down to a much lower monthly payment.

As long as zoning and housing markets remain as dysfunctional as they are, you get to enjoy the benefits of housing going up 20+% per year.

Leverage to the hilt, get a million-dollar home, keep it for three years, pocket a cool 500k.

Obviously this time it's different, and housing shall continue it's spectacular bull run forever.

This is only happening in a handful of cities, though, right?

Pretty much all cities above a certain size, at least in the "west". Not sure how it's on other parts of the planet.

Populations are migrating to cities en masse, which creates huge demand for city housing. And most cities haven't really been keeping up with the supply side since the 1930s or so.

> Congress pushed the banks into doing them in the early 2000s to extend credit to marginalized populations!

How so? Subprime mortgages were largely not sold to government entities, but to private investors as CDOs. And government banking regulations about investing in low income communities never required making subprime loans.

They pushed as in asked them to. It is often times prudent to strengthen relationships in the country you do business. This turned out to be fruitful as a different congress hedged their failed bets with money that taxpayers were going to give Congress.

With all the money banks pay for lobbying, do you really think they would go against their own self interest just to “strengthen relationships”?

The government didn’t push subprime loans. Subprime loans were by definition “non comforming loans” that were not backed by any government institution like FHA or Fannie Mae.

This is exactly what lead up to the 2008 crisis. Like, exactly. In the 90s when wage growth was low one of the mechanisms for addressing it was to simply give everybody access to mortgages they couldn’t really afford. By 2008, most banks were levered by more than 30:1. The key result of Dodd-Frank was that it gave the Fed power to influence how leveraged banks were, and now most of them are levered at about 10:1. Changing this would remove the key element of protection against another crisis occurring.

It is so easy to get an FHA loan, if you don't qualify for one -- you really don't deserve it.

This is coming from someone who was able to get a less than 4% FHA $340K mortgage three years after having two foreclosures a short sale, and three additional loans that were settled for less than full value.

Unless you live in an high priced area where rent is going up more than inflation a mortgage isn't really worth it. It ties you to a location and makes it harder to move to where the jobs are.

> It ties you to a location and makes it harder to move to where the jobs are.

This sentiment gets expressed frequently in these discussions. There is a hell of a lot anchoring me to a particular place than whether or not I own the place I live. If I had to move, selling my residence would be a relatively minor consideration in the grand scheme.

Not if you happen to be underwater. Some places still haven’t recovered from 2008. There are parts of the metro area where I live that are still underwater.

It wouldn’t be easy, but if I had a choice between staying where I am where I couldn’t find any jobs and moving. I would move. But in my case, if I can’t find any company that’s looking for a software developer with an up to date skill in my entire metro area and I couldn’t find any type of remote job or contract, I’ve got bigger issues.

My responsibilities are only to my spouse, minor children, and some day maybe my parents. My parents already live in a different town than I do, but they would have to move to wherever I move to.

When I buy I intentionally buy well below what I can afford, so being underwater has not been an issue for me.

As far as abandoning a metro area, it took quite a bit for my wife and I to finally uproot. That we owned our house was relatively low on the friction list. Hell, my wife wants to delay buying again (we rent) because she finds the act of moving so stressful.

Being “underwater” is not about buying less than you can afford. It’s about when you get ready to sell, the house is worth less than you owe if you have to move.

My mortgage is less than 25% of our net pay, but if it fell in value to a point where it was worth less than $50K what we owed on it and we had to move, we would be in trouble.

I think you're reading a partisan meaning into "equality-enhancing" that is not what the speaker intended, and then kicking a strawman down the road. Are you sure that's what she meant, or is it just an easier thing for you to argue against?

Inequality in the context of this interview means wealth distribution. It does not refer to racial equality, as I interpret your reference to affirmative action. "...We Got More Inequality" refers to the ease with which people can borrow money from a bank. New regulations make it more expensive for banks to loan money to people with relatively less capital. So those with less capital have less access to credit. This includes people who are capable of paying off the loans. And those with more capital have easier access to credit, simply because it is less expensive for the bank. So now it is easier for the wealthy to grow their wealth and the result is a less even wealth distribution.

Banks can't meet capital requirements for lower than prime lending or aren't willing to do it.

This leads to a segment of the population (usually lower income, but not always) without broad access to credit or leverage.

So? If they cannot afford to pay a reasonable interest rate on the money, could they even really afford to pay it back at 0%, or even negative?

There are certainly segments of this population that can afford to pay back a loan. Or there is a loan that can be structured so that this segment of customer can pay it back. Its just not profitable or efficient for a bank to lend in this segment as a whole currently.

I think you meant to say “can, in fact, pay our bills.”

Actuarial tables don't lie, but the question they answer isn't necessarily the correct one.

They’re similar to all the government support(subsidized mortgages, education) given to white people post WWII that allowed them to build the generational wealth and greater proportion of middle class standing they enjoy today.

The alternative is to accept we have a lot of people without adequate housing and actively deal with it and quit playing games to satisfy the fetish of spoiled rich people

Edit: https://www.cnbc.com/2018/08/08/gop-congressman-chris-collin...

I’m sure things like this are isolated incidents given that members of Congress have a level of immunity from such laws.

Let’s keep discussing market solutions in a market that has been and always will be rigged and rerigged as needed coughpanamapaperscough

>> The alternative is for banks to give out easy money again like in the leadup to 2008 and that didn't work out well

It could have worked out well if the Obama administration had just allowed the financial system to collapse instead of bailing it out. The collapse of the financial system would have meant that many poorly run companies would have disappeared and they would have been replaced by newer, smaller and more efficient companies. Europe recovered from WW2 relatively quickly; surely the US could also recover from a partial market collapse.

Before 2008, there were a lot of talented, ambitious people desperately waiting for an opportunity to compete on the marketplace but the government bailouts took away that opportunity and allowed corporations to keep running their inefficient oligopolies uninterrupted. Today, most of these talented, ambitious people have become losers; they're poor and paralyzed by self-doubt. The reality is that they might actually have succeeded if the government had simply allowed capitalism to take its natural course. The carpet was pulled from under them.

I feel everyone saying this is completely ignoring what that would mean. You like 10% unemployment? Cool. Here's 25+% unemployment. Sure, a few people might have benefitted in such a way that it would allow them to be the new entrenched banking class, but millions more people would have found themselves laid off, foreclosed upon, and in general completely fucked over through no fault of their own.

Everyone would have survived and they would have gained a great deal of wisdom from this experience.

Rich people would have learned humility and everyone else would have learned that the system actually works.

Instead, rich people learned complacency and everyone else learned that the system is rigged.

> Europe recovered from WW2 relatively quickly; surely the US could also recover from a partial market collapse.

Well, part of that is because of countries like ours which weren't completely destroyed were able to assist financially, help rebuild essential infrastructure, and -- perhaps most importantly -- provide political stability to the region (which they desperately needed in 1945).

I'm not sure who would have played that role if we had let the entire global financial system melt down in 2008.

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