The Market Ticker
Commentary on The Capital Markets- Category [Housing]

You have to be kidding me -- this was just spewed at CNBS, and caused me to need a new keyboard.

Again.

Worse, it dovetails with this piece:

WASHINGTON (AP) — A federal regulator says government-controlled mortgage giants Fannie Mae and Freddie Mac have reached an agreement with major banks that could expand lending.

The head of the Federal Housing Finance Agency, which oversees Fannie and Freddie, announced the deal Monday at a conference of the Mortgage Bankers Association in Las Vegas. FHFA Director Mel Watt said the deal clarifies conditions in which banks could be required to buy back mortgages they sell to Fannie and Freddie for misrepresenting the loans' risks.

Watt said the agreement in principle is "a significant step forward" that will help make more mortgage credit available without harming Fannie and Freddie's finances.

Everyone is looking for a "3%" maximum down payment requirement, basically -- and they may get it too.

But that's beyond stupid.  Well beyond.

Here's what nobody is talking about in this context -- down payments are, essentially, inverse leverage indicators.

That is, if you have a 20% down payment on a financed "thing" your leverage is 5:1.  That's rather high, but at least somewhat rational.

With a 3% down payment your leverage is 33:1 or more than six times higher!

The problem here is the same as everywhere else -- the economy in general is drunk on exponential credit expansion, which is in fact inflation, and you, dear reader, get screwed by this as the expansion of unbacked credit causes prices to rise yet your wages do not.  In other words you lose purchasing power through these shenanigans -- that's inflation!

Wake up folks -- those putting more air in the balloon are simply trying to rescue their own fat from the fire, which is threatening to consume them.  But there is no rescue per-se -- there is only dragging you in to take their place, and if you sit silently for this crap (or worse, cheer it on!) you will be the one that fries.

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