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A recent report had the average FHA credit score in the high 600's/low 700's. If you read the report closely, you'll see they are robbing Peter to pay for Paul. It's not that the program is in trouble, more like they need the funds for their other housing policies like Section 8 and multi-family.
The FHA loans have been very profitable, with minimal losses in the past 3+ years. They want out of the single family loan business, right at the same time Congress wants to retire Fannie and Freddie.
What's wrong with this picture?
Where does it say that the FHA loans were very profitable with minimal losses or that the troubled programs for FHA are tied to Section 8 or multi family? The FHA loans post bubble were risky, and they lost a lot of money, that's the reasons the reserve ratios have dwindled so much.
Where does it say that the FHA loans were very profitable with minimal losses or that the troubled programs for FHA are tied to Section 8 or multi family? The FHA loans post bubble were risky, and they lost a lot of money, that's the reasons the reserve ratios have dwindled so much.
I know. So let the ponzie scheme commence . Lets now hit the people who pay their PMI to make up for the pin heads who defaulted.
It wont work. All this will cause is people fleeing FHA as quick as possible to fannie freddie and portfolio to avoid the PMI. It will just create another 80 /20 market
The first part just simply isn't true, if they weren't risky in the past why would they be experiencing such heavy losses from loans originated post bubble? Why are the revising loan standards continuously and raising insurance premiums if the prior loans weren't risky?
They have made changes to the FHA requirements, one being the MIP being paid for the life of the loan, along with higher premiums for new loans, expanded short sales, etc.
You're also right that 1600 lenders have lost the ability to originate FHA mortgages, however nowhere in the report does it cite lender fraud as a main cause of FHA losses.
Where is this in the report? The lenders that lost the ability to make the loans is certainly in the report buried at the end, but the link between loans not originated to FHA standards being the largest contributor to FHA losses is nowhere in the report. Seller funded down payment assistance was cited as the biggest cause of losses, with early payment defaults cited as the second item, but neither were tied to lender fraud.
You're linking everything to lender fraud and saying that if anyone read the report they would realize that, but I've read the report and the links you infer from the report just aren't there.
First payment defaults are either lender negligence or lender fraud. That's *why* first-payment defaults are tracked. That's why these 1,600 lenders got the boot. They were either complicit or negligent.
Characterizing these loans as "risky" is silly. They're owner-occupant loans, with full docs required. If they're underwritten to FHA standards, they arent risky at all. The borrower would likely pay more in rent than they are in payments, a default means the borrower is in dire straits.
As for your assertion that loans written from 2009-current were somehow "riskier" than in years past, it's the *economy*, not the borrower that is the problem, and this year's report is based on old information.
We've had a 25% increase in values in 2012 in Phoenix. Loans originated here from 2009-2012 are in fine shape, those buyers bought at the bottom, and if they default, the collateral is worth more than the loan. I'm quite certain there are other areas of the country that have improved greatly as well.
First payment defaults are either lender negligence or lender fraud. That's *why* first-payment defaults are tracked. That's why these 1,600 lenders got the boot. They were either complicit or negligent.
Characterizing these loans as "risky" is silly. They're owner-occupant loans, with full docs required. If they're underwritten to FHA standards, they arent risky at all. The borrower would likely pay more in rent than they are in payments, a default means the borrower is in dire straits.
As for your assertion that loans written from 2009-current were somehow "riskier" than in years past, it's the *economy*, not the borrower that is the problem, and this year's report is based on old information.
We've had a 25% increase in values in 2012 in Phoenix. Loans originated here from 2009-2012 are in fine shape, those buyers bought at the bottom, and if they default, the collateral is worth more than the loan. I'm quite certain there are other areas of the country that have improved greatly as well.
This is a good post . I enjoyed it.
I dont understand why it has anything to do with keeping the PMI permanently . To me its a cash grab from the people who pay their mortgage and I disagree with it.
Where does it say that the FHA loans were very profitable with minimal losses or that the troubled programs for FHA are tied to Section 8 or multi family? The FHA loans post bubble were risky, and they lost a lot of money, that's the reasons the reserve ratios have dwindled so much.
In mortgage defaults during the mortgage crisis, FHA were the 2nd least likely to default, VA being the first least likely. This is not opinion, but fact. It won't take much to dig up stats supporting this....the majority of the loans that went bad were low doc, no doc or subprime conventional loans. The only loans that never deviated from underwriting guidelines were VA and FHA loans which were almost non-existent in originations during the bubble.
What I am referring to is what is well known within mortgage circles and those that are politically active in the real estate world. Perhaps I misspoke it was being put away for multifamily, more like low income housing or some other slush fund. Contact anyone on your local government committee with the Board of Realtors or Mortgage Bankers Association - (personally, I suspect this will be the next scandal, public funds being diverted, oh, surprise). But here's a taste of what I speak:
I imagine, with more than a cup of coffee and 10 minutes, I could find much more, but industry-wide, everyone is saying 1 + 1 doesn't equal 34 and they've been saying it for some time.
Last edited by SmartMoney; 12-29-2012 at 09:52 AM..
In mortgage defaults during the mortgage crisis, FHA were the 2nd least likely to default, VA being the first least likely? This is not opinion, but fact. It won't take much to dig up stats supporting this....the majority of the loans that went bad were low doc, no doc or subprime conventional loans. The only loans that never deviated from underwriting guidelines were VA and FHA loans which were almost non-existent in originations during the bubble.
What I am referring to is what is well known within mortgage circles and those that are politically active in the real estate world. Perhaps I misspoke it was being put away for multifamily, more like low income housing or some other slush fund. Contact anyone on your local government committee with the Board of Realtors or Mortgage Bankers Association - (personally, I suspect this will be the next scandal, public funds being diverted, oh, surprise). But here's a taste of what I speak:
I imagine, with more than a cup of coffee and 10 minutes, I could find much more, but industry-wide, everyone is saying 1 + 1 doesn't equal 34 and they've been saying it for some time.
In mortgage defaults during the mortgage crisis, FHA were the 2nd least likely to default, VA being the first least likely. This is not opinion, but fact. It won't take much to dig up stats supporting this....the majority of the loans that went bad were low doc, no doc or subprime conventional loans. The only loans that never deviated from underwriting guidelines were VA and FHA loans which were almost non-existent in originations during the bubble.
What I am referring to is what is well known within mortgage circles and those that are politically active in the real estate world. Perhaps I misspoke it was being put away for multifamily, more like low income housing or some other slush fund. Contact anyone on your local government committee with the Board of Realtors or Mortgage Bankers Association - (personally, I suspect this will be the next scandal, public funds being diverted, oh, surprise). But here's a taste of what I speak:
I imagine, with more than a cup of coffee and 10 minutes, I could find much more, but industry-wide, everyone is saying 1 + 1 doesn't equal 34 and they've been saying it for some time.
We are talking about two different things though. You are referring to loans made during the bubble, I am talking about loans post bubble when FHA loans filled in for the fallout of subprime loans.
On the second point with the diverted funds, thank you for the links, that is something I will read more into.
I know. So let the ponzie scheme commence . Lets now hit the people who pay their PMI to make up for the pin heads who defaulted.
It wont work. All this will cause is people fleeing FHA as quick as possible to fannie freddie and portfolio to avoid the PMI. It will just create another 80 /20 market
I actually read an article on this recently. Good call. They were also complaining about FHA rates going up .
I wonder if there will now be a rise in subordinate financing to avoid PMI.
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