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In the US all mortgages have an embedded put option. They are nonetheless affordable, because rather than being privately underwritten mortgages are effectively
by bradleyjg 4y ago
In the US all mortgages have an embedded put option. They are nonetheless affordable, because rather than being privately underwritten mortgages are effectively owned or guaranteed by the government, which sets the rates by political fiat rather than economics.
- sokoloff 4y agoI thought only a subset of mortgages were directly backed (VA, FHA, USDA) and that only conforming mortgages were eligible to be sold to Fannie Mae/Freddie Mac, with non-confirming (colloquially “jumbos”) being entirely privately funded. The non-confirming loan share varies widely over time, but is usually double-digit percentage of overall mortgages.
- bradleyjg 4y agoI believe the Fed also owns some non agency mbs. On top of that bank regulators manipulate capital adequacy requirements to make them more attractive to banks than they would be otherwise.
- formerkrogemp 4y agoNotably, this will no longer be the case as the Fed unwinds its balance sheet.
- bradleyjg 4y agoIf, not when.
- xhrpost 4y agoThis site says 50% but the data is a bit old. I remember seeing other sites in the past year quoting percentages in the 90's. https://www.integritylending.com/understanding-what-a-federally-backed-mortgage-loan-means/#:~:text=About%2050%25%20of%20all%20mortgage,FHA https://www.integritylending.com/understanding-what-a-federa...
- eru 4y ago> In the US all mortgages have an embedded put option. They are nonetheless affordable, because rather than being privately underwritten mortgages are effectively owned or guaranteed by the government, which sets the rates by political fiat rather than economics. Doesn't that just mean that the government gives home owners free put options? Yet another instance of welfare for the well-off?