Mortgage originators in the United States typically sell off their loans in the secondary market, where the main buyers are the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.
Do you have a sense for how many loans are in each section? I would imagine that the negatively impacted areas align with the majority of loans today, while the positively impacted areas represent, no pun intended, the minority.
Also, the administration has been vocal about equity goals, so why not simply talk plainly about the motivation of redistributing from those who take on less risk to those who take on more?
I don't know how populated each cell is, but there will be shifts across cells for reasons discussed in the post. Certainly the administration wants to help potential homebuyers with limited savings or inherited wealth, which I think this policy would achieve (regardless of borrower race-ethnicity). Of course there are well known wealth inequalities by race so there will also be a redistributive effect along those lines. But one point I was trying to make in the post is that high wealth individuals can just strategically adjust down payments to escape any extra fee burden. If that happens the GSEs may be exposed to more risk and may have to raise fees. Just speculation on my part, I don't have any inside information on their thinking.
Sounds to me as though the new rules will lead us down the path to more defaults as people with better credit make bigger down payments and people with worse credit borrow more than they can afford. A different path back to 2008. Or am I reading this wrong?
Quite possible Dane, but those with better credit may make smaller down payments and buy the mandatory insurance to gain from the lower fees. These are some of the unintended consequences that need to be discussed. But the environment is not conducive to calm debate right now, especially on complex issues with many moving parts. Easier to just respond with knee jerk reactions and soundbites.
Do you have a sense for how many loans are in each section? I would imagine that the negatively impacted areas align with the majority of loans today, while the positively impacted areas represent, no pun intended, the minority.
Also, the administration has been vocal about equity goals, so why not simply talk plainly about the motivation of redistributing from those who take on less risk to those who take on more?
I don't know how populated each cell is, but there will be shifts across cells for reasons discussed in the post. Certainly the administration wants to help potential homebuyers with limited savings or inherited wealth, which I think this policy would achieve (regardless of borrower race-ethnicity). Of course there are well known wealth inequalities by race so there will also be a redistributive effect along those lines. But one point I was trying to make in the post is that high wealth individuals can just strategically adjust down payments to escape any extra fee burden. If that happens the GSEs may be exposed to more risk and may have to raise fees. Just speculation on my part, I don't have any inside information on their thinking.
Sounds to me as though the new rules will lead us down the path to more defaults as people with better credit make bigger down payments and people with worse credit borrow more than they can afford. A different path back to 2008. Or am I reading this wrong?
Quite possible Dane, but those with better credit may make smaller down payments and buy the mandatory insurance to gain from the lower fees. These are some of the unintended consequences that need to be discussed. But the environment is not conducive to calm debate right now, especially on complex issues with many moving parts. Easier to just respond with knee jerk reactions and soundbites.