From the NYT:
"Housing officials say the [Federal Housing Administration] will face a deficit for the first time in its 74-year history, starting in the fiscal year that begins in October. And they blame a rapidly growing and increasingly troubled sector of the F.H.A.’s mortgage portfolio, known as the seller-financed down payment loan program, which has suffered from high delinquency and foreclosure rates in recent years.
Under the program, a home seller arranges to cover the buyer’s down payment — using financial help from a nonprofit company — but typically adds that sum or more to the total cost of the house. The arrangement has been particularly attractive to financially struggling buyers and to owners in depressed housing markets, according to Congressional officials.
In 2000, such mortgages made up less than 2 percent of F.H.A.-insured loans, officials say. By 2007, statistics show, they accounted for 35 percent of F.H.A. loans.
Housing officials say these mortgages have foreclosure rates two to three times those of others, leaving the agency reeling from the losses.
. . .
'These types of loans have pushed F.H.A. to the brink of insolvency,' Alphonso R. Jackson, the housing secretary, told senators recently. 'They are costing hard-working Americans their homes.' Mr. Jackson announced last week that he would resign his post as of April 18".
12 comments:
No wonder many banks have increased their minimum criteria for a FHA loan above the FHA criteria. If the insurance value is in doubt... No wonder bond buyers are demanding more security before purchasing CMBS.
This credit crunch is getting interesting. Like many others, I've always assumed FHA would be there. If they have to be bailed out, that would be a bit costly.
Got Popcorn?
Neil
We just sold our house in southern Va with this program. Buyers put $100 deposit, and that's basically all they shelled out for the 5 bedroom, 3 bath, 3400 sq ft home.
This is shocking, shocking I tell you!
Who could possibly have known that buyers without money might not be ready to pay for houses?
Obviously FHA needs more funding!
I think that's pretty despicable, not that I wouldn't take advantage as a seller . . . but come on . . . if there is a need for social welfare to help people buy something (which as a follower of Austrian economics, I HIGHLY dispute) . . . there is absolutely no way someone buying a 3400 sq ft. home should qualify. If you need FHA to help you buy that . . .you shouldn't be buying that.
Is there anyone in this world that doesn't expect a handout from the government anymore?!!!
Geez, 100$ to buy a 3400 square foot house! And they wonder why people walk away after a couple years.
I mean seriously, why not break the whole house down, sell the appliances, floors, carpets, counter tops, pipes, trash the place and leave?
If they had saved up and shelled out 75k of their hard earned cash, I bet they would appreciate the house a lot more.
Geez, 100$ to buy a 3400 square foot house! And they wonder why people walk away after a couple years.
Hence why many believe the incentives will only make the problem worse in the future. Anyone who studies this market realizes it will be a prolonged downturn.
Got Popcorn?
Neil
"Hence why many believe the incentives will only make the problem worse in the future."
Not only are additional incentives a bad idea, there is no way they are going to reach the level of what was offered during the bubble. During the run-up zero money down purchasing was available to anyone who wanted it.
Short of paying people to buy houses what can you do to lower the bar further?
I wish for once the politicians would demonstrate an understanding of economics. The single best thing they could do is mandate that Fannie and Freddie buy only loans with at least 15-20% down.(dependent on the price of the house, the borrower, etc)
That would result in a massive drop in home prices, but it would also all but rule out another bubble while encouraging saving. Americans in general are just too willing to take on too much debt.
If they want to do that it is of course their right... but there is no reason the government needs to facilitate that through Fannie and Freddie.
Also, the MRIS numbers are out.
That would result in a massive drop in home prices, but it would also all but rule out another bubble while encouraging saving. Americans in general are just too willing to take on too much debt.
Too willing? They almost being FORCED! The U.S. government does EVERYTHING IT CAN THINK OF to DISCOURAGE savings and ENCOURAGE debt.
First, they tax interest income at the highest possible rate (the income tax rate.)
Then, they give a deduction for mortgage debt at the highest possible rate.
Then, they purposely inflate the dollar so anything you DO save is worth less and less, and so THEY can spend, spend, spend to keep their sorryass jobs running things.
Next, they tax the poorest workers for social security money (the cap is around 95K, so the rich stop paying in early in the year), and give the money to the RICHEST people (because payouts are salary history based and not needs based.)
Next, they make sure yields on all kinds of savings vehicles are as low as they can possibly make them (helping also to debase the dollar.)
Finally, they bail out the riskiest troubled spenders and debtors.
To add to the previous, it's probably okay anyway that savings is discouraged, and that there are almost NO good investments available now with the stock market, housing, the dollar and yields down, because after all, with the economy slowing and no one buying houses or cars and the financial industry imploding and the internet bubble gone and lower tax revenues for state and local governments to spend on staff, there won't be any jobs left to earn income to invest!
So, its self-correcting and is all coming together in the end--no jobs and nothing to put the money in anyway.
Of course, there's a couple of problems--
1. We still have to pay for food, which is expensive because it is now heavily imported and energy intensive.
2. We still have to pay for the Republican 100-year war, AND in order to get their party reelected, the NEW one they will start this year with Iran or some other country that threatens to unpeg their currency to the dollar.
Fun times! Let's all go and buy houses!
well said scott. especially the SS part, hadnt thought of it that way.. that the wealthy are still getting their high pay ss when it is no longer taxed after 95k
and even with all that i'd still rather have savings than debt! kinda shocking
screw the taxman! we're going from dink to sik, and even with the income drop, i'll be happy to be giving MUCH less to the taxman
This is shocking since FHA just doubled their buying power from low $300s to $729,000.
scott, you have a good point there. One of the reasons I am buying now is that I am fed up in paying extra every year simply because I don't own a home. The other reason is the pride in ownership.
Lets face it though. It is in the best interest of profits to encourage spending over saving. Sad but true. Profits drive the economy....
Post a Comment