U.S. to lower the size of mortgage it will guarantee (real estate, foreclosure)

[yeahthatguy]

U.S. to lower the size of mortgage it will guarantee - latimes.com

[bayarea-girl]

Not a bad thing. This just means that home prices will continue to decline. People should have more than 3% to put down on a home and should be qualified to purchase.

[Bulldogdad]

Seriously right now 3-5% down is not going to be a big issue as housing prices are pretty much at the bottom. Many areas are starting to see a very low increase over LY. Now is a good time for the Government to back mortgages while the rates are so damn low. Mortgage lenders are being as tight as a Morman on Castro street right now with their lending practices. Which is actually hurting the economy more than helping it.

And before some you zealots go nutso, I am all for strict and fair lending practices.

[yeahthatguy]

You should never have been able to buy a house w/ less than 20% down. That is a strict and fair lending practice which there should be no exceptions for.. Subsidizing lending rates so banks aren't raping people and backing mortgages is a different matter once the potential home owner has some skin in the game aka 20% down.

[CAVA1990]

Originally Posted by yeahthatguy

You should never have been able to buy a house w/ less than 20% down. That is a strict and fair lending practice which there should be no exceptions for.. Subsidizing lending rates so banks aren't raping people and backing mortgages is a different matter once the potential home owner has some skin in the game aka 20% down.

I tend more toward the free market rather than strict regulation. If banks want to take the risk with lower down payments, that's their business. As an investor, having that much money sitting tied up in an asset when it could be earning a higher return elsewhere (stocks, business, etc.) makes little sense.

[Bulldogdad]

Originally Posted by yeahthatguy

You should never have been able to buy a house w/ less than 20% down. That is a strict and fair lending practice which there should be no exceptions for.. Subsidizing lending rates so banks aren't raping people and backing mortgages is a different matter once the potential home owner has some skin in the game aka 20% down.

That is just some fictional number that a bean counter dreamt up. Where people and banks got into trouble is the interest only, no money down, no verification of income or employement scenario. Plus people using their houses inflationary values as ATM machines. Are there going to be defaults? Sure! But if a new home owner has an exemplary credit history and a long term stable job with several years of consistent income and meets or exceeds the debt ratio requirements I see nothing wrong with the 3.5% down the FHA requires as a minimum down payment. For those who have a little more risk involved sure, use a sliding scale of down payment up to what ever percent the lender deems necessary for the risk. Lets be level headed about this so we can start getting people back into houses.

[user_id]

This isn't a big deal, they are just dropping the confirming limits to reflect the declines that have occurred in real estate.

[user_id]

Originally Posted by Bulldogdad

That is just some fictional number that a bean counter dreamt up. Where people and banks got into trouble is the interest only, no money down, no verification of income or employement scenario.

umm....no its not a number that was dreamed up one day. Its the number, over years of experience, that has proven to be the "sweet spot" for banks to avoid principle loss on loans due to foreclosure.

Odd that you think the entire mortgage industry adheres to a convention that has no reflection of reality.... Traditionally loans with less than 20% down would require private mortgage insurance. No sane bank would lend at 3.5%, that only works because its being subsidized by the government. 3.5% wouldn't even cover the selling costs in the event of a foreclosure.

[yeahthatguy]

Originally Posted by CAVA1990

I tend more toward the free market rather than strict regulation. If banks want to take the risk with lower down payments, that's their business. As an investor, having that much money sitting tied up in an asset when it could be earning a higher return elsewhere (stocks, business, etc.) makes little sense.

A home is not an investment and if you have so little capital that you can't put 20% down on a home you want to buy .. Maybe you shouldn't (A) : be buying a home (B) be investing.

The free market depends on the govt. and by proxy the tax payer. So, if you tend towards the free market, let it truly be free.. No FDIC and when a bank goes bankrupt from such practices let it be their business and your money's business to disappear.

I invest/trade .. However, at the juncture I am approaching of starting a family, a home purchase makes perfect sense and there are many benefits :
> Writing off property tax
> Not paying rent
> Having a place to raise my family that I own..

20% down is a small slice of my capital and I will still happy trade/invest while working towards paying off my house.. As do many investors/traders.

[yeahthatguy]

Originally Posted by user_id

umm....no its not a number that was dreamed up one day. Its the number, over years of experience, that has proven to be the "sweet spot" for banks to avoid principle loss on loans due to foreclosure.

Odd that you think the entire mortgage industry adheres to a convention that has no reflection of reality.... Traditionally loans with less than 20% down would require private mortgage insurance. No sane bank would lend at 3.5%, that only works because its being subsidized by the government. 3.5% wouldn't even cover the selling costs in the event of a foreclosure.

^ This . +1 rep