I read with interest about Labor's new shared Home ownership scheme it is promoting.
Basically it is saying that it will provide a portion of the Home loan for an equity stake in the home that will be redeemable on the sale of the property. It is similar to schemes in other states, like WA's Key Start program.
Have a couple of questions based on that type of scheme however.
1. By providing a portion of the mortgage, effectively the Government is providing housing finance and loans and indeed, a second mortgage over the property, similar to what commercial banks do. Will that mortgage be subject to an interest rate? One of the key criticisms of the WA keystart scheme is that the interest rate is higher than commercial lenders to encourage people off the scheme when they are able to.
2. The other issue is choice of property. Keystart in WA does not allow any property to come under the scheme. The government will actual purchase property for use for the program and only those houses are subject the Shared Ownership scheme. Will that be the case of the Commonwealth?
3. When selling the property, the WA housing authority has first claim on the property before it can be sold on the free market. By also valuing the property and potentially buying it, there is a conflict of interest inherent in the transaction. Will that be the case under the Commonwealth Scheme?
4. The WA Government sells off its loan book to other banks, effectively getting into the Mortgage Backed Security Business. Is that also the plan for the Commonwealth Scheme?
Scary stuff. The Australian Government effectively is going into the Banking business which is no place for a Government to go. The amount of funding per year will be huge. Just in WA alone in 2015/2016, the borrowing was to the tune of $1.2 billion a year. Include NSW, QLD and VIC to the scheme and you are looking at $3 billion+ a year in loans to people who generally cant get a loan with the commercial banks. These are the conditions that resulted in the GFC.
https://en.wikipedia.org/wiki/Bank_of_North_Dakota. The state of ND has its own bank and I suspect saves taxpayers lots of fees and have more oversight. "..The bank was initially conceived by populists in the Non-Partisan League, who wanted to reduce farmers' dependence on out-of-state corporations...
ReplyDelete"https://en.wikipedia.org/wiki/Bank_of_North_Dakota#/media/File:Day_21_Occupy_Wall_Street_October_6_2011_Shankbone_3.JPG
Bank of North Dakota releases 2021 Annual Report and S&P rating > https://bnd.nd.gov/bank-of-north-dakota-releases-2021-annual-report-sp/
May 24, 2022
I wish we had this in #Vermont but it failed.
Ethical actions: "In the 1940s, BND sold back farmland which had been foreclosed during the ’30s, usually to the original families who owned it and had been allowed to remain on the land and farm it."