Interesting, with $8000 credit and FHA loan, it was pretty much a no-money-down program by the US government in the last few years. It surprises someone that it is more risky??

[quote=carlsbadworker]Interesting, with $8000 credit and FHA loan, it was pretty much a no-money-down program by the US government in the last few years. It surprises someone that it is more risky??[/quote]

Exactly. This is what many of us were saying years ago — the risk is now borne by the govt instead of private entities. These 3% down loans — especially with the tax credit that could be applied to the down payment — were never going to work out in the long run. Not only that, but the fact that sellers are still allowed to “credit” buyers for closing costs really means that buyers have precious little skin in the game, if any at all.

All the refinance activity, with private loans being refinanced into govt-backed loans, was a way to off-load the risk from the private sector to the public sector, too. Taxpayers are now on the hook for far more than they ever would have had to bear if things were allowed to correct when the market was trying to get back to normal in 2008.

All of the bailouts and govt interventions were done for the benefit of foolish lenders and private financial institutions (yes, including pension funds). It was never about saving Joe Sixpack, the idiot home-debtor who bid up prices with NINJA loans.

But I’m guessing some idiots will still believe that our problems are due to “union thugs.”

When will we ever learn?

[quote=livinincali]Here’s a good blog post that shows the progression of FHA defaults. It’s been steadily rising ever quarter and Q2 2012 should be out soon.

http://www.calculatedriskblog.com/2012/04/lawler-comments-on-fha-single-family.html%5B/quote%5D

I could have predicted this years ago. The FHA loan ceiling is much too high almost everywhere in the US. The FHA 203(b) program was initially put into place to assist first time moderate income buyers in getting a “leg up” into homeownership. It was NEVER intended to enable buyers to purchase luxury housing and/or housing in highly desirable areas for only 3.5% down.

Even with the several increases in up-front and monthly MIP premiums in recent years, this extra MIP will prove to NOT be enough to insure the inevitable tide of defaults (by borrowers who never should have been approved for those mortgages) and subsequent foreclosures, IMO.

The FHA mortgage “ceiling” in SD County should have always been =<$300K. It's not supposed to be a "major player" here and never was. This is a MORE THAN ADEQUATE mortgage for the purpose the program was intended for.

It makes sense to me because FHA limits were increased to help buyers during the crisis. But as prices drop those people who thought they got deals in 2008 and 2009 are walking.