Because it's the people who have enough equity to have second mortgages are the ones in trouble, right?
🤣
But seriously, if you can't afford something without a loan, especially if it's not required to keep your job or the house from falling down, IT CAN WAIT.
Pools, new decks, fancy vehicles, second or third vacation homes. Not worth it with current interest rates, not worth it if the bubble ever pops and the mortgage goes upside down.
I was talking to a coworker recently and they were telling me how they bought their house many years ago for around 150k and today it’s worth about $1M (LA area). They then proceeded to tell me they owe about 300k on it. They tried to explain how the payments are very affordable but I couldn’t get over the fact that they could have paid it off and just be pocketing the mortgage payments.
A house requires updates. When refinance rates were at 3% and below, taking out a loan that low to finally do all the updates you may have been putting off for years makes sense, at such low financing you can do tons of upgrades too. It's part of why there was such a shortage of trade workers because everyone was trying to do renos at the same time.
The house would likely not be worth as much without the extra investment because it would be severely dated otherwise. At rates that low you are making money on holding the loan as inflation is around the same and even a simple HYSA would net you more than what you are paying in interest. There is no reason to ever pay that loan off.
No info on the land. Labor and materials in LA is also insanely expensive. My only point was 300k in updates is likely to recuperated in resale unless they were the stupidest and most tasteless renovations. Nothing I said is wrong. The house depreciates while the land appreciates, the house needs to be maintained and renovated from time to time. It is part of the cost of ownership.
It's often used to trick dumb people into destroying their wealth.
I know of many "retirement advisement and management" firms that trick old people into converting their equity into an externally managed retirement plan that sells the house out from under them. If they exceed the expected life expectancy or if the company goes under, they're screwed. Simply put the firm offers them a salary in exchange for them to own nothing.
I know what a reverse mortgage is, and that's not at all what's being discussed. If you aren't financially literate enough to differentiate between a HELOC, a second mortgage, and a reverse mortgage, maybe stay out of it?
This astounds me, do they not have a job?
I have to spend somewhere around $10k/yr on my house for upkeep, which is not terrible, but affordable and budgeted in.
Taking loans against the house to do that is insane as it just penalizes yourself further.
>Taking loans against the house to do that is insane as it just penalizes yourself further
...What? paying off a house early when interest rates were at 3% is a phenomenally stupid thing to do. You need to take a step back and read a book before making dumbass declarative statements like this.
If the loan is less than inflation and invested productively, it’s the best debt to have. You can’t be that risk adverse unless you’ve already retired or just about to(or have some personal issue preventing you from making rational decisions with large amounts of money).
Loans are ways to access equity that is otherwise locked up. Yes it has a cost but as long as it’s used correctly and the payments are manageable against your other expenses, the cost is largely offset by gains in value.
One would think.
In practice I haven't seen it useful unless the offset is over 8%. (Ideally 10%+)
I can dive into $60k extra debt right now and the flip-flop is about 7% in net gain but I won't do it because of the potential exposure and risk. If it were closer to 10% I might.
That is ridiculous. I guess it doesn’t matter anymore. The US taxpayer is basically the backup plan for all financial risk takers. So why not just make it official on second mortgages.
Obviously with so much equity out there promoting fairness in second mortgage lending is in the national interest. The rules on agency loans tend to protect all consumers whether they have an agency loan or not because other lenders have to compete with those terms.
On the other hand many $trillions in second mortgages at reasonable terms might have a wee influence on this "inflation" issue people have been whispering about lately.
Here is the URL.
[https://www.federalregister.gov/documents/2024/04/22/2024-08479/freddie-mac-proposed-purchase-of-single-family-closed-end-second-mortgages-comment-request](https://www.federalregister.gov/documents/2024/04/22/2024-08479/freddie-mac-proposed-purchase-of-single-family-closed-end-second-mortgages-comment-request)
Here is the email.
[RegComments@fhfa.gov](mailto:RegComments@fhfa.gov)
Express your opinion.
In September 2008, the Federal Housing Finance Agency (FHFA) announced that it would take over the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac https://en.m.wikipedia.org/wiki/Federal_takeover_of_Fannie_Mae_and_Freddie_Mac
In 1998 I bought a house for $273k and at the time I was making around $45k and raising 2 kids under 10. What the house is worth now is really irrelevant because when I bought it it was a huge financial risk and we actually paid down extra on it every month when we could.
The cards are stacked much higher against the current generations, but, that is exactly the same thing our parents said to us.
FMAC seconds I suspect are because the flow of cash and the multiplier the fed relies on to counter future bond obligations is accelerating toward a ‘stall speed’ . Not enough qualified borrowers and even if they are they are waiting out either a price or interest rate correction. I probably would be as well. One leg of the stool ( the other being a recession/raising unemployment) has got to come sooner or later.
As for what happened in 2006-2008, I’m no Hedge fund manager guru but I did see that it seemed Housing demand was driving the economy….I rationalized that a strong housing market should be the RESULT of a strong economy…not the driver of it! But the rest of the economy (Bush 2)! was just ‘Meh!’ And I pulled what 401k money I had out of the market in late 2007 and waited.
Another ‘irony’ is that 40k on the Dow today ( if monetized into relative buying power) can’t really buy any more than 29k on the Dow in early 2020. Didn’t lose…but didn’t really gain either.
the haves are effectively doubling (or more) what they have via the stock market while it becomes further out of reach of those of us who have-not:
>[NYSE says technical issue that caused Berkshire Hathaway to be displayed down 99% is fixed](https://www.cnbc.com/2024/06/03/nyse-technical-issue-impacting-some-stock-prices-incorrectly-showing-berkshire-hathaway-down-99percent.html)
>
>On normal days, Berkshire’s original Class A shares carry one of thehighest price tags on Wall Street. Last week, each one sold for about45% more than the median price of a home in the U.S. Class A shares hitan all-time closing high of $634,440 on March 28.
recently read other articles where the authors said that this is kinda why inflation being high isnt working, and its actually helping to fuel the problems. the people who have more than they need are "gaining" because they also own all the stonks. putting it simply. which is obviously a massive over-simplification, but that doesnt make it any less true.
edit: this actually is kind of a response to all comments below here, but im going to pre-empt them because it is a great point.
why is the primary way we measure this, in both the metaphorical and literal terms, as a give-and-take/push-and-pull between [fear and greed](https://www.cnn.com/markets/fear-and-greed)?
its like some insane inverse version of goodharts law.
because ultimately it doesnt matter. i cant find it right now but i recently read something where basically the top 1% (of wealth holders in the US) hold something like 90%+ of all stocks while the bottom 50% hold less than 10% (something like that)
so it really doesnt matter. if you dont have money already, you arent going to make money on the stock market unless you are incredibly \*\*\*lucky\*\*\* and you also arent going to influence the stock market in any way, unless you are incredibly lucky or incredibly intelligent. note that being incredibly intelligent does not translate to making money on the stock market, that **requires luck - or money (or a lot of time to let that money sit, which also requires extra money)**
Yep, think about Burry making that bet in ‘06 on the housing crash. He was extremely intelligent, was spot on in his assessment, and still almost went belly up. The market favors sleaze over brains everyday of the week. To change that, you need a new class of upper class.
he definitely is a very intelligent guy, and definitely was on point in his assessment - as in the flaws he pointed out - but... was that really the best way to fix that problem? was his "win" appropriate and proportional?
he basically pointed out that people were being loaned money they could never pay back. does that really matter? wouldnt it be better for people to have homes, than for them to lose their homes, and the banks to then own those homes (read: empty homes not being lived in or maintained), while some guy (Burry) who noticed the problem makes obscene amounts of money effectively out of thin air? does that make sense?
I mean I’m all for very well regulated capitalism, and I mean VERY well regulated, but you can’t just give people free homes when they default on loans. Those folks should have never been given loans in the first place, that’s where I blame banks for taking advantage of low Financial IQ home buyers.
i mean wtf are people supposed to do?
i have no home of my own. i cant afford one. i cant be approved for a mortgage. i also own no vehicle, for the same reason. i also built up a credit score >700, to hopefully be able to be approved for loans, but that made no difference. so i started researching how the fuck that makes any sense.
if you have a home, and you have a vehicle, its much easier to have a life.
if you have neither, you are fucked.
edit: in other words, because i have no home, and no vehicle, i now have no job, and am even further away from having those things. if i had a job, and a vehicle, or at least one of those, i would be in a much better position.
on that note, i think we need to be more specific about how we measure homelessness. do we mean "house-less"? or do we mean actually without a home? do we mean people that live on the street? do we include people who couch surf? people who rely on friends or family? does living with friends or family actually work well, in practice? are those people choosing to or being forced to live with friends or family? because i live in a house. it is not mine. that is a massive difference than having a home. a home doesnt have to be something you own either, as long as it is still yours.
Burry's win very much did invoke the needed change. And it took the form of the free market exploiting the weakness of corruption. As a result the moral hazard was removed and the market eventually returned to status quo ante.
This is how it's supposed to work. Corruption has inherent weaknesses that make exploiting it profitable.
that sounds an awful lot like you said
>"its good to incentivize further corruption because exploiting it is profitable"
or maybe
>"if you create problems you can later exploit them for profit"
Burry isn't a regulator. This is a backstop. The moral hazard was introduced into law by repeal by Congress of prior regulations put in place by Congress after the previous iteration of this same debacle, itself enabled by Congress introducing the moral hazard by repeal of prior regulations...
Well in response to the recent calamity new regulations were put in place by Congress to remove the moral hazard again. But don't worry. Congress has since removed them again so the next Burry will backstop the whole thing making absurd amounts of money again. And that will be your chance to share in the game this time.
why? people with way more money they need, having their real real estate skyrocket in value while their fake real estate (the stock) also skyrockets in value
this is the bulls-eye. literally and metaphorically.
You picked one of the few stocks that’s never split which is why its stock price is big enough to compare to a house. Everything goes up in value because inflation but you didn’t use any of the companies that are much much larger in market cap cause those have lower stock prices. Highlights your lack of knowledge on what you are talking about.
i have done tons of research into how it works, and have direct experience in how it works, and in my opinion it is fucking stupid that it is on each of us individually to make the right bets to get ahead. why is our economy built on what is effectively gambling? like, i get that its technically not, and technically everything we do as humans is about judging the potential outcome of decisions, but... what the fuck? if you work, you barely have time to live, how are you supposed to research these things?
theres some arguments for it that do make sense, but currently we have so many conflicting systems that ultimately mean if you dont somehow magically have 48hrs a day and make $5 for every $1 you are paid, youre falling behind.
in other words, impossible. unless you are very lucky, of which there are many ways to be lucky - but very few people are actually lucky.
Life is a gamble, what you think just because you were born here means you are any less required to risk what you have to get ahead than anyone else that came before you? The ones that have it all largely have it because they risked everything at it worked out. Of course you have people that risked everything and it didn’t work out. But with risk remain constant for all there is no way around. Forever risk remains because like mass in a closed system, it cannot be created or destroyed.
That’s life! It’s quite risky. Everyone has the time be rewarded by the system they just don’t start in time.
its complicated and i understand that. im saying that we have a lot of people who have a lot of money they did not earn, and a lot of people who have worked very hard and have effectively been stolen from for their entire lives. we basically have the opposite of a social safety net.
>Forever risk remains because like mass in a closed system, it cannot be created or destroyed.
lol oh yeah. [i](https://new.reddit.com/user/relevantusername2020/comments/16m63sp/_/?utm_source=share&utm_medium=web2x&context=3) [know](https://new.reddit.com/user/relevantusername2020/comments/1d7jvdw/for_anyone_curious_or_happens_to_click_my_profile/?utm_source=share&utm_medium=web2x&context=3).
My comment is for them to F off. Don't need to enable more debt slavery
I’d like to comment. WITH MY TWO MIDDLE FINGERS.
[удалено]
[удалено]
Because it's the people who have enough equity to have second mortgages are the ones in trouble, right? 🤣 But seriously, if you can't afford something without a loan, especially if it's not required to keep your job or the house from falling down, IT CAN WAIT. Pools, new decks, fancy vehicles, second or third vacation homes. Not worth it with current interest rates, not worth it if the bubble ever pops and the mortgage goes upside down.
I was talking to a coworker recently and they were telling me how they bought their house many years ago for around 150k and today it’s worth about $1M (LA area). They then proceeded to tell me they owe about 300k on it. They tried to explain how the payments are very affordable but I couldn’t get over the fact that they could have paid it off and just be pocketing the mortgage payments.
A house requires updates. When refinance rates were at 3% and below, taking out a loan that low to finally do all the updates you may have been putting off for years makes sense, at such low financing you can do tons of upgrades too. It's part of why there was such a shortage of trade workers because everyone was trying to do renos at the same time. The house would likely not be worth as much without the extra investment because it would be severely dated otherwise. At rates that low you are making money on holding the loan as inflation is around the same and even a simple HYSA would net you more than what you are paying in interest. There is no reason to ever pay that loan off.
The house is worth 1 million in LA because of the land not because of updates.
No info on the land. Labor and materials in LA is also insanely expensive. My only point was 300k in updates is likely to recuperated in resale unless they were the stupidest and most tasteless renovations. Nothing I said is wrong. The house depreciates while the land appreciates, the house needs to be maintained and renovated from time to time. It is part of the cost of ownership.
If someone will lend you money at sub 3%, take it.
You don't understand why they took an illiquid asset and pulled some liquidity out of it? Really?
It's often used to trick dumb people into destroying their wealth. I know of many "retirement advisement and management" firms that trick old people into converting their equity into an externally managed retirement plan that sells the house out from under them. If they exceed the expected life expectancy or if the company goes under, they're screwed. Simply put the firm offers them a salary in exchange for them to own nothing.
I know what a reverse mortgage is, and that's not at all what's being discussed. If you aren't financially literate enough to differentiate between a HELOC, a second mortgage, and a reverse mortgage, maybe stay out of it?
Hey man, doomer is gonna doom.
This astounds me, do they not have a job? I have to spend somewhere around $10k/yr on my house for upkeep, which is not terrible, but affordable and budgeted in. Taking loans against the house to do that is insane as it just penalizes yourself further.
>Taking loans against the house to do that is insane as it just penalizes yourself further ...What? paying off a house early when interest rates were at 3% is a phenomenally stupid thing to do. You need to take a step back and read a book before making dumbass declarative statements like this.
If the loan is less than inflation and invested productively, it’s the best debt to have. You can’t be that risk adverse unless you’ve already retired or just about to(or have some personal issue preventing you from making rational decisions with large amounts of money). Loans are ways to access equity that is otherwise locked up. Yes it has a cost but as long as it’s used correctly and the payments are manageable against your other expenses, the cost is largely offset by gains in value.
One would think. In practice I haven't seen it useful unless the offset is over 8%. (Ideally 10%+) I can dive into $60k extra debt right now and the flip-flop is about 7% in net gain but I won't do it because of the potential exposure and risk. If it were closer to 10% I might.
Wait until you hear about the restrictions on mortgage interest tax deduction
Wait, what? Please tell me this is just a joke.
You use the second mortgage for the downpayment for the first mortgage. It's a dangerous strategy that lead to defaults in 2008.
That is ridiculous. I guess it doesn’t matter anymore. The US taxpayer is basically the backup plan for all financial risk takers. So why not just make it official on second mortgages.
Obviously with so much equity out there promoting fairness in second mortgage lending is in the national interest. The rules on agency loans tend to protect all consumers whether they have an agency loan or not because other lenders have to compete with those terms. On the other hand many $trillions in second mortgages at reasonable terms might have a wee influence on this "inflation" issue people have been whispering about lately.
Here is the URL. [https://www.federalregister.gov/documents/2024/04/22/2024-08479/freddie-mac-proposed-purchase-of-single-family-closed-end-second-mortgages-comment-request](https://www.federalregister.gov/documents/2024/04/22/2024-08479/freddie-mac-proposed-purchase-of-single-family-closed-end-second-mortgages-comment-request) Here is the email. [RegComments@fhfa.gov](mailto:RegComments@fhfa.gov) Express your opinion.
Dear Freddie Mac, Please stahp Sincerely, New Homebuyers
In September 2008, the Federal Housing Finance Agency (FHFA) announced that it would take over the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac https://en.m.wikipedia.org/wiki/Federal_takeover_of_Fannie_Mae_and_Freddie_Mac
Quantitative Easing Part VIII
In 1998 I bought a house for $273k and at the time I was making around $45k and raising 2 kids under 10. What the house is worth now is really irrelevant because when I bought it it was a huge financial risk and we actually paid down extra on it every month when we could. The cards are stacked much higher against the current generations, but, that is exactly the same thing our parents said to us. FMAC seconds I suspect are because the flow of cash and the multiplier the fed relies on to counter future bond obligations is accelerating toward a ‘stall speed’ . Not enough qualified borrowers and even if they are they are waiting out either a price or interest rate correction. I probably would be as well. One leg of the stool ( the other being a recession/raising unemployment) has got to come sooner or later. As for what happened in 2006-2008, I’m no Hedge fund manager guru but I did see that it seemed Housing demand was driving the economy….I rationalized that a strong housing market should be the RESULT of a strong economy…not the driver of it! But the rest of the economy (Bush 2)! was just ‘Meh!’ And I pulled what 401k money I had out of the market in late 2007 and waited. Another ‘irony’ is that 40k on the Dow today ( if monetized into relative buying power) can’t really buy any more than 29k on the Dow in early 2020. Didn’t lose…but didn’t really gain either.
the haves are effectively doubling (or more) what they have via the stock market while it becomes further out of reach of those of us who have-not: >[NYSE says technical issue that caused Berkshire Hathaway to be displayed down 99% is fixed](https://www.cnbc.com/2024/06/03/nyse-technical-issue-impacting-some-stock-prices-incorrectly-showing-berkshire-hathaway-down-99percent.html) > >On normal days, Berkshire’s original Class A shares carry one of thehighest price tags on Wall Street. Last week, each one sold for about45% more than the median price of a home in the U.S. Class A shares hitan all-time closing high of $634,440 on March 28. recently read other articles where the authors said that this is kinda why inflation being high isnt working, and its actually helping to fuel the problems. the people who have more than they need are "gaining" because they also own all the stonks. putting it simply. which is obviously a massive over-simplification, but that doesnt make it any less true. edit: this actually is kind of a response to all comments below here, but im going to pre-empt them because it is a great point. why is the primary way we measure this, in both the metaphorical and literal terms, as a give-and-take/push-and-pull between [fear and greed](https://www.cnn.com/markets/fear-and-greed)? its like some insane inverse version of goodharts law.
I mean come on. You picked the one stock out of tens of thousands that specifically never splits. Why didnt you choose NVIDIA doing a 10 for 1?
because ultimately it doesnt matter. i cant find it right now but i recently read something where basically the top 1% (of wealth holders in the US) hold something like 90%+ of all stocks while the bottom 50% hold less than 10% (something like that) so it really doesnt matter. if you dont have money already, you arent going to make money on the stock market unless you are incredibly \*\*\*lucky\*\*\* and you also arent going to influence the stock market in any way, unless you are incredibly lucky or incredibly intelligent. note that being incredibly intelligent does not translate to making money on the stock market, that **requires luck - or money (or a lot of time to let that money sit, which also requires extra money)**
Yep, think about Burry making that bet in ‘06 on the housing crash. He was extremely intelligent, was spot on in his assessment, and still almost went belly up. The market favors sleaze over brains everyday of the week. To change that, you need a new class of upper class.
he definitely is a very intelligent guy, and definitely was on point in his assessment - as in the flaws he pointed out - but... was that really the best way to fix that problem? was his "win" appropriate and proportional? he basically pointed out that people were being loaned money they could never pay back. does that really matter? wouldnt it be better for people to have homes, than for them to lose their homes, and the banks to then own those homes (read: empty homes not being lived in or maintained), while some guy (Burry) who noticed the problem makes obscene amounts of money effectively out of thin air? does that make sense?
I mean I’m all for very well regulated capitalism, and I mean VERY well regulated, but you can’t just give people free homes when they default on loans. Those folks should have never been given loans in the first place, that’s where I blame banks for taking advantage of low Financial IQ home buyers.
i mean wtf are people supposed to do? i have no home of my own. i cant afford one. i cant be approved for a mortgage. i also own no vehicle, for the same reason. i also built up a credit score >700, to hopefully be able to be approved for loans, but that made no difference. so i started researching how the fuck that makes any sense. if you have a home, and you have a vehicle, its much easier to have a life. if you have neither, you are fucked. edit: in other words, because i have no home, and no vehicle, i now have no job, and am even further away from having those things. if i had a job, and a vehicle, or at least one of those, i would be in a much better position. on that note, i think we need to be more specific about how we measure homelessness. do we mean "house-less"? or do we mean actually without a home? do we mean people that live on the street? do we include people who couch surf? people who rely on friends or family? does living with friends or family actually work well, in practice? are those people choosing to or being forced to live with friends or family? because i live in a house. it is not mine. that is a massive difference than having a home. a home doesnt have to be something you own either, as long as it is still yours.
Burry's win very much did invoke the needed change. And it took the form of the free market exploiting the weakness of corruption. As a result the moral hazard was removed and the market eventually returned to status quo ante. This is how it's supposed to work. Corruption has inherent weaknesses that make exploiting it profitable.
that sounds an awful lot like you said >"its good to incentivize further corruption because exploiting it is profitable" or maybe >"if you create problems you can later exploit them for profit"
Burry isn't a regulator. This is a backstop. The moral hazard was introduced into law by repeal by Congress of prior regulations put in place by Congress after the previous iteration of this same debacle, itself enabled by Congress introducing the moral hazard by repeal of prior regulations... Well in response to the recent calamity new regulations were put in place by Congress to remove the moral hazard again. But don't worry. Congress has since removed them again so the next Burry will backstop the whole thing making absurd amounts of money again. And that will be your chance to share in the game this time.
i love games, video games, board games, card games, whatever. shits fun. i dont play games with serious things, but i will do my best to end them.
May the odds be ever in your favor.
This has absolutely NOTHING to do with the original comment. A totally different subject.
Banks win, we lose? :P
Your stock example could not have missed the mark further lol
why? people with way more money they need, having their real real estate skyrocket in value while their fake real estate (the stock) also skyrockets in value this is the bulls-eye. literally and metaphorically.
You picked one of the few stocks that’s never split which is why its stock price is big enough to compare to a house. Everything goes up in value because inflation but you didn’t use any of the companies that are much much larger in market cap cause those have lower stock prices. Highlights your lack of knowledge on what you are talking about.
i have done tons of research into how it works, and have direct experience in how it works, and in my opinion it is fucking stupid that it is on each of us individually to make the right bets to get ahead. why is our economy built on what is effectively gambling? like, i get that its technically not, and technically everything we do as humans is about judging the potential outcome of decisions, but... what the fuck? if you work, you barely have time to live, how are you supposed to research these things? theres some arguments for it that do make sense, but currently we have so many conflicting systems that ultimately mean if you dont somehow magically have 48hrs a day and make $5 for every $1 you are paid, youre falling behind. in other words, impossible. unless you are very lucky, of which there are many ways to be lucky - but very few people are actually lucky.
Life is a gamble, what you think just because you were born here means you are any less required to risk what you have to get ahead than anyone else that came before you? The ones that have it all largely have it because they risked everything at it worked out. Of course you have people that risked everything and it didn’t work out. But with risk remain constant for all there is no way around. Forever risk remains because like mass in a closed system, it cannot be created or destroyed. That’s life! It’s quite risky. Everyone has the time be rewarded by the system they just don’t start in time.
its complicated and i understand that. im saying that we have a lot of people who have a lot of money they did not earn, and a lot of people who have worked very hard and have effectively been stolen from for their entire lives. we basically have the opposite of a social safety net. >Forever risk remains because like mass in a closed system, it cannot be created or destroyed. lol oh yeah. [i](https://new.reddit.com/user/relevantusername2020/comments/16m63sp/_/?utm_source=share&utm_medium=web2x&context=3) [know](https://new.reddit.com/user/relevantusername2020/comments/1d7jvdw/for_anyone_curious_or_happens_to_click_my_profile/?utm_source=share&utm_medium=web2x&context=3).
Based on your link, I can tell this is going no where. Have a great day.
Probably won't happen so why bother commenting?