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While I think the MIP rate hike and the length of the MIP are now absurd I don't see any problem with them wanting to get a chance to review the changes before allowing them to be reduced.
Does the Insurance fully fund defaults? Or does taxpayer money subsidize the premiums. You can say it was fully funded. But if it was partially funded by taxpayers, then you are transferring some of the losses of private banks, which are insured by the FHA, onto tax payers.
What happened with all of the loans insured by the FHA that went into foreclosure after the housing bubble burst? Did the insurance premiums cover that or did the taxpayer cover that?
I ask because if premiums have to be high to cover risk, then they should be. Why is cranking out billions of dollars in new loans, propping up housing prices helping the little guy? You can say that reducing premiums will allow more lower income people to get bigger loans. All this does is make banker richer and gets poor people into bigger riskier loans.
the insurance fully covers defaults, and *always* has. Taxpayers never ate a loss on fha loans. Fha loans started going south waaaaaay after the market crashed for every other mortgage product out there. FHA never did "stated income", "no doc", "interest only" or any other suicide loans. FHA loans allow someone of modest means to buy *one* house, not *ten* on your starbucks salary, like "traditional" loan products.
One could argue with good evidence to back it up that FHA loans "saved" the economy from crashing even further than it did, cause when the banker-dudes started folding up, they also stopped lending *any* money of their own, and FHA loans went from like 5% of new loans to like 50% of new loans. <---- true story, look it up.
Dont blame poor people for crashing the economy, it was fine "upstanding" citizens who didn't need or want FHA financing that knocked the wheels off.
Current FHA MIP rates are egregious to the point of forcing homebuyers to refinance down the line, almost to the point of collusion, IMO.
The up-front Premium is one thing, but .0085 per month for the entire term of the loan is exponentially (literally) more than it had been in the past.
FHA MIP should not be a component of vengeance. It should sufficiently insure the loans. That would be accomplished with 1% up front and 55 pbs for the first 78 months or @<80%LTV. This would facilitate Market Entry by first time or credit-challenged buyers who have demonstrated capacity and responsibility, without punishing FHA homebuyers and forcing them into rolling the dice down the road with an otherwise unnecessary refi.
The up-front Premium is one thing, but .0085 per month for the entire term of the loan is exponentially (literally) more than it had been in the past.
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It's not that amount per month, it's that amount per year or .85% divided by 12. On a $300K home it's an extra $212.50 a month, that's a lot of money to pay monthly for the life of the loan, plus over $5K in upfront MIP.
Still high, almost 1% of your total mortgage yearly for 30 years.
If they realize people are refinancing after they reach the point where they can drop the MIP perhaps they will lower it or shorten the term. If rates go higher it may not be beneficial to drop it for a while with the costs to refinance and appraisal costs. For someone like me who didn't borrow a large amount I would be better off paying the loan off faster than refinancing to drop the MIP, I will have to reevaluate and look into things when that time comes.
My friend purchased her $800k house on a FHA loan. Not exactly "modest means".
Conventional loans are cheaper and buyers can use them with as little as 3% down so the "modest means" argument is a bit excessive. They do require a higher credit score...but that has nothing to do with "affordability" or "helping low income borrowers". You don't have to be wealthy to have decent credit.
Obama hiked the mortgage premiums on FHA loans multiple times, and also changed the MIP from 5 years to the life of the loan. Let's stop the "Trump is not for the little people" rhetoric being pushed over this unless you are going to criticize Obama for the same (actually worse) actions (I won't hold my breath).
Also, owning a home is not a right in this country last time I checked. There are some people that should not be approved for mortgages. You would think we would have learned this lesson already (thanks Bill Clinton.)
The rate reduction would have ZERO effect on anyone currently holding an FHA mortgage, only new mortgages written after 1/27.
Quote:
Originally Posted by Zippyman
the insurance fully covers defaults, and *always* has. Taxpayers never ate a loss on fha loans. .
Conventional loans are cheaper and buyers can use them with as little as 3% down so the "modest means" argument is a bit excessive. They do require a higher credit score...but that has nothing to do with "affordability" or "helping low income borrowers". You don't have to be wealthy to have decent credit.
That is true, you can be under the federal poverty level and have good credit as long as you've used it and always paid back your debt. The only thing great credit will do with FHA is get you the best interest rate.
As far as helping low income borrowers and affordability FHA does nothing, you still have to have a debt to income ratio that can support the loan and you can only buy a home that you can afford under that ratio.
The FHA loan is a little more flexible with the dti ratio than a conventional loan would be and since banks have less risk and can sell the loan they are more likely to help you secure an FHA loan.
and an 800K home with an FHA loan is crazy. that's almost $560 a month in MIP, plus $14,000 upfront mortgage insurance payment.
My friend purchased her $800k house on a FHA loan. Not exactly "modest means".
Conventional loans are cheaper and buyers can use them with as little as 3% down so the "modest means" argument is a bit excessive. They do require a higher credit score...but that has nothing to do with "affordability" or "helping low income borrowers". You don't have to be wealthy to have decent credit.
Obama hiked the mortgage premiums on FHA loans multiple times, and also changed the MIP from 5 years to the life of the loan. Let's stop the "Trump is not for the little people" rhetoric being pushed over this unless you are going to criticize Obama for the same (actually worse) actions (I won't hold my breath).
Also, owning a home is not a right in this country last time I checked. There are some people that should not be approved for mortgages. You would think we would have learned this lesson already (thanks Bill Clinton.)
The rate reduction would have ZERO effect on anyone currently holding an FHA mortgage, only new mortgages written after 1/27.
I also hold Maxine Watters, Nancy Pelosi and Barney Frank responsible, as well as Clinton. This group led the charge that homeownership is an entitlement. In 2004, an investigation hearing on Fannie and Freddie, these three maintained there were no problems and tighter restrictions would only hurt those that could not afford a mortgage.. Think about that for a minute. And we really wonder how we got into hot water. Most blame Wall Street. The problem started with our elected leaders.
Excellent article! While FHA was undergoing the reinvention of themselves, it was the only game in town for almost 2 years. Everyone's (a large majoity) credit was trashed, so it was "give it to Mikey, he will eat anything." Only Mikey was FHA and we were feeding them garbage.
Quote:
The FHA program is merely the new subprime cloaked in a different moniker. If you put lipstick on the pig, it’s still a pig. In its current structure FHA is nothing more than a glorified rental program with effectively a free option to purchase. It may be no more difficult to qualify to rent an apartment than to receive an FHA loan. Standards have been so diluted that the program is little more than just one more in the infinite list of government entitlement programs.
Edited to add:. FHA ceased being a low income source of financing over a decade ago. During the crisis, they had to increase loan limits so those in trouble could get a loan. Now FHA is reserved for those with credit challenges.
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