"Mortgage finance giant Fannie Mae just debuted its new 'HomePath Ready Buyer Program', which lets first-time homebuyers get up to a 3% rebate of a home's purchase price if they buy a Fannie Mae property, so long as they complete an online homebuyer education course which costs $75."The new HomePath Ready Buyer Program, as described by Fannie Mae, could create $4,500 in savings on a $150,000 home for first-time buyers (defined as borrowers who have not owned a home in the prior three years)."In addition to the 3% rebate, Fannie Mae will refund the cost of the homebuyer education course. [...]"This new program comes after Melvin Watt, director of the Federal Housing Finance Agency, announced last December that Fannie Mae and Freddie Mac would soon start buying mortgage securities backed by 30-year loans with just 3% down payments, which banks largely halted delivering two years ago, instead demanding 20% down."
"The International Monetary Fund has sounded the alarm on the exorbitant levels of debt across the world, this time literally."The IMF's World Economic Outlook describes a prostrate planet caught in a low-growth trap as the population ages across the Northern Hemisphere, and productivity splutters. Nor is this malaise confined to the West. The fertility rate has collapsed across the Far East. China's workforce is shrinking by three million a year."The report warned of a 'persistent reduction' in the global growth rate since the Great Recession of 2008-2009, with no sign yet of a return to normal. 'Lower potential growth will make it more difficult to reduce high public and private debt ratios,' it said."Christine Lagarde, the Fund's managing director, calls it the 'New Mediocre'. [...]"The world has been drawn deeper into a Faustian Pact."Total public and private debt levels have reached a record 275% of GDP in rich countries, and 175% in emerging markets. Both are up 30 points since the Lehman crisis."Nobody knows for sure whether this is benign, or how it will end. The haunting fear for the lords of global finance at IMF headquarters this year is that it may never be repaid. Caveat Creditor."
"Over the more than two thousand years of economic history, a clear record emerges regarding the relationship between the level of indebtedness of a nation and its resultant pace of economic activity."The once flourishing and powerful Mesopotamian, Roman and Bourbon dynasties, as well as the British Empire, ultimately lost their great economic vigor due to the inability to prosper under crushing debt levels."In his famous paper 'Of Public Finance' (1752) David Hume, the man some consider to have been the intellectual leader of the Enlightenment, wrote about the debt problems of Mesopotamia and Rome. The contemporary scholar Niall Ferguson of Harvard University also described the over-indebted conditions in all four countries mentioned above."
"The reason for the remarkably slow expansion over the past decade and a half has to do with the accumulation of too much debt."Numerous studies indicate that when total indebtedness in the economy reaches certain critical levels there is a deleterious impact on real per capita growth."Those important over-indebtedness levels (roughly 275% of GDP) were crossed in the late 1990s, which is the root cause for the underperformance of the economy in this latest expansion."