4 ms·

> The federal government subsidizes them. Curious how does federal govt subsidize them?

dragonwriter 3y ago
> Curious how does federal govt subsidize them? Through the VA Loan, FHA Federal Home Loan, and USDA Rural Loan programs.
- dangwhy 3y ago
  These sounds like specialty programs ? > Cheap 30y fixed rate home loans are an American thing. The federal government subsidizes them. This statement sounded like 3oy fixed rate is possible only because of fed govt. meaning if its wasn't for fed govt subsidies 30yr fixed rate wouldn't have been possible.
  - dragonwriter 3y ago
    > These sounds like specialty programs ? FHA alone accounts for something like 1/5-1/4 of all home mortgages, varying slightly over time; and, its entire purpose was to shift the whole market (which it did).
nradov 3y ago
In most cases it isn't a literal subsidy. Fannie Mae acts as a government-sponsored market maker to purchase home mortgages from lenders, then package and sell them to investors. By providing an "artificial" source of liquidity and taking on significant balance sheet risk they keep mortgage interest rates much lower than they would be in a free market system. https://www.fanniemae.com/about-us https://www.fanniemae.com/about-us
- dangwhy 3y ago
  got it. Doesn't make sense to limit supply and also subsidize a product a the same time. Wouldn't that automatically increase prices? How does high prices help the people govt is trying to help. All this makes no sense to me. why are they doing this.
  - nradov 3y ago
    Mortgages are subsidized by the federal government. Housing supply is limited by state and local governments. Those are separate entities which often work in conflict with each other.
    - dangwhy 3y ago
      Doesn't matter who is limiting the supply though? Subsidizing something with artifically limited supply will automatically raise the prices and hurt ppl who they are intending to help. What am i missing here?

> Curious how does federal govt subsidize them? Through the VA Loan, FHA Federal Home Loan, and USDA Rural Loan programs.

dangwhy 3y ago
These sounds like specialty programs ? > Cheap 30y fixed rate home loans are an American thing. The federal government subsidizes them. This statement sounded like 3oy fixed rate is possible only because of fed govt. meaning if its wasn't for fed govt subsidies 30yr fixed rate wouldn't have been possible.
- dragonwriter 3y ago
  > These sounds like specialty programs ? FHA alone accounts for something like 1/5-1/4 of all home mortgages, varying slightly over time; and, its entire purpose was to shift the whole market (which it did).

nradov 3y ago

In most cases it isn't a literal subsidy. Fannie Mae acts as a government-sponsored market maker to purchase home mortgages from lenders, then package and sell them to investors. By providing an "artificial" source of liquidity and taking on significant balance sheet risk they keep mortgage interest rates much lower than they would be in a free market system. https://www.fanniemae.com/about-us https://www.fanniemae.com/about-us

dangwhy 3y ago
got it. Doesn't make sense to limit supply and also subsidize a product a the same time. Wouldn't that automatically increase prices? How does high prices help the people govt is trying to help. All this makes no sense to me. why are they doing this.
- nradov 3y ago
  Mortgages are subsidized by the federal government. Housing supply is limited by state and local governments. Those are separate entities which often work in conflict with each other.
  - dangwhy 3y ago
    Doesn't matter who is limiting the supply though? Subsidizing something with artifically limited supply will automatically raise the prices and hurt ppl who they are intending to help. What am i missing here?