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> They're don't really come from the lending industry - lenders could not and would not ever create this product on their own. They're a government subsidy to m
by voisin 4y ago
> They're don't really come from the lending industry - lenders could not and would not ever create this product on their own.
They're a government subsidy to mortgagors enabled by the origination process, obscured by a few hops of financialization.
Is the government buying the mortgages or how is this a subsidy from the government? It seemed from the great financial crisis that these mortgage backed securities were being bought by institutions all over the place, so if there is demand why would it be a subsidy?
- deleted 4y ago[deleted]
- Grimburger 4y agoFannie May and Freddie Mac is the research starting point you want here. US mortgages are certainly subsidised by the taxpayer through some complex financial instruments and those two government owned corporations. Funnily enough when I jest to American colleagues about it being socialism they seem confused and don't think that it is at all. Many don't seem to realise just how drastic a 30 year fixed term is in every other financial market on Earth. I think the max you can fix in Australia is 3 years? https://en.wikipedia.org/wiki/Fannie_Mae https://en.wikipedia.org/wiki/Fannie_Mae https://en.wikipedia.org/wiki/Freddie_Mac https://en.wikipedia.org/wiki/Freddie_Mac
- maxerickson 4y agoThey pretty much have an implicit guarantee from the government, but they aren't government owned.
- Schnitz 4y agoThe irony is that because of the persistent low interest rates in the last decade it is more and more common to take out a 5/1 in the US because people think the slightly higher interest rate of a 15 or 30 year fixed is throwing away money. In fact, I know nobody except myself that got a fixed rate mortgage in the last few years. I certainly sleep better knowing that I don’t have to refinance in the next 2 years…