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Exhibit #287 on why Americans will continue to hang themselves given enough rope -- people continue to take out loans they cannot afford and continue to ignore the importance of saving for a rainy day:
[b]orrowers are flocking back to the FHA, which has become the only option for those who lack hefty down payments or stellar credit. The agency's historic role in backing mortgages is more crucial now than at any time since its founding.
With the surge in new loans, however, comes a new threat. Many borrowers are defaulting as quickly as they take out the loans. In the past year alone, the number of borrowers who failed to make more than a single payment before defaulting on FHA-backed mortgages has nearly tripled, far outpacing the agency's overall growth in new loans, according to a Washington Post analysis of federal data.
Many industry experts attribute the jump in these instant defaults to factors that include the weak economy, lax scrutiny of prospective borrowers and most notably, foul play among unscrupulous lenders looking to make a quick buck.
If a loan "is going into default immediately, it clearly suggests impropriety and fraudulent activity," said Kenneth Donohue, the inspector general of the Department of Housing and Urban Development, which includes the FHA. ...
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.
so yes -- there was a tripling, but the result is still a low number
But the percentage increase is hugely important -- it demonstrates the rate of change and the direction we're heading in (i.e., down the toilet with more loans being given to people who cannot afford them and default on the first effing payment!)
We won't learn until we're beaten down through a Second Great Depression, I suppose.
But the percentage increase is hugely important -- it demonstrates the rate of change and the direction we're heading in (i.e., down the toilet with more loans being given to people who cannot afford them and default on the first effing payment!)
We won't learn until we're beaten down through a Second Great Depression, I suppose.
JG183 has already said that 20% of people in US are underwater on the mortgage is no big deal since 80% of people are current and then factor in all the people who own their property outright. We are fine.
so yes -- there was a tripling, but the result is still a low number
You're on the wrong track. There's an obvious "good news" slant to that article but you're missing it due to trying to claim the number is low.
OK, I'll read it for you and even put the pieces together:
First from the article:
Quote:
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.
The raw number is meaningless what matters if that the number of instant defaults has tripled in one year. So 3 times as many instant defaults are occurring now as last year. That sounds bad.
but but but...
The article then says:
Quote:
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
That changes things. Though we are still missing a required piece of information: what is the change in the "mortgage market" over that period. It's obviously shrunk, since lending standards have tightened and hence less loans have been written, and some existing loans have been closed out early through foreclosure.
Let's pretend the size of the mortgage market hasn't changed, that means there are 15x as many FHA loans as three years ago. The "3 times" number was for one year, but it also says it's accelerating so lets overestimate a lot and say 3x3 = 9. So the number of instant defaults has increased by 9x while the number of mortgages has increased by 15x. That mean a smaller percentage of loans are instantly defaulting.
As long as the mortgage hasn't halved in size, that number is going to come out ahead. That 9x number should probably be more like 5x which would mean as long as the mortgage market hasn't shrunk to 1/3 the size of 3 years ago (which is a pretty certain assumption) the rate of instant default has fallen in the last 3 years.
Of course, personally, I'm going with "what a crap article, since they can't explain what the numbers mean I don't believe their numbers in the first place"
"In the past year alone, the number of borrowers who failed to make more than a single payment before defaulting on FHA-backed mortgages has nearly tripled, far outpacing the agency's overall growth in new loans, according to a Washington Post analysis of federal data."
So, this tells me that among new loans, the default-before-first-payment group increased more than 3x, while the number of new loans the agency is making is not 3x what it was before (in fact, the increase in new loans is being "far outpac[ed]" by the increase in default-before-first-payment).
By all accounts, this points to an increasing default-before-first-payment rate in the loans FHA is issuing, no?
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