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Comment by wheaties | Hacker News Reader

The biggest issue is the structure of the mortgage finance industry. They've grown so dependent upon Fannie and Freddie that there does not exist a good private alternative who can compete on equal terms. And who can blame them? I wouldn't want to buy a 30yr loan paying ~4% interest. They sell those loans as fast as they can and collect their fee.

There's also a reluctance of the political parties to scale them back due to the repercussions it would have on home buyers. Who wants to be known as the candidate that stopped X from buying a home?

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>Who wants to be known as the candidate that stopped X from buying a home?

Where X is people who won't go into a ridiculous amount of debt for a house, they've already done it.

These days, a significant portion of the mortgage industry is built on rapidly transferring risk onto the Federal Government. Even though agency bonds are sold on the open market, after 2008, we all know those are effectively insured by the Federal Government.

This is a way to pass free money to everyday homebuyers.

The money arguably ends up in the hands of the sellers. The buyer maybe gets a little more buying power (but the people they are competing with are getting that too).

Not really, at least in competitive markets like the Bay Area. The buyer has an increasing need to anti up more of a downpayment because of inflating home prices. So while the financing is easier and they can leverage themselves more, they still need to come up with a quickly growing chunk of change to even take advantage of the cheap debt.

Are you agreeing with my parenthetical?

I was just clarifying that while the buyer in theory has more total buying power (so yes, I agree there), it is all on the debt side. Their buying power from a cash standpoint has, if anything, worsened, because of housing cost inflation and the extra downpayment they need to have saved up.

In this market with cheap debt, there's a large number of HENRY's (High Earner, Not Rich Yet) who can afford the mortgage payments, but are perhaps too young to have had a chance to have saved up the necessary downpayment without help from families and such.

Who wants to be known as the candidate that stopped X from buying a home

I do! There's a whole host of additional reasons that I'm not a viable candidate though.

Mortgage subsidization is the whole point of the program, not sure I see the issue in your argument. We get lower mortgage interest rates because they exist.

One of the issues with Freddie and Fannie is that they were privately owned but back stopped by the government (not explicitly.) So when they were taken over by the government, the idea was that something else would take their place. There isn't an alternative currently and structurally within the private sector to do that. Mortgage REITS are also not the answer, they are too dependent on short term funding; funding that can and will dry up at a moments notice.

Yep, the government's goal is to promote stable home ownership. Investors should invest in mortgage brokers if they want the socialized benefits of the governments policy, because the loans just end up in fannie/freddie after origination and servicing fees are collected. The government wants control because they hold all the risk.

> Yep, the government's goal is to promote stable home ownership.

Which I don't understand, because mobility is more important in the current economic jobs climate. With cheap mortgage money, you're subsidizing people handicapping their ability to earn an income if their job evaporates.

The federal government needs to incentivize remote work through tax policy if it continues encouraging homeownership (which I agree is good from a societal perspective), or remove all support from the residential real estate market and allow the free market to be free (ie remove the subsidized benefits of buying vs renting, let landlords absorb the risk of large capital outlays for housing units).

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