Could Uncle Sam get a mortgage?

My credit-minded boss posed an interesting question to me this week: Could the U.S. government obtain a home loan given its current financial situation?

To find out, I invited Uncle Sam into my lending office for an interview. (Note: The numbers I use are rounded off to reflect figures an actual borrower might give. Add seven zeroes to all figures for actual amounts.)

KT: Good morning, Sam. It’s a pleasure to meet you. I’ve admired you for a long time. I understand you’d like a mortgage. Let me start by asking how much you make.

US: $216,000 a year.

KT: Pretty nice income. What are your annual expenses?

US: $346,000.

KT: Whoa. Okay. How much money do you owe to lenders right now?

US: $960,000.

KT: What is that debt secured by?

US: Uhhh. What do you mean?

KT: Nevermind. What assets do you own?

US: Tanks, space shuttles, mountains, canyons. You know, the usual stuff.

KT: What about liquid assets? And I’m not talking Great Lakes or coastal waters.

US: You bet. I own two mints. One’s in Denver; the other’s in Philly. Have you ever taken a tour?

KT: Umm, no. Regarding the $960,000 that you owe, what are your principal and interest payments every year?

US: My loans are “interest-only” and the rates are really low right now. I pay only $22,000 in interest each year. That number will go up soon as interest rates rise, but it sure is nice right now.

KT: What if your creditors started requiring principal reductions instead of just interest payments?

US: The average maturity on my loans is about 5 years so I guess I’d pay about $195,000 per year in principal.

KT: And you only make $216,000? Do you have any other debt besides what we’ve discussed?

US: Well, I borrowed $460,000 from my grandparents, but they’re not pushing me to pay it back anytime soon.

KT: What? Let me make sure I have everything correct: You owe $960,000 to creditors and $460,000 to family. You make $216,000 a year and spend $346,000, including $22,000 in interest.

In addition, you conservatively should be making $195,000 in annual principal payments to lenders and, if we amortized your family debt similarly, $94,000 in annual principal payments to your grandparents, not to mention interest.

When I add all that up, your annual debt service to income ratio is 144%. Our policy max is 40%. Plus, you have negative net worth. I’m sorry, we’re not going to be able to help you.

US: Did I mention that I own 2 mints? Perhaps I could print some dollars to secure the loan with.

KT: Unfortunately, we can’t take as collateral an asset that is declining in value.

US: No problem. My great aunt will finance the home. Do you know Fannie Mae?

[Notes: Lender debt = securities held by individuals or institutions; Family debt = intragovernmental borrowing such as from the Social Security Trust Fund; Sources: U.S. Treasury Department, Government Accountability Office, Congressional Budget Office]

Kevin Thompson is a lender at Texas Heritage Bank and a political columnist for The Boerne Star. He can be reached at

1 Response to “Could Uncle Sam get a mortgage?”

  1. 1 Jake Smith June 4, 2011 at 03:55

    Great post. Thanks for putting it all so simple for us.

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