I remember hearing about these FHA loans some time ago, and thinking we are so beset with problems, what’s one more going to do. If past experience is anything to go by, will the removal of the Government guarantee (as is the suggestions) really provide incentives to ensure the underlying loans are good? I’d rather that there were tighter regulations to ensure that.

I remember hearing about these FHA loans some time ago, and thinking we are so beset with problems, what’s one more going to do. If past experience is anything to go by, will the removal of the Government guarantee (as is the suggestions) really provide incentives to ensure the underlying loans are good? I’d rather that there were tighter regulations to ensure that.

” will the removal of the Government guarantee (as is the suggestions) really provide incentives to ensure the underlying loans are good?”

Of course it would. As long as you didn’t replace it with another govt guarantee, like a govt guarantee against bank losses if banks take on the risk.

But this misses the whole point of FNM and FRE and FHA. They are there to funnel money into housing demand, to make home prices higher than they would otherwise be. Since most voters own homes, and most voters really want to see their home prices high, not low, pols direct various institutions to do things that increase house prices. If they pulled the guarantee from FHA loans, pols would replace it with something else. If they didn’t, home prices would really collapse, and voters and banks would besiege Congress.

” will the removal of the Government guarantee (as is the suggestions) really provide incentives to ensure the underlying loans are good?”

Of course it would. As long as you didn’t replace it with another govt guarantee, like a govt guarantee against bank losses if banks take on the risk.

But this misses the whole point of FNM and FRE and FHA. They are there to funnel money into housing demand, to make home prices higher than they would otherwise be. Since most voters own homes, and most voters really want to see their home prices high, not low, pols direct various institutions to do things that increase house prices. If they pulled the guarantee from FHA loans, pols would replace it with something else. If they didn’t, home prices would really collapse, and voters and banks would besiege Congress.

” will the removal of the Government guarantee (as is the suggestions) really provide incentives to ensure the underlying loans are good?”

Of course it would. As long as you didn’t replace it with another govt guarantee, like a govt guarantee against bank losses if banks take on the risk.

But this misses the whole point of FNM and FRE and FHA. They are there to funnel money into housing demand, to make home prices higher than they would otherwise be. Since most voters own homes, and most voters really want to see their home prices high, not low, pols direct various institutions to do things that increase house prices. If they pulled the guarantee from FHA loans, pols would replace it with something else. If they didn’t, home prices would really collapse, and voters and banks would besiege Congress.

That was an excellent article. I would add that all govt-backed loans should explicitly ban any kind of seller credits. These credits seem to be getting pretty outrageous, and it artificially inflates the official selling prices — which are used as comps for the next sale… Same problems as before. The only difference is that the taxpayer is now officially backing these junk loans.

As stated before, selling a house usually costs well over 5-6%. If a buyer only puts 3.5% down, they are underwater from day one.

The **minimum** down payment should be 20%, and credits (both tax credits and seller credits) should be somehow reflected in the official recording of the sale. This is the only way to safeguard the lenders — and the taxpayers who are backing all these mortgages.

That was an excellent article. I would add that all govt-backed loans should explicitly ban any kind of seller credits. These credits seem to be getting pretty outrageous, and it artificially inflates the official selling prices — which are used as comps for the next sale… Same problems as before. The only difference is that the taxpayer is now officially backing these junk loans.

As stated before, selling a house usually costs well over 5-6%. If a buyer only puts 3.5% down, they are underwater from day one.

The **minimum** down payment should be 20%, and credits (both tax credits and seller credits) should be somehow reflected in the official recording of the sale. This is the only way to safeguard the lenders — and the taxpayers who are backing all these mortgages.