Problem Solved: The Return of the $1,000 Down Mortgage

[temeculaguy]

Admittedly I’m using info from 1990/1991 because that is when i bought my first house and the fha ceiling was 41%, the default rate back then was steady in the 5-8% rate and had been stable until 2001 when it broke 10% and kept climbing. DTI’s during the recent boom were virtually non existent.

I’m not saying it’s ideal, just that it can be done. FHA loans were not designed for people at the apex of their careers, it was primarily for first timers. I had a 41% dti, but I was like 22 or 23 years old, every year that number went down as my income increased.

And the answer to the question about what happens if there is extended unemployment, divorce, etc, is that you sell the house. No dti can calculate that, you stop working, you stop owning, that is not new, I’m sure of it. The part about raising a family and saving for retirement, people who make 60k gross don’t get to raise families and buy houses on that, plain and simple. That example is for they typical college grad buying a little condo for under 200k. So in my mind, since fha was using that 41% 20 years ago and had a lower default rate, even through boom and bust cycles, the culprit of todays problems isn’t that 41%.

Would I buy today with a 41% dti, hell no! I’m over 40, my earnings are near their peak in my career, I do have kids to send to college, and pay for cars and insurance, etc., etc., etc. so I’m more conservative, but at this point in my life I’m not who that loan is intended for, when I was, it worked, that’s all I’m saying.

I could be wrong on this but I was trying to research the history of dti’s and found that during the boom years of 2005,2006, they were using 59%, so was conventional, if that is true, that is crazy. But then again on a stated income loan, there is no dti, I believe that is the biggest reason things went to pieces.

[bearishgurl]

In the eighties and maybe up until about ’92, the typical conventional front end ratio was 25 and the back end was 31 or 33, depending on the lender and how long the borrower had left on some payments (perhaps less than a year on a car pymt left).

Like UCGal posted here, the giant thrifts including WAMU (not in CA at that time) and all those institutions insured by the FSLIC kept the loans in their own portfolios 100% of the time and most were fully assumable. In other words, each lender called their own shots (NOT FNMA or FDMC). This worked well, was more private for the borrower and kept the government’s nose out of lending. The only info these “portfolio” lending institutions had to report to the government was their perceived race or nationality of the borrowers upon meeting them as all loan application activities were performed face-to-face (there was no internet). This reporting requirement was in place to show the government that the lender was attempting to eradicate lending discrimination based upon race. However, redlining was still somewhat of a problem (another form of insidious discrimination which was indirectly race-based).

IMO, in spite of laws enacted to the contrary, practically speaking, “redlining practices” among conventional lenders did not fully cure themselves until the bulk of home loans were packaged and sold off on the secondary market and hard-money lending became “mainstream” in the form of “sub-prime” lending. We now know this “experiment” turned out to be to the detriment of the lender, the borrower AND the taxpayer.

I’m not saying I think conventional lenders should still be redlining today to keep themselves afloat. I’m saying I’m still in favor of HFA’s and the FHA because they serve a purpose in this regard. If the HFA’s are managed correctly and do not allow “silent seconds” and other creative timebombs, then I think they work – for certain markets. I think every first-time buyer has to start somewhere, but expensive, highly desirable markets are NOT that “somewhere” if the potential buyer has little or no money to put down.

I believe the current FHA lending limits for CA are excessive.

See: http://www.fha.com/lending_limits_state.cfm?state=CALIFORNIA

I have NO IDEA why this program’s lending limits were raised to these dangerous levels. In my mind, the FHA was never set up to help people purchase luxury properties or properties in highly-desirable coastal areas. It was set up to give a first-time buyer and/or credit-challenged person a leg-up into entry-level homeownership. This agency doesn’t have the personnel to manage thousands of foreclosures sure to plague them at these exorbitant lending limits. I feel a $300K limit is currently more than ample to serve CA. If a buyer whose only option is FHA (due to lack of downpayment) feels they have to buy in a desirable (read “expensive”) community and nothing less, then that buyer should rent until they either (1) save more $$ for a downpayment, or (2) concede their true current “station-in-life” and buy what (and where) they can afford with the FHA program. That’s the way it ALWAYS WAS until these limits were raised through the ceiling, the roof and into the stratosphere.

[end of rant]

[bearishgurl]

In the eighties and maybe up until about ’92, the typical conventional front end ratio was 25 and the back end was 31 or 33, depending on the lender and how long the borrower had left on some payments (perhaps less than a year on a car pymt left).

Like UCGal posted here, the giant thrifts including WAMU (not in CA at that time) and all those institutions insured by the FSLIC kept the loans in their own portfolios 100% of the time and most were fully assumable. In other words, each lender called their own shots (NOT FNMA or FDMC). This worked well, was more private for the borrower and kept the government’s nose out of lending. The only info these “portfolio” lending institutions had to report to the government was their perceived race or nationality of the borrowers upon meeting them as all loan application activities were performed face-to-face (there was no internet). This reporting requirement was in place to show the government that the lender was attempting to eradicate lending discrimination based upon race. However, redlining was still somewhat of a problem (another form of insidious discrimination which was indirectly race-based).

IMO, in spite of laws enacted to the contrary, practically speaking, “redlining practices” among conventional lenders did not fully cure themselves until the bulk of home loans were packaged and sold off on the secondary market and hard-money lending became “mainstream” in the form of “sub-prime” lending. We now know this “experiment” turned out to be to the detriment of the lender, the borrower AND the taxpayer.

I’m not saying I think conventional lenders should still be redlining today to keep themselves afloat. I’m saying I’m still in favor of HFA’s and the FHA because they serve a purpose in this regard. If the HFA’s are managed correctly and do not allow “silent seconds” and other creative timebombs, then I think they work – for certain markets. I think every first-time buyer has to start somewhere, but expensive, highly desirable markets are NOT that “somewhere” if the potential buyer has little or no money to put down.

I believe the current FHA lending limits for CA are excessive.

See: http://www.fha.com/lending_limits_state.cfm?state=CALIFORNIA

I have NO IDEA why this program’s lending limits were raised to these dangerous levels. In my mind, the FHA was never set up to help people purchase luxury properties or properties in highly-desirable coastal areas. It was set up to give a first-time buyer and/or credit-challenged person a leg-up into entry-level homeownership. This agency doesn’t have the personnel to manage thousands of foreclosures sure to plague them at these exorbitant lending limits. I feel a $300K limit is currently more than ample to serve CA. If a buyer whose only option is FHA (due to lack of downpayment) feels they have to buy in a desirable (read “expensive”) community and nothing less, then that buyer should rent until they either (1) save more $$ for a downpayment, or (2) concede their true current “station-in-life” and buy what (and where) they can afford with the FHA program. That’s the way it ALWAYS WAS until these limits were raised through the ceiling, the roof and into the stratosphere.

[end of rant]

[bearishgurl]

In the eighties and maybe up until about ’92, the typical conventional front end ratio was 25 and the back end was 31 or 33, depending on the lender and how long the borrower had left on some payments (perhaps less than a year on a car pymt left).

Like UCGal posted here, the giant thrifts including WAMU (not in CA at that time) and all those institutions insured by the FSLIC kept the loans in their own portfolios 100% of the time and most were fully assumable. In other words, each lender called their own shots (NOT FNMA or FDMC). This worked well, was more private for the borrower and kept the government’s nose out of lending. The only info these “portfolio” lending institutions had to report to the government was their perceived race or nationality of the borrowers upon meeting them as all loan application activities were performed face-to-face (there was no internet). This reporting requirement was in place to show the government that the lender was attempting to eradicate lending discrimination based upon race. However, redlining was still somewhat of a problem (another form of insidious discrimination which was indirectly race-based).

IMO, in spite of laws enacted to the contrary, practically speaking, “redlining practices” among conventional lenders did not fully cure themselves until the bulk of home loans were packaged and sold off on the secondary market and hard-money lending became “mainstream” in the form of “sub-prime” lending. We now know this “experiment” turned out to be to the detriment of the lender, the borrower AND the taxpayer.

I’m not saying I think conventional lenders should still be redlining today to keep themselves afloat. I’m saying I’m still in favor of HFA’s and the FHA because they serve a purpose in this regard. If the HFA’s are managed correctly and do not allow “silent seconds” and other creative timebombs, then I think they work – for certain markets. I think every first-time buyer has to start somewhere, but expensive, highly desirable markets are NOT that “somewhere” if the potential buyer has little or no money to put down.

I believe the current FHA lending limits for CA are excessive.

See: http://www.fha.com/lending_limits_state.cfm?state=CALIFORNIA

I have NO IDEA why this program’s lending limits were raised to these dangerous levels. In my mind, the FHA was never set up to help people purchase luxury properties or properties in highly-desirable coastal areas. It was set up to give a first-time buyer and/or credit-challenged person a leg-up into entry-level homeownership. This agency doesn’t have the personnel to manage thousands of foreclosures sure to plague them at these exorbitant lending limits. I feel a $300K limit is currently more than ample to serve CA. If a buyer whose only option is FHA (due to lack of downpayment) feels they have to buy in a desirable (read “expensive”) community and nothing less, then that buyer should rent until they either (1) save more $$ for a downpayment, or (2) concede their true current “station-in-life” and buy what (and where) they can afford with the FHA program. That’s the way it ALWAYS WAS until these limits were raised through the ceiling, the roof and into the stratosphere.

[end of rant]

[bearishgurl]

In the eighties and maybe up until about ’92, the typical conventional front end ratio was 25 and the back end was 31 or 33, depending on the lender and how long the borrower had left on some payments (perhaps less than a year on a car pymt left).

Like UCGal posted here, the giant thrifts including WAMU (not in CA at that time) and all those institutions insured by the FSLIC kept the loans in their own portfolios 100% of the time and most were fully assumable. In other words, each lender called their own shots (NOT FNMA or FDMC). This worked well, was more private for the borrower and kept the government’s nose out of lending. The only info these “portfolio” lending institutions had to report to the government was their perceived race or nationality of the borrowers upon meeting them as all loan application activities were performed face-to-face (there was no internet). This reporting requirement was in place to show the government that the lender was attempting to eradicate lending discrimination based upon race. However, redlining was still somewhat of a problem (another form of insidious discrimination which was indirectly race-based).

IMO, in spite of laws enacted to the contrary, practically speaking, “redlining practices” among conventional lenders did not fully cure themselves until the bulk of home loans were packaged and sold off on the secondary market and hard-money lending became “mainstream” in the form of “sub-prime” lending. We now know this “experiment” turned out to be to the detriment of the lender, the borrower AND the taxpayer.

I’m not saying I think conventional lenders should still be redlining today to keep themselves afloat. I’m saying I’m still in favor of HFA’s and the FHA because they serve a purpose in this regard. If the HFA’s are managed correctly and do not allow “silent seconds” and other creative timebombs, then I think they work – for certain markets. I think every first-time buyer has to start somewhere, but expensive, highly desirable markets are NOT that “somewhere” if the potential buyer has little or no money to put down.

I believe the current FHA lending limits for CA are excessive.

See: http://www.fha.com/lending_limits_state.cfm?state=CALIFORNIA

I have NO IDEA why this program’s lending limits were raised to these dangerous levels. In my mind, the FHA was never set up to help people purchase luxury properties or properties in highly-desirable coastal areas. It was set up to give a first-time buyer and/or credit-challenged person a leg-up into entry-level homeownership. This agency doesn’t have the personnel to manage thousands of foreclosures sure to plague them at these exorbitant lending limits. I feel a $300K limit is currently more than ample to serve CA. If a buyer whose only option is FHA (due to lack of downpayment) feels they have to buy in a desirable (read “expensive”) community and nothing less, then that buyer should rent until they either (1) save more $$ for a downpayment, or (2) concede their true current “station-in-life” and buy what (and where) they can afford with the FHA program. That’s the way it ALWAYS WAS until these limits were raised through the ceiling, the roof and into the stratosphere.

[end of rant]

[bearishgurl]

In the eighties and maybe up until about ’92, the typical conventional front end ratio was 25 and the back end was 31 or 33, depending on the lender and how long the borrower had left on some payments (perhaps less than a year on a car pymt left).

Like UCGal posted here, the giant thrifts including WAMU (not in CA at that time) and all those institutions insured by the FSLIC kept the loans in their own portfolios 100% of the time and most were fully assumable. In other words, each lender called their own shots (NOT FNMA or FDMC). This worked well, was more private for the borrower and kept the government’s nose out of lending. The only info these “portfolio” lending institutions had to report to the government was their perceived race or nationality of the borrowers upon meeting them as all loan application activities were performed face-to-face (there was no internet). This reporting requirement was in place to show the government that the lender was attempting to eradicate lending discrimination based upon race. However, redlining was still somewhat of a problem (another form of insidious discrimination which was indirectly race-based).

IMO, in spite of laws enacted to the contrary, practically speaking, “redlining practices” among conventional lenders did not fully cure themselves until the bulk of home loans were packaged and sold off on the secondary market and hard-money lending became “mainstream” in the form of “sub-prime” lending. We now know this “experiment” turned out to be to the detriment of the lender, the borrower AND the taxpayer.

I’m not saying I think conventional lenders should still be redlining today to keep themselves afloat. I’m saying I’m still in favor of HFA’s and the FHA because they serve a purpose in this regard. If the HFA’s are managed correctly and do not allow “silent seconds” and other creative timebombs, then I think they work – for certain markets. I think every first-time buyer has to start somewhere, but expensive, highly desirable markets are NOT that “somewhere” if the potential buyer has little or no money to put down.

I believe the current FHA lending limits for CA are excessive.

See: http://www.fha.com/lending_limits_state.cfm?state=CALIFORNIA

I have NO IDEA why this program’s lending limits were raised to these dangerous levels. In my mind, the FHA was never set up to help people purchase luxury properties or properties in highly-desirable coastal areas. It was set up to give a first-time buyer and/or credit-challenged person a leg-up into entry-level homeownership. This agency doesn’t have the personnel to manage thousands of foreclosures sure to plague them at these exorbitant lending limits. I feel a $300K limit is currently more than ample to serve CA. If a buyer whose only option is FHA (due to lack of downpayment) feels they have to buy in a desirable (read “expensive”) community and nothing less, then that buyer should rent until they either (1) save more $$ for a downpayment, or (2) concede their true current “station-in-life” and buy what (and where) they can afford with the FHA program. That’s the way it ALWAYS WAS until these limits were raised through the ceiling, the roof and into the stratosphere.

[end of rant]

[Arraya]

luring people with no-down mortgages into homes that are certain to lose significant value is either delusional or down-right evil. Either way, the results will be the same — a bunch of pissed off people and further thrashing of public finances.

They came up with the FHA from the,” The National Housing Act of 1934″ with the public intent to make housing more affordable and the cynical understanding that “debt encumbered dont go on strike”. Which is understandable given the economic climate at the time. This is also way we have homeownership rates at close to 70% in the US and in the 20%s in some european countries.

Ironically, today, it’s used to keep RE prices elevated mainly because of the extreme systemic dependancy on certain prices levels with the public spin of helping people. Which, in an abstract sense, is true, but not for the reasons advertised.

Every gimmick they use to keep the illusion up, is basically a hail mary pass at trying to avoid the inevitable. Eventually, the game will be over and the biggest bubble in the history of the world will deflate.

[Arraya]

luring people with no-down mortgages into homes that are certain to lose significant value is either delusional or down-right evil. Either way, the results will be the same — a bunch of pissed off people and further thrashing of public finances.

They came up with the FHA from the,” The National Housing Act of 1934″ with the public intent to make housing more affordable and the cynical understanding that “debt encumbered dont go on strike”. Which is understandable given the economic climate at the time. This is also way we have homeownership rates at close to 70% in the US and in the 20%s in some european countries.

Ironically, today, it’s used to keep RE prices elevated mainly because of the extreme systemic dependancy on certain prices levels with the public spin of helping people. Which, in an abstract sense, is true, but not for the reasons advertised.

Every gimmick they use to keep the illusion up, is basically a hail mary pass at trying to avoid the inevitable. Eventually, the game will be over and the biggest bubble in the history of the world will deflate.

[Arraya]

luring people with no-down mortgages into homes that are certain to lose significant value is either delusional or down-right evil. Either way, the results will be the same — a bunch of pissed off people and further thrashing of public finances.

They came up with the FHA from the,” The National Housing Act of 1934″ with the public intent to make housing more affordable and the cynical understanding that “debt encumbered dont go on strike”. Which is understandable given the economic climate at the time. This is also way we have homeownership rates at close to 70% in the US and in the 20%s in some european countries.

Ironically, today, it’s used to keep RE prices elevated mainly because of the extreme systemic dependancy on certain prices levels with the public spin of helping people. Which, in an abstract sense, is true, but not for the reasons advertised.

Every gimmick they use to keep the illusion up, is basically a hail mary pass at trying to avoid the inevitable. Eventually, the game will be over and the biggest bubble in the history of the world will deflate.

[Arraya]

luring people with no-down mortgages into homes that are certain to lose significant value is either delusional or down-right evil. Either way, the results will be the same — a bunch of pissed off people and further thrashing of public finances.

They came up with the FHA from the,” The National Housing Act of 1934″ with the public intent to make housing more affordable and the cynical understanding that “debt encumbered dont go on strike”. Which is understandable given the economic climate at the time. This is also way we have homeownership rates at close to 70% in the US and in the 20%s in some european countries.

Ironically, today, it’s used to keep RE prices elevated mainly because of the extreme systemic dependancy on certain prices levels with the public spin of helping people. Which, in an abstract sense, is true, but not for the reasons advertised.

Every gimmick they use to keep the illusion up, is basically a hail mary pass at trying to avoid the inevitable. Eventually, the game will be over and the biggest bubble in the history of the world will deflate.

[Arraya]

luring people with no-down mortgages into homes that are certain to lose significant value is either delusional or down-right evil. Either way, the results will be the same — a bunch of pissed off people and further thrashing of public finances.

They came up with the FHA from the,” The National Housing Act of 1934″ with the public intent to make housing more affordable and the cynical understanding that “debt encumbered dont go on strike”. Which is understandable given the economic climate at the time. This is also way we have homeownership rates at close to 70% in the US and in the 20%s in some european countries.

Ironically, today, it’s used to keep RE prices elevated mainly because of the extreme systemic dependancy on certain prices levels with the public spin of helping people. Which, in an abstract sense, is true, but not for the reasons advertised.

Every gimmick they use to keep the illusion up, is basically a hail mary pass at trying to avoid the inevitable. Eventually, the game will be over and the biggest bubble in the history of the world will deflate.

[Author]

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