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Old 08-11-2009, 06:35 AM
 
12,869 posts, read 13,718,988 times
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The FHA’s standard insurance program today is notoriously lax. It backs low downpayment loans, to buyers who often have below-average to poor credit ratings, and with almost no oversight to protect against fraud. Sound familiar? This is called subprime lending—the same financial roulette that busted Fannie, Freddie and large mortgage houses like Countrywide Financial.

The article goes on to note that as of the end of this year FHA and Ginnie will have issued and hold one trillion dollars of mortgages, that the current default rate is now 7%, and the delinquent rate is running some 13%.

Why?

Because the same crooks, swindlers and thieves that infested the housing market in 2003, 2004, 2005, 2006 and 2007 in "subprime" and "ALT-A" have now moved into the FHA product.

There is only ONE way to guarantee safety and soundness in mortgage lending. ONE!

That is to require twenty percent down payments, limit the back end ratio, or debt-to-income, to no more than 36%, and fully-underwrite EVERY SINGLE FILE, with CRIMINAL penalties ruthlessly enforced for ANY fraudulent misrepresentation BY ANYONE.

PERIOD!

The FHA is now running with leverage equal to that of Bear Stearns and Lehman Brothers. You know, those two "banks" that were underwriting loans without sufficient down payments and on dodgy debt-to-income ratios AND BLEW UP?

We're even doing 125% loan-to-value on FHA NOW!

In some cases, these owners are so overdue in their payments, and housing prices have fallen so dramatically, that the borrowers have a negative 25% equity in the home and they are still eligible for an FHA refinance.

i am copying this verbatim from denninger because i think it is such an important issue. THE SAME THINGS ARE BEING DONE AGAIN THAT GOT US INTO THIS MESS IN THE FIRST PLACE.
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Old 08-11-2009, 06:50 AM
 
706 posts, read 1,207,268 times
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Thks Sandy. Denninger is a pretty prolific writer and follow him often.
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Old 08-11-2009, 07:13 AM
 
22,769 posts, read 27,845,610 times
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I agree with the premise of the article, mainly because I don't own a house. If we went back to 20% down, I am confident the housing market would grind to a halt for a long time. So, there are plenty of people and organizations who want to support home prices, and this is one way they are trying to do that.
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Old 08-11-2009, 09:01 AM
 
Location: Business ethics is an oxymoron.
2,171 posts, read 2,619,853 times
Reputation: 4856
Default Am I A Crook?

The wife and I are both in our mid 30's. We bought our first house a few months ago. Went FHA 3% down. So does that mean that we are the "dodgy" people you so despise?

We would've LIKED to have bought several years ago, but saw the housing bubble for the stupidity that it as and decided to ride it out.

After looking at a number of options, we went FHA simply....because we can.

But I/we have between us:

FICOs in the upper-mid 700's

5 digits saving account

10+ years of documented employment history including reference of good standing from current employer.

4 years of documented apartment rental-at same location-with not a single payment being late.

Only a couple thousand in CC debt, having just two accounts.

The stack of documentation we produced was over 3" thick. The bank, for berevity asked us to stop, that we had produced enough proof to qualify us for FHA.

Oh yeah and most of all: We want a HOUSE to live in. Tell me again what a house ATM is? I have no interest in any of that. I bought a HOME....a nice place to LIVE and eventually grow old.

You going to sit thre and try and tell me I shouldn't have gotten it?

Sorry Charlie.
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Old 08-11-2009, 09:09 AM
 
22,769 posts, read 27,845,610 times
Reputation: 14617
Quote:
Originally Posted by Des-Lab View Post
You going to sit thre and try and tell me I shouldn't have gotten it?
No. That is not what this is about.

You should've had to put 20% down. I should have to do the same, when I go to buy a house, and I'm every bit as creditworthy as you are.

All these people who bought in the past 10 years, they should've had to put 20% down as well. That's my opinion.
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Old 08-11-2009, 09:54 AM
 
Location: Portland, Oregon
7,090 posts, read 11,196,488 times
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Where's the article?
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Old 08-11-2009, 10:16 AM
 
5,165 posts, read 5,570,561 times
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Quote:
Originally Posted by Des-Lab View Post
The wife and I are both in our mid 30's. We bought our first house a few months ago. Went FHA 3% down. So does that mean that we are the "dodgy" people you so despise?

We would've LIKED to have bought several years ago, but saw the housing bubble for the stupidity that it as and decided to ride it out.

After looking at a number of options, we went FHA simply....because we can.

But I/we have between us:

FICOs in the upper-mid 700's

5 digits saving account

10+ years of documented employment history including reference of good standing from current employer.

4 years of documented apartment rental-at same location-with not a single payment being late.

Only a couple thousand in CC debt, having just two accounts.

The stack of documentation we produced was over 3" thick. The bank, for berevity asked us to stop, that we had produced enough proof to qualify us for FHA.

Oh yeah and most of all: We want a HOUSE to live in. Tell me again what a house ATM is? I have no interest in any of that. I bought a HOME....a nice place to LIVE and eventually grow old.

You going to sit thre and try and tell me I shouldn't have gotten it?

Sorry Charlie.
Do not take it personally. Obviously this is not about people in your situation. My wife and I are currently looking for our first home and are going to FHA insured mortgages because we do not want to put down 10-20%.
We have basically the same criteria as yourself.
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Old 08-11-2009, 10:17 AM
 
5,165 posts, read 5,570,561 times
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Quote:
Originally Posted by rubber_factory View Post
No. That is not what this is about.

You should've had to put 20% down. I should have to do the same, when I go to buy a house, and I'm every bit as creditworthy as you are.

All these people who bought in the past 10 years, they should've had to put 20% down as well. That's my opinion.
Why? There is no reason that you have to put 20% down. If you choose to be leveraged that is your decision.
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Old 08-11-2009, 10:28 AM
 
Location: Cleveland, OH
753 posts, read 2,316,646 times
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Yes the OP is about you, he says he wants everyone to have to pay 20% down on their house.

The size of your down payment has nothing to do with being able to make your payments when you lose your job. It makes my monthly payment lower. So when I lose my job and can't pay my mortgage, all my 20% down means is I just lost a lot more than I would have if I had only put 3% down. They are going to foreclose on me regardless.

So because I don't have $25,000 in the bank I should not be able to have my own home? Give me a break. That's just more of the rich get richer and the poor get poorer. I should be able to put $0 down if I have the income to support the monthly payment.
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Old 08-11-2009, 10:31 AM
 
22,769 posts, read 27,845,610 times
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Quote:
Originally Posted by cleanhouse View Post
Why? There is no reason that you have to put 20% down. If you choose to be leveraged that is your decision.
There are a variety of reasons that 20% down is a good standard, but they are somewhat beside the point.

If banks were lending with 3% down, with no federal money involved, and banks held onto those mortgages - then sure, you should be free to borrow at 3%, as long as the bank accepts the risks. But that isn't how it works.

As it is, federal taxpayers are enabling this decision. FHA is supported by the taxpayers. Our secondary mortgage markets are backstopped by Ginnie Mae, Freddie Mac, Fannie Mae, which are supported by taxpayer dollars. This 97% LTV, which you refer to as "your choice", is just another scheme that all Americans pay for.
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