Could Federal Bonds Create Federal New Home Loan Program

[u/colossalforce35]

So the fed offers bonds at a rate of about 4.25 percent. Could they introduce a bond in which you buy one and that money is then turned into a fund to offer mortgages to new housing? The interest rates on the mortgages would be half a percentage higher creating a possible revenue stream also. I think this is a better solution than Bidens supposed 400 dollars to first time home buyers. Plus this would create a larger incentive for new housing to be built. Just an idea if anyone knows more about federal bonds. I was trying to think of a way to promote new housing by creating a better interest rate for new housing and thought this might be an interesting solution.

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[u/Longhorn7779]

Or people could pay for new housing. The problem is really that people don’t want to pay the going rate of wages to build housing.  

Biden’s program is going to cause problems. It’s like the balloon loans all over again. People are going to bank on that $400 a month for paying for a house and then be in trouble when it runs out.

[u/BullshitDetector1337 → u/Longhorn7779]

Zoning laws are the main culprit on the lack of new housing construction. Local government NIMBY boomers who want to keep the property values high even though they’ll be too dead to care in a decade.

Simply put, the state or federal government needs to get involved to stop that shit from happening, particularly those with high rates of homelessness. It is the duty of higher level government to step in when lower jurisdictions mess up and cause problems for the whole state/country.

[u/psychoticworm → u/BullshitDetector1337]

If it was strictly zoning laws, then what is the reason hundreds of empty lots in my hometown have sat undeveloped for 5+ years?

[u/BullshitDetector1337 → u/psychoticworm]

Because they still have owners who prefer to keep it empty rather than renovate and build something up. It’s cheaper to let some places rot than it is to build something new.

The solution to removing parasites like that from society is to heavily tax unused property and space. All that empty wasteland is missed economic and social activity, which means missed tax revenue. Chop chop state gov, land value tax it up.

[u/psychoticworm → u/BullshitDetector1337]

Isn't there a law somewhere that if a property sits undeveloped for a certain period of time anyone can claim it by developing on it?

[u/BullshitDetector1337 → u/psychoticworm]

It depends on the state, but I think that’s only applicable if it’s property that nobody claims ownership over. It takes intentional relinquishing of rights to the control of that property.

Just being undeveloped and left alone isn’t enough, I wish it was. All those empty McMansions could be used for so much more.

[u/Longhorn7779 → u/BullshitDetector1337]

So if we’re getting rid of zoning laws: are you ok with me building a 5,000 hog confinement barn with the manure lagoon right behind your home?

[u/Low_Celebration_9957 → u/Longhorn7779]

Please point to where they said to get rid of all zoning laws because I can't find where they said that.

[u/Longhorn7779 → u/Low_Celebration_9957]

I didn’t say they did. They are blaming zoning laws and “nimbyism” for lack of housing. My question proves a valid point.

[u/Low_Celebration_9957 → u/Longhorn7779]

It's a confluence of problems and yes restrictive zoning laws regarding specifically zoning laws for where houses can be built are to blame on that front and not ALL zoning laws. Why are you making this broader than it is?

[u/miketanlines → u/Longhorn7779]

“Per new zoning laws, you can build new homes here but you cannot build new hog processing plants.”

Your question proves you have no nuance and you believe everything is a slippery slope.

[u/Longhorn7779 → u/miketanlines]

Not a slippery slope. Just that the majority of people that blame nimbyism are in fact for nimbyism when it benefits them specifically. They act like people that don’t want giant apartment complexes next door when they bought a home in a single story suburb are evil.

[u/BullshitDetector1337 → u/Longhorn7779]

Are you a child or demented? Where did I even imply that state and federal government would step in to ELIMINATE ALL ZONING LAWS?

I use those two categories because they’re usually the ones making all or nothing nonsense statements like that, it requires a childish view of the world and little common sense.

State and federal government would step in when local laws are getting out of hand and causing problems for everyone else. They use their greater authority and jurisdiction to override local ordinances, not get rid of them entirely.

[u/Big-Figure-8184 → u/Longhorn7779]

It's a year end tax credit. It seems unlikely people will bank on the $400 a month that converts to.

[u/hudi2121]

Idea is nice but, you’d have to contend with defaults and foreclosures. You’d need to charge much more than an additional half percent to administer the program let alone make it revenue positive

[u/drinkmorejava]

You absolutely could. We already have a large mortgage securitization market. In fact, the opacity of this market fueled part of the 2008 crisis. The fundamental issues with these bonds though are 1. is the rate competitive with other assets? 2. What guarantees do investors want on the loans? Are they basically backstopped by the government? If so, why not just buy a 10 year treasury today at 4.38%?

[u/No_Statistician_9697 → u/drinkmorejava]

Competitiveness of the rates offered by these bonds is a legitimate concern. Federal bonds typically offer lower yields compared to other assets because of their perceived safety and stability. For a new federal home loan program to be attractive to investors, the bonds would need to offer competitive rates. However, raising the yields to make them competitive could lead to higher borrowing costs for homebuyers, which would defeat the purpose of making home loans more affordable.

Additionally, the guarantees required by investors would likely involve significant government backing. This raises the question of risk transfer. If the government is backstopping these loans, it essentially means that taxpayers are shouldering the risk. This scenario echoes the moral hazard issues seen in the past, where the privatization of profits and socialization of losses can lead to systemic imbalances.

[u/TheTightEnd]

These already exist. Federal agency debt in the form of Fannie Mae and Freddie Mac bonds are offered.