Quote:
Originally Posted by Innsertnamehere
The 30 year insured and 1.5 million purchase price changes were overdue, IMO.
30-year mortgages are standard globally and forcing buyers to finance for 25 years was only hurting affordability.
The $1 million insured price has been static for years and has not been adjusted for inflation. $1.5 million is a reasonable increase that puts the real value closer to what it was originally intended to be. They should be indexing it to inflation though, not just ad-hoc increases like this.
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But why should the government be guaranteeing this mortgage insurance in the first place? Why should the federal government shoulder the risk? At least keeping the insured price at $1 million means that eventually the government could roll itself out of this business.
What most mortgage holders also don't realize is that mortgage insurance is to protect the banks (it's a form of bailing out the banks so they don't have to take on any balance sheet risk, so that banks are incentivized to prioritise real estate lending, and encourage them to pursue moral hazard like ignoring money laundering and mortgage fraud), and not the homeowners. In the case of default, it's CHMC that will bounty-hunt the homeowner to cover their losses from default payouts.
Increasing the cap to $1.5M is the most explicit form of socializing risks and privatising reward, and an explicit endorsement of the advanced financialization of the residential real estate market. And this is being sold under the false premise of "improving affordability".
Quote:
Originally Posted by theman23
It's a bit of a circular argument. If housing prices run up to $3 million because of the increased liquidity and (perhaps more importantly) the implicit signal of housing being too big to fail by the federal government, will we need to double the cap again?
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Exactly. Is there any end to this merry-go-round if the government keeps ratcheting up the risk that it has to bear on MBS bonds?
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