However, the Federal Government's intervention to further prevent plunging home values extends much further than a trasfer of funds to certain income-qualified "buyers": currently, 96.5% of all mortgages are owned or backed by the US. This is accomplished primarily via giants Fannie Mae and Freddie Mac, which were placed in US "conservatorship" in 2008. This number is up from 15% in 2006.
Read the WSJ article; CalculatedRisk has analysis from the SF Fed.
The Automatic Earth explains the consequences of US government intervention:
Let nobody try and fool nobody else anymore. Fannie and Freddie have nothing to do with the less privileged: they are the ultimate tools for Washington to keep Wall Street alive. Not only would significantly lower home values put severe strains on the major banks' balance sheets, they would also implode and destruct what Mortgage Backed Securities and various other housing related derivatives can be put on the books for.Read more here.
And if Washington keeps on refusing to do so, maybe some other party can come up with some calculations on what the cost to the taxpayer would be, now that 96.5% of mortgages are provided on that taxpayer's account, of prices going down another 10%, and another set of calculations for a 20% drop, and one for 30% (or maybe 50% would be a better, more realistic view). If a government holds the view that it can spend tax revenue at will and limitless, that same government can still be put to task for doing so largely in secret. The American people have a right to know how their money is spent, on what it is spent, and above all how much.
The government needs to explain, for instance, why it has decided to prop up home prices at levels that are far higher than what they were prior to the 2002-2007 housing boom. This is vital data, because it will, or at least may, alert enough people to the fact that domestic real estate prices have zero percent chance of staying at those levels unless taxpayer money is used into perpetuity to guarantee any and all mortgages. (Red emphasis = BB.)
Frightening graphic posted at CalculatedRisk:
Meanwhile, people who already have mortgages are fleeing: 31% of all defaults are now considered strategic.