Hacker News Reader

Comment by roenxi | Hacker News Reader

It goes a lot deeper than the 30 year mortgage. The entire US financial system seems to be premised on the idea that free markets aren't reckless enough and that they needed to be pushed out into riskier territory. 30 year mortgages are one aspect of this strategy. Pumping money into stock and bond markets via the fed and the "President's Working Group on Financial Markets" are another wing drawing money into riskier assets. Listening to Peter Schiff talking about what happened when he tried to open a full reserve bank was also eye opening (spoilers: banking regulators do not like full reserve banks).

I feel it is unfair that capitalism is tarred with the inevitable collapses that follow. Capitalists are being pushed to the brink here. The regulators are where the push comes from that forces the US economy to take far more risk than is sensible.

View on HN

US 30 year mortgage, fixed rate as they are, are risk subsidised by Fannie Mae and Freddie Mac. It's a regulatory subsidy of the mortgage and ex-mortgage home owning class.

That 'problem' is caused by regulation, structural regulation, not day-to-day regulatory enforcement or change. So where does that risk 'go'? Where do you suggest? What can regulators do to un-risk the risk that's been un-risked/passed on from those that take out mortgages?

I'm not sure I follow the question, but presumably the people borrowing the money aren't bearing it and the people lending the money probably aren't stupid enough to lend money for 30 years at fixed interest rates. So by elimination, the the people holding the bag are probably the taxpayers.

But I don't know the details of how the market works. Wouldn't surprise me if there are other quirks at play.

This is such unadulterated bullshit. The purpose of a 30-year fixed mortgage is to build up equity over the course of someone's working career such that when it comes time for them to retire, they own their primary residence and only have to pay property tax on it until they die. This allows people to retire on a fixed income less than what they earned in the workforce, enabling their nest egg to actually BE a nest egg, and then also allows them to pass that property to their heirs, allowing for the beginning of generational wealth, if not the continuation thereof.

If you rent for the same period of time, you piss away literally hundreds of thousands of dollars of home equity which you and your heirs can benefit from. But let's piss all over the greatest tool society ever created for creating generational wealth, because it's "capitalist," and that means it's icky.

Except the average US mortgage holder buys and sells a house every 7 years. For the first 7 years the amortization schedule means you're paying almost all interest and building very little equity. You're also paying realtor fees and transaction costs each time.

So while paying off a 30 year mortgage might have been to pay off the house and keep it forever, that's not how Americans treat it. They basically use it as a way to get 10-20x leverage on housing prices speculation, and if they profit, cash out 7 years later and do it again with a new house.

1) your argument is right 2) but it hasn't been an average of every 7 years in at least 30 years.

It's 13.2 years. And perhaps it shouldn't be. There's lots of foregone opportunities when you stick in a home and don't move to better employment.

Reply on news.ycombinator.com