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PaperclipPerfector  1mo ago (text post)   2585 thread views

Small-Scale Question Sunday for November 23, 2025

Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?

This is your opportunity to ask questions. No question too simple or too silly.

Culture war topics are accepted, and proposals for a better intro post are appreciated.

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Here is one for you - what will happen if the Federal Government straight out forbids mortgages longer than 15 years? This question was raised in my head after the consensus about how terrible the Trump idea about 50 year mortgage is. So what happens if we go in the other direction?

A lot of people discover they have no hope of ever buying a home, and probably elect some asshole that promises them to fix it quick and easy, usually by taking other people's money who don't deserve it anyway, and it'll get only worse from there.

A series of 5 year mortgages with 30, 25,20,15, 10, and 5 year amortization terms only differ from a 30 year mortgage if interest rates change dramatically or your credit changes (because you underwrite the series 6 times rather than once).

So while my sympathies are with Quantum's effects practically for many homeowners it could end up being very little change except more worrying that rates will change next time.

Single-family homes would get a lot smaller. Hard to tell what the effects on the financial system would be though.

The 30-year-mortgage is a tool for hiding the extent of government subsidization of the housing market. For all we know, it might be the only thing propping-up the economy. The buisiness model of Fannie Mae and Freddie Mac is offering "too-big-to-fail" government credit backstops to mortgage originators as a service.

"The only reason that they all get to continue living like kings is because we got our fingers on the scale in their favor. I take my hand off, well then the whole world gets really fucking fair really fucking quickly and nobody actually wants that. They say they do, but they don't.

You need a higher credit score and a bigger down payment to qualify for one.

Which will lead to prices falling and stabilizing in another point.

"Prices falling" means massive amount of underwater mortgages - we all saw how much fun that is - and also massive budget problems in every place that relies on property tax income.

also massive budget problems in every place that relies on property tax income.

This part is 100% not true -- if your home price goes down so will your property taxes, but if everyone's home price goes down, the taxes will stay the same. Your town has a budget -- it determines the tax bill per dollar value, not the other way around.

In practice, that would just gum up the housing market and prices would ossify at a high level, because noone wants to take a loss.

And yet in all other markets people take losses all the time while still not wanting. And everyone that wants to sell their house can't afford to wait forever. They will break and probably sooner than later. Of course we will also have to keep private equity and some other over capitalized entities out of residential housing, but that is hardly a bad idea anyway.

And yet in all other markets people take losses all the time while still not wanting

Not the same "people". Most individuals that participate in stock market, for example, do that via relatively safe vehicles, or if they don't, it's commonly understood as being a very high-risk activity. Buying a house is understood as a part of being a responsible adult. If that results in massive losses, you'd have a lot of very angry people around who would demand the government to "do something about it" - and since we have a democracy, people usually get what they want, for better or (usually) for worse.

we will also have to keep private equity and some other over capitalized entities out of residential housing

Or just make local zoning less restrictive so that more housing can be built.

The local zoning codes are as they are not because of some random accident. They are such because usually people want them as they are - or are ok with them as they are. What would make them change their minds? If housing markets suddenly drops - e.g. because it became harder to get a mortgage - then they are unlikely to say "well, let's make it drop even further by increasing supply now!".

They are what they are because the voters are current homeowners not future homeowners.

I mean to be clear, zoning regulations are almost universally the way they are because people don’t pay attention to them. That’s true both in low-zoning regulation cities like Houston and high-zoning regulation cities.

That could be so, but to change them, you will need to make those people active and on your side. And to make homeowners actively on your side with the message "you home price just dropped, we will make it drop even further!" does not look like a winning strategy.

The problem with doing this is that then more housing is built and the Venn diagram of "reliably votes in municipal elections" and "actually wants more housing to be built" is two unconnected circles.

There is no need for an outright ban. In the absence of government subsidies, the 30-year mortgage is not "abolished"—it withers away. Quote from Hidden in Plain Sight chapter 4:

After the speculative boom of the late 1920s, in which mortgages with LTV (loan-to-value) ratios of 100 percent were not uncommon, the Great Depression produced excessively conservative lending policies by the banks that had been the primary sources of housing finance. At the time, there were no national markets for mortgages, many local and regional differences in mortgage terms, very low LTV ratios of 50 to 60 percent, and a homeownership rate of less than 44 percent. Mortgages tended to be relatively short-term, with bullet payments at the end. If a mortgage could not be refinanced at the end of its term—and many in the Depression could not be—it was foreclosed.

The US government's direct involvement in housing finance began in 1934 with the creation of the FHA (Federal Housing Administration), which had the authority to insure mortgages for up to 100 percent of the loan amount. By providing a government guarantee, the FHA was intended to overcome the reluctance of banks and others to make long-term mortgage loans. Over time, the FHA had a major role in standardizing mortgage terms, increasing acceptable LTV ratios to approximately 80 percent, and encouraging the development of mortgages that amortized over multiyear periods. In 1934, FHA-insured loans had a maximum LTV ratio of 80 percent and a maximum loan term of 20 years. A 1936 FHA underwriting manual shows that, in addition, FHA underwriters wanted to see a good or excellent credit record and a relatively low debt-to-income ratio that took into account the borrower's residual income (remaining income after taxes, household costs, and outstanding debts). Because of these strict underwriting standards, the FHA's record for the next twenty years—through the Great Depression, World War II, and the post-war housing boom—was exemplary: defaults on FHA mortgages remained well under 1 percent.

Of course. But the politicians who don't offer the voters some goodies also wither away and are replaced with ones that do. It's easy to discuss theory but when the question is "do you have a chance for your family to have a home or you'd need to move to some bumfuck place in the middle of nowhere to afford it, or rent increasingly shittier apartments for your whole life" - how many people would be disciplined enough to still maintain "the government should not have any role in it"? Sadly, not so many. The politicians successfully sold the nation the dream of "every family can own a house" (with some sad exceptions of course, but you don't want to be a sad exception, you want to be a normal family) and now it is expected to deliver on it, and if certain politicians don't, then others will replace them who do.

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