Monday, September 08, 2008

Remember when?

Do you remember how a year ago the trolls on the housing blogs were saying how Fannie and Freddie entering the jumbo market would sent prices back on their upward spiral?

I wonder how much longer the GSE's (or whatever they're called now) will be able to offer loans above $417k. There never was an appetite for the bonds backed by this toxic debt. There are really two choices:

1. Put in new rules that apply to mortgages between $417k and $729k that reduce the risk to bond buyers. I would propose that it will take larger down payments (25% or 15% plus PMI), lower DTI (35% maximum), and proof of reserves. Obviously something that would create a "V-shaped recovery."* ;)

Got Popcorn?

* There is no V-shaped recovery. This downturn will be 'in the bog' as other bloggers called it. For 2 to 3 years prices will be sticky on the downside.

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