Must Read! ~ FNMA & FMCC Due Diligence ~ Just imagine what will happen when this bloated debt bubble finally pops. After the FED stops printing $85 billion dollars per month in funny money to create an artificial demand for mortgages.
The Federal Reserve Is Making A Big Mistake
From QE 1 through QE 3 as of now the Federal Reserve has increased its balance sheet from $900 billion to $3.7 trillion today. Here is a primer on the mechanics. The Fed currently purchases $40 billion in mortgage backed securities and $45 billion in treasuries each month. The Fed has no excess money or reserves…..so they simply fire up the printing presses and print out of thin air $85 billion of new money each and every month. This is money that goes directly into the money supply. Nobody knows the ultimate denouement of money printing on this scale. Germany tried “abnormal” money printing in the early 1920’s after W.W. I and the result was hyperinflation, collapse of the German economy, and the rise of Hitler.
This artificial demand for mortgages and U.S. Treasuries by all means is the lynchpin to keeping rates low.
The low mortgage rates have indeed spurred the housing market. But that too is to some extent artificial. There are still various mortgage programs, like FHA, (Federal Housing Administration) where only a 3 percent down payment is required. Fannie Mae has a three percent down offering as well. FHA standards have been so lax and defaults so high that the agency is now basically bankrupt. They have had to raise insurance premiums to borrowers so high that the products they offer now are often more expensive than many of the conventional Fannie Mae and Freddie Mac mortgages. Where would the housing market be without mortgages of lax underwriting standards? Where would housing be without government subsidy welfare HAMP and HARP which offer lower rates and principal reductions to defaulted borrowers? How many millions of the home purchases over the last four years have been by investment group’s bottom fishing rather than real underlying demand by owner occupied dwellers? Has anyone considered that if there are real buyers out there, with a real cash to make meaningful down payments then a hundred basis point (one percent) increase in rates shouldn’t matter very much? Maybe the price of some houses would come down to compensate for the higher rates. There are so many asterisks next to the housing recovery I wonder where the truth really lies.
www.forbes.com/sites/richardfinger/2013/09/...g-a-big-mistake/
The United States federal government currently has over $17 trillion dollars in debt with $126 trillion in unfunded liabilities.
There will be over $20 trillion in debt and around $155 trillion dollars in unfunded liabilities by 2017 according to the US debt clock.
In my honest opinion the last thing our government wants to do right now is give up their massive dividend payments from the Fannie Mae and Freddie Mac conservatorships.
They need to use these funds to begin paying down the national debt. If this debt bubble pops their could be a total economic collapse. Bringing down Fannie Mae, Freddie Mac and the entire financial system. It would be irresponsible for congress to not begin paying down the debt with these dividend payments. They are running out of time. Interest rates will eventually go up.
The massive debt is the result of reckless out of control spending.
en.wikipedia.org/wiki/...akeover_of_Fannie_Mae_and_Freddie_Mac
www.usdebtclock.org/index.html
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