Does the 30 year fixed make sense?
To us consumers, yes. To us title company owners, absolutely. But to our society? Maybe? To banks? Only if the government helps them out.
To me, the unsung villain of the mortgage crisis is the 30-year fixed rate self-amortizing mortgage with no prepayment penalty. This hothouse creature is beloved of liberals, who like any product that gives the consumer the power to shaft banks whenever it is to their advantage. And it is beloved of conservatives because it smacks of sober citizens taking on modest, stable obligations they can meet
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And whenever this product went bad, rather than reconsidering its support, the government staged another intervention to keep this type of loan alive. It gave an implicit guarantee to Fannie and Freddie, deregulated the savings and loans (and then bailed them out), had its regulators and lawmakers help create the market in mortgage securities, and so forth. All the while, it gave a giant tax subsidy to mortgage interest that convinced people they were fools not to buy.
Also in the article a mention of one of the greatest, and hilarious, books on Wall Street: Liar’s Poker. If you haven’t read it, you should.