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Here's a snap shot of one of the main paragraphs,
"Once again, thousands of borrowers are getting loans they do not stand a chance of repaying. Only now, unlike in the subprime meltdown, Congress would have to bail out the lenders if the FHA cannot make good on guarantees from its existing reserves. And those once-robust reserves are showing signs of stress, raising the possibility that taxpayers may have to pick up the tab for the first time since the agency was established in 1934. More than 9,200 of the loans insured by the FHA in the past two years have gone into default after no or only one payment, according to the Post analysis. The pace of these instant defaults has tripled in one year. By last fall, more than two dozen FHA home loans on average were defaulting this way every day, seven days a week. The overall default rate on FHA loans is accelerating rapidly as well but not as dramatically as that of instant defaults. The agency's share of the mortgage market is up from 2 percent three years ago to nearly a third of the mortgages now made, its highest level in at least two decades, according to Inside Mortgage Finance, an industry trade publication. The FHA does not lend money directly. It provides mortgage insurance for borrowers working with FHA-approved lenders and uses the premiums to cover its losses. If the premiums are not enough, taxpayers could be on the hook."
If the government was really serious about fixing the mortgage lending industry, they need to fix their own lending problems first. Most everyone who reads this City Data site knows FHA loans are the "safest, very little downpayment loan program backed by the US government.
Eventually all taxpayers will be on the hook. The government needs to do what private lenders are requiring these days. REAL downpayments. None of this 3.5%. If those are truly interest in buying a home, they need to have more skin in the game. If they can't come up with at least 5%, maybe even 10% PLUS 6 months of mortgage (principal/interest/taxes/insurances in bank reserves), then they need to seriously doubt someone's ability to afford a home. 6 months of reserve cash should be needed in case of illness, unexpected unemployment, unexpected financially difficulties. For those of you who argue that they need to put down as little as possible in order to save on cash reserves, maybe you need to wait until you have enough cash reserves to buy a home.
The sad thing while the vast majority of brokers are honest, there are thousands of mortgage brokers who primarily did subprimes who have switched over to primarily FHA backed loans since the subprime lending game ended a couple of years ago.
Yeah, I know there are VA loans out there but I think those who have bravely served our country (USA) deserve to still have those loan options available.
While I agree that FHA is the new sub-prime with all the problems that come with it, I am, however, getting tired of the whining about taxpayers bailing this out.
For the past 8 years big corporations have been "bailed out" by the government and mortgage fraud and predatory lending has been ignored.
In order to get the economy turned around some MAJOR changes need to take place. And if bailing out homeowner is what it takes to kick-start the economy, I am all for it. Provided safeguards are put in place so this doesn't happen again.
In order to get the economy turned around some MAJOR changes need to take place. And if bailing out homeowner is what it takes to kick-start the economy, I am all for it. Provided safeguards are put in place so this doesn't happen again.
That's the issue I'm having with the "homeowner bailout" There are zero new regulations being proposed with regards to FHA. Wow, I think they increased the downpayment from 3% to 3.5% this year.
The government needs to do much more. If someone wants to put down just 5%, than they need to keep 6 months of cash reserves in the bank and report back to the (lender orgovernment) that they still have these reserves for a certain period of time.
There's currently no new regulation being proposed in the FHA lending standards (that I know of).
If home prices decline (say 5-15% further as some are predicting), than those who made FHA backed loans in 2008/9 will just walk away because they made such little downpayment and see no sense or having very little cash reserve to resell their homes if they lose their jobs or need to move.
Well, Rome wasn't built in one day. And property values are not in decline everywhere. Here in OK and other midwest regions they are actually still strong and increasing.
Here is another thought. There was, and still is, an enormous amount of predatory lending going on and we'll see a LOT of modifications in the near future.
Back when the housing prices were accelerating at 10% a year it was nearly impossible for folks to keep up and save for a 20% down payment and STILL have a decent cash reserve...especially in the areas where housing prices are (were) outrageous (NE, for example). So FHA was the way to go. You can't slam everyone that has an FHA mortgage...there's good, honest consumers in the FHA market also.
And, btw, someone that only put 3.5% down and has since seen the house value fall by 10-15/20% didn't loose as much as someone that did the 20% downpayment!!
That's the issue I'm having with the "homeowner bailout" There are zero new regulations being proposed with regards to FHA. Wow, I think they increased the downpayment from 3% to 3.5% this year.
The government needs to do much more. If someone wants to put down just 5%, than they need to keep 6 months of cash reserves in the bank and report back to the (lender orgovernment) that they still have these reserves for a certain period of time.
There's currently no new regulation being proposed in the FHA lending standards (that I know of).
If home prices decline (say 5-15% further as some are predicting), than those who made FHA backed loans in 2008/9 will just walk away because they made such little downpayment and see no sense or having very little cash reserve to resell their homes if they lose their jobs or need to move.
That was my point in another thread. All this talk about bailing out while the problem is still allowed to go on w/ no regulatory change. The government needs to address the problem itself before it comes up with damage control. This is akin to bailing out the boat before plugging the hole that is leaking. Bailing alone will accomplish nothing.
While I agree that FHA is the new sub-prime with all the problems that come with it, I am, however, getting tired of the whining about taxpayers bailing this out.
For the past 8 years big corporations have been "bailed out" by the government and mortgage fraud and predatory lending has been ignored.
Two wrongs don't make a right.
Quote:
In order to get the economy turned around some MAJOR changes need to take place. And if bailing out homeowner is what it takes to kick-start the economy, I am all for it. Provided safeguards are put in place so this doesn't happen again.
Bailing out homeowners who made terrible decisions can only hurt the economy in the long run. If people get rewarded for bad decision making, they will continue to make bad decisions and all we will do is postpone more of the housing crisis to another time, at which point it will be out of control.
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