U.S. government to backstop mortgages above $1M

The government should not be subsidizing anyone going for a second slice of cake, when there are lots of people who haven’t had a first slice.

The FHFA assesses up-front fees on second homes [1]. One could simply delay this assessment, for a fee, and not assess it if e.g. a year down the line the borrower only has one mortgage. (That said, it seems simpler to reduce the threshold to two from ten.)

[1] https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announce...

Not a fan even in today's world. Example:

The house next to mine sold for $300k 2y ago. Those owners put about $50k into renovations and sold 1y later for $450k. The current owner did nothing (didn't even mow the lawn!) and 6m later decided to pack up and move across country for a job. He put the house on the market for $650k. It's beyond insulting. That house is going to sit on the market for a long time unless he is willing to make no money or even lose money on the overall transaction.

Seems like an easy fix for the case that's reasonable that doesn't require people to subsidize the wealthy.

There's zero reason for an LLC for own a SFH other than as some sort of tax scheme like you mention. Require that any mortgage on a SFH or owner-occupied multiplex be held by an individual. If you want an LLC to own a SFH/OOM, buy it in cash.

zoning regulations and the whole path dependence of the last centuries restrict choices to very few ones.

as long as the network effect of cities, the macro effects of the global economy (the dollar propped up, suppressing exports, which wreaks havoc on everything that's not finance) and various other factors (school districts, car dependence) have so oversized influence on where people can live.

and for the foreseeable future there are going to be very high-level coordination problems which keep the market in a pathological state.

You mean "NY, NJ, CT, and MA". They are the states that provide the vast majority of the surplus in federal taxes paid by its people versus expenditures to them and their states.[1] Four other states also have substantial surpluses, of which two voted for Clinton and Biden, and two voted for Trump both times. Every other state either breaks even (CA among them) or receives more than their people pay in taxes. Of the ten states that get back the most, five and a half (of Maine) voted for Clinton/Biden and four and a half voted for Trump/Trump. Source: Rockefeller Institute's annual studies on the subject.

[1] Yes, they are all Democratic states today, but this was exactly the same a century ago, when MA and CT were solidly Republican and NJ and NY were swing states.

A bad policy, to be sure, but that doesn’t mean the homes are inherently uninsurable.

Risk is the currency of insurance.

Yet what does every single new home in Florida have? A composite shingle roof, no built-in 100mph+ storm shutters, etc. No requirement for built-in backup power.

This is one instance where insurance should be free to properly price risk. Make classifications of storm resistance and price each home based on what standard it meets.

Frankly California has the same problem with earthquake insurance even though it's all sold by the state created (but supposedly not backed) authority. The rates mostly don't reflect any earthquake-proofing nor what standard the home was built to. If you retrofit a 1930s home to the best modern standard you still pay the same rate as your neighbor who did not.

This is similar to introducing arcane metrics like for example “federal dependency” (https://sipanews.fiu.edu/2021/03/24/2021s-most-least-federal...) with nonobvious methodology, and then pretending that the states that are high in “federal dependency” ranking are actually more meaningfully “dependent” on federal government, which doesn’t actually pass muster if you look at the methodology (for example, according to their methodology, a state that collects $1k in taxes per capita, and gets $4k from federal government, while spending $5k per capita, is more dependent on federal government than a state that collects $10k in taxes, gets $10k from feds and spends $20k, which is absurd).

Basically, there is a lot of attempts at hoodwinking audience by giving impression that there is some deep quantitative analysis behind the claims, when in fact it’s all just partisan shenanigans.

Of course paying for bandaids or ibuprofen is on the table but that isn’t what we are talking about mostly.

> Or, to give an example from the article — houses that are eligible for government guarantees (those below $750K-$1M) have appreciated similar amounts in the past decade to those that's aren't eligible.

I don't think it's that different. The banks are still mainly concerned with the income-to-debt ratio, just like with conventional loans. The difference is that often people applying for jumbo mortgage loans will use assets and reserves to try to get the bank to worry less about the income-to-debt ratio.

Also 20% down is the standard for a primary-home mortgage loan, regardless of amount. Sometimes that goes to 30% for non-primary-home investment properties, especially if the buyer is not a citizen or green card holder. Lower than 20% is possible, though more difficult to get since 2008, and you usually have to do unfortunate, costly things like obtain mortgage insurance.

(We're talking US market here, since this article is about the US. Other markets presumably differ.)

inflation started to really blow up when the energy prices did

arguably the effects of the stimulus were masked by the big unemployment due to COVID, and when it decreased enough for the wage rises to start to get felt the spiral started, and the Fed acted late (because in the post 2008 recovery they acted too fast)

So yes, they're on the market. A different market than long term rentals.

I’m not against the idea that govt subsidies raise prices, but it seems like cherry picking to fit a shaky model.[1] If it’s a primary factor, wouldn’t we see that across all schools? Perhaps there’s a different, more foundational cause and we’re being fooled by spurious correlation. If it isn’t applicable elsewhere I fail to see how it can be labeled a root cause.

[1]For example, UofPhoenix was not founded until the late 1970s. This also corresponds to a handful of other societal factors can can be argued contributed to educational costs. If the GI Bill was primarily driving these costs, we should see it in the way the benefits were implemented. Like a high spike post WW2, to waning post Vietnam, to slightly higher with the Montgomery GI bill, to another spike with the post 9/11 GI Bill. But college tuition costs seem to be a fairly steady march higher, including not-for-profit non-vocational schools.

People have to live somewhere. If you're renting and this insane policy gets enacted, you now need to buy something or you'll be out on the street. So supply increases, but demand increases by the same amount.

The article is about Fannae Mae and Freddie Mac which buys loans from lenders and turns them into mortgage backed securities.

The lender is not in the business of issuing a loan and then collecting the cash for 30 years. The lender is in the business of issuing the loan and selling it to Fannae Mae.

I don't know what determines the interest rate in this scenario, but Fannae Mae needs to account for mortgage default risk when they operate the program. It is not run as a charity and the possibility of mortgage default means it is not risk free to Fannae Mae.

There are government guaranteed loans not covered by this article like FHA and VA loans which have mortgage insurance, but I don't think they are cost free to the lender if the loan defaults. I believe the lender needs to comply with regulatory requirements and has costs related to making an insurance claim and proving eligibility for an insurance claim when they get compensated.