Zombie loans? Can't wait for this one!
😎 Don't get ahead of yourself! See from yesterday's "Comments" [link] that many of you did your homework. Were you surprised that no other country uses the 30-year fixed rate mortgage in their housing finance? Little unusual don't you think...wonder why?
Will let you do your own historical research, but here's a 15 second summary. With the 1930's Great Depression, the banking industry collapsed. Millions lost their savings and faced foreclosure on their home mortgages at their local bank.
The federal government stepped in to try to avoid further financial disaster with two new programs 1) federal insurance of bank deposits (that $250,000 coverage you now enjoy) and in 1938 created the Federal National Mortgage Association (better known as "Fannie Mae") to "expand the mortgage market", but in reality to let folks keep their homes (and coincidentally help bail out the banks!).
Government intervention in a crisis (whether financial, pandemic, hurricane, fire or flood) is usually a pretty good thing - regardless of your libertarian leanings. One of the problems with such government programs is often, once the crisis has passed ; the programs don't want to close down... and instead turn into zombies. They refuse to die!
Fannie Mae went looking for a continuing purpose with a vengeance and found: "The American Dream - Home Ownership"! To help all of us achieve that dream and to avoid another financial collapse, Fannie Mae and the U.S. government would join forces to guarantee those risky 30-year fixed rate mortgages! Soon others piled in - Ginnie Mae, Freddie Mac, USDA - and the race was on!
😎 Lets stop there and ask a couple of questions:
1) Do you think that "The American Dream - Home Ownership " is an idea which has merit?
2) Do you think that federal government involvement with the mortgage market is good?
