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PaperclipPerfector  1d ago (text post)   606 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.

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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?

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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