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alstry (35.70)

Housing Bill to Destroy America!!!!! and NEW HomeBuilders

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July 23, 2008 – Comments (3)

WASHINGTON -- House and Senate leaders have largely hammered out a compromise deal on a mammoth housing package that would permit the government to bolster Fannie Mae and Freddie Mac in an emergency, overhaul supervision of the housing-finance giants and allow the government to insure up to $300 billion in refinanced mortgages.

http://online.wsj.com/article/SB121672848030473401.html?mod=hpp_us_whats_news

The housing bill as proposed is going to ignite the printing presses of the Federal Government.  Get ready for interest rates to skyrocket and inflation to go out of control.  Demon that's for you.  The problem is that higher interest rates is going to raise mortgage rates and NEW HOME BUILDERS will get killed. 

There is over $12 Tillion in mortgages.  $300 Billion provision for guaranteeing mortgage refinancing is less than 3% of outstanding mortgages.  We already have over 1 million homes on the path to foreclosure.  Remember, mortgages are defaulting because people can't afford to make their mortgage payments and/or sell their homes for the balance of the mortgage.

Higher interest rates is only going to bring down the value of houses further.  It is falling home values that is prohibiting many from selling their homes and paying off their mortgages.  This package will only accellerate the decline in the value of homes as interest rates rise.  It is absolutely insane.

How short sighted can our lawmakers be?  As the world sees we are going to start printing dollars out of control....they are going to start dumping dollars causing the dollar to devalue further.  Import prices, including oil, will skyrocket....anyone ready for $8 per gallon gas???

Finally, out of the $12 trillion dollars in mortgages....who is going decide which $300 billion get refinanced and guaranteed.  What incentive will your neighbor, who is working his ass off to stay current, continue to pay his existing mortgage when he can simply default and get a better deal?

Anyone see moral hazard folks?

$300 Billion of EXISTING mortgages?  How about $3 Trillion or more!!!!!!!

No one will want to buy a new house with a new mortgage because home values will be crashing in value as interest rates skyrocket and jobs are lost.

If this bill passes we are screwed......all of us.  Dollar crashes, interest rates skyrocket, houses and investment assets implode in value, inflation goes out of control, umemployment explodes, construction stops completely, and you can figure out the rest!!!!!!!

Watch what the 10 year bond does today just on the rumor of the package.

3 Comments – Post Your Own

#1) On July 23, 2008 at 7:34 AM, Richthofen80 (93.04) wrote:

You ask some great questions, but I want to say that I don't think the financial armageddon you propose will happen. I do think that this will hurt the recovery big time, and we'll end up bailing out shareholders of companies with taxpayer dollars. disgusting.

 The problem is the government is trying to 'prop up' house prices. But they fail to see why the prices even need to be propped up in the first place. Its because housing prices got way too expensive relative to incomes. They NEED to come down and the banks NEED to contract. Its not forever, just until house prices are reasonable and people start saving for a house again. You know, saving. Where you spend 2-4 years living on rice and beans and put money in an account, then when that account is 20% of a home which is valued at no more than 3x income and the payment is 25% of monthly expenses. Also, HELOCs and other financial instruments need to essentially be what they once were: very rare tools. Maybe someday we'll see people actually pay off their house, or maybe the 15 year mortgage will come back in vogue.

Incomes have essentially been falling relative to prices of goods. So there NEEDS to be housing deflation.

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#2) On July 23, 2008 at 9:50 AM, Gemini846 (88.80) wrote:

I wrote all my representitives/senators yesterday and BEGGED them to vote NO. No to Bailouts. Yes to Freedom.

There are plenty of socialist states out there. America doesn't have to be one of them. We spent too many years fighting the commies to become like them overnight.

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#3) On July 23, 2008 at 5:00 PM, StockSpreadsheet (74.38) wrote:

The government should not do half-@$$ed measures on this.  If they say that Fannie and Freddie are not backed by the government, then they should let them fail.  If they are backed by the government, then they should be brought back into the government as official departments under the Department of the Interior or some other department.  They should not let them run as quasi-independent entities to overpay their executives and create financial crises and then run in with taxpayer money to bail them out when their chickens come home to roost.  Either annex them or cut them off and let them die.  Don't play the middle ground.

My two cents.

Craig 

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