More mortgage bad news.

[Winnie]

FHA and Ginnie Mae: The Next Fannie and Freddie - WSJ.com

Herein lies the problem. 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.

Is anyone on Capitol Hill or the White House paying attention? Evidently not, because on both sides of Pennsylvania Avenue policy makers are busy giving the FHA even more business while easing its already loosy-goosy underwriting standards.

Why would our policy makers do this? Maybe there is another side to this story.

From where I sit it looks like a terrible idea to promote taxpayer guaranteed subprime lending.

 

[CK1]

FHA and Ginnie Mae: The Next Fannie and Freddie - WSJ.com





Why would our policy makers do this? Maybe there is another side to this story.

From where I sit it looks like a terrible idea to promote taxpayer guaranteed subprime lending.

Here's why they are doing this- its called "wealth redistribution" and that is what this administration is all about. Obama told Joe the plumber this is what he intends on doing and he is.

 

[Geo]

Here's why they are doing this- its called "wealth redistribution" and that is what this administration is all about. Obama told Joe the plumber this is what he intends on doing and he is.

Yes. Wealth Redistribution. That's what this is.
Obama is a socialist. Obama is an elitist. Let's talk about Reverend Wright.

What's it like to be stuck in October 2008???

 

[Bob]

with most lenders requiring a 720 fico, the average borrower has no where to turn. 720 requirements would shut out one half to three quarters of the potential home buyers here in orlando. fha is a great alternative, especially for first time buyers. buyes with credit scores in the mid/upper 600s are not subprime fodder

 

[Mango]

with most lenders requiring a 720 fico, the average borrower has no where to turn. 720 requirements would shut out one half to three quarters of the potential home buyers here in orlando. fha is a great alternative, especially for first time buyers. buyes with credit scores in the mid/upper 600s are not subprime fodder

No, mid -to high 600's are not subprime fodder, but my issue is the down payment amount. 3% is squat and with a tax write off incentive, FHA is setting it self up once again. What is so wrong with 5-10% down, even more? The less money put down, the higher the insurance rate; therefore more defaults and with the property prices so much lower, there is no reason to insure loans to $729k as conforming in high cost areas. Ginnie Mae, do not even get me started with them and those loans that are considered in Farm rural; Sowal being one of them. :roll:

 

[30ashopper]

with most lenders requiring a 720 fico, the average borrower has no where to turn. 720 requirements would shut out one half to three quarters of the potential home buyers here in orlando. fha is a great alternative, especially for first time buyers. buyes with credit scores in the mid/upper 600s are not subprime fodder

..

Herein lies the problem. 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.

On June 18, HUD’s Inspector General issued a scathing report on the FHA’s lax insurance practices. It found that the FHA’s default rate has grown to 7%, which is about double the level considered safe and sound for lenders, and that 13% of these loans are delinquent by more than 30 days. The FHA’s reserve fund was found to have fallen in half, to 3% from 6.4% in 2007—meaning it now has a 33 to 1 leverage ratio, which is into Bear Stearns territory. The IG says the FHA may need a “Congressional appropriation intervention to make up the shortfall.”

What you derscribe and what the article describes are two completely different lending standards. In the end if it's as bad as the WSJ states, we'll all be paying for the mortgages when they default.

 

[AliKat]

The hard part with first time homeowners is to come up with 10% or more for first time without help of mommy or daddy. Especially when you have two children to raise and there is no affordable childcare options in the area that don't have a waiting list a mile long. So you are stuck as a single income family basically by default.

I am not saying that no down payment options is a great idea just saying that I don't think high down payment options are an option for most first time homebuyers. That is unless you could buy a house for no money down, put in granite countertops and jack the price up $100,000 less than 6 months later. Problem is those days are gone.

 

[Winnie]

I've always believed that saving up for the 10% or more down is a good indicator of how prepared a person is for home ownership. You can rent with a paycheck to paycheck budget. Home ownership involves a greater level of responsibilty and reward.

I once heard Gretchen Wilson say that it made her mad to hear people denigrate people for living in mobile homes. She said she's know many good people who dreamed of having their own piece of ground and mobile home to put on it. Nothing wrong with that IMO.

 

[Bob]

No, mid -to high 600's are not subprime fodder, but my issue is the down payment amount. 3% is squat and with a tax write off incentive, FHA is setting it self up once again. What is so wrong with 5-10% down, even more? The less money put down, the higher the insurance rate; therefore more defaults and with the property prices so much lower, there is no reason to insure loans to $729k as conforming in high cost areas. Ginnie Mae, do not even get me started with them and those loans that are considered in Farm rural; Sowal being one of them. :roll:

i would say, given market valuations now, 3 percent is ok provided scrupulous underwriting and conservative appraisals. take away fha, and you'll see a leg down in residential real estate

 

[scooterbug44]

Someone who can't manage to save 10% for the down payment doesn't deserve to own a home IMO.

Owning a house isn't a right - it's something you earn with good financial planning, so if you can't afford the downpayment, maybe you <gasp> can't afford the house!