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SDEngineer
Participant[quote=Arraya]They also fail to mention that the FHA’s mortgage insurance is more costly (and can handle a higher default rate WITHOUT passing that on to taxpayers) and that the FHA historically “cures” defaulted loans at a higher rate than the banks.
http://www.bostonherald.com/business/general/view/2009_05_11_Home_loan_quagmire:_Rep_warns_another_U_S__agency_may_need_big_bailout/srvc=home&position=also
Rep warns another U.S. agency may need big bailout[/quote]
None of which addresses the fact that the loans that are going heavily bad on the FHA side are the 0 down (through seller funded DPA) loans to folks with sub 620 scores – which simply aren’t available any longer. As far as I can tell, this is a problem that has already been solved by both eliminating the seller funded DPA and requiring a minimum standard of creditworthiness.
Given the changes, I expect the FHA to return to historical norms for it’s performance (especially considering that the requirements in place now are tougher requirements than have been historically needed on it).
SDEngineer
Participant[quote=Arraya]They also fail to mention that the FHA’s mortgage insurance is more costly (and can handle a higher default rate WITHOUT passing that on to taxpayers) and that the FHA historically “cures” defaulted loans at a higher rate than the banks.
http://www.bostonherald.com/business/general/view/2009_05_11_Home_loan_quagmire:_Rep_warns_another_U_S__agency_may_need_big_bailout/srvc=home&position=also
Rep warns another U.S. agency may need big bailout[/quote]
None of which addresses the fact that the loans that are going heavily bad on the FHA side are the 0 down (through seller funded DPA) loans to folks with sub 620 scores – which simply aren’t available any longer. As far as I can tell, this is a problem that has already been solved by both eliminating the seller funded DPA and requiring a minimum standard of creditworthiness.
Given the changes, I expect the FHA to return to historical norms for it’s performance (especially considering that the requirements in place now are tougher requirements than have been historically needed on it).
SDEngineer
Participant[quote=Arraya]They also fail to mention that the FHA’s mortgage insurance is more costly (and can handle a higher default rate WITHOUT passing that on to taxpayers) and that the FHA historically “cures” defaulted loans at a higher rate than the banks.
http://www.bostonherald.com/business/general/view/2009_05_11_Home_loan_quagmire:_Rep_warns_another_U_S__agency_may_need_big_bailout/srvc=home&position=also
Rep warns another U.S. agency may need big bailout[/quote]
None of which addresses the fact that the loans that are going heavily bad on the FHA side are the 0 down (through seller funded DPA) loans to folks with sub 620 scores – which simply aren’t available any longer. As far as I can tell, this is a problem that has already been solved by both eliminating the seller funded DPA and requiring a minimum standard of creditworthiness.
Given the changes, I expect the FHA to return to historical norms for it’s performance (especially considering that the requirements in place now are tougher requirements than have been historically needed on it).
SDEngineer
Participant[quote=Arraya]They also fail to mention that the FHA’s mortgage insurance is more costly (and can handle a higher default rate WITHOUT passing that on to taxpayers) and that the FHA historically “cures” defaulted loans at a higher rate than the banks.
http://www.bostonherald.com/business/general/view/2009_05_11_Home_loan_quagmire:_Rep_warns_another_U_S__agency_may_need_big_bailout/srvc=home&position=also
Rep warns another U.S. agency may need big bailout[/quote]
None of which addresses the fact that the loans that are going heavily bad on the FHA side are the 0 down (through seller funded DPA) loans to folks with sub 620 scores – which simply aren’t available any longer. As far as I can tell, this is a problem that has already been solved by both eliminating the seller funded DPA and requiring a minimum standard of creditworthiness.
Given the changes, I expect the FHA to return to historical norms for it’s performance (especially considering that the requirements in place now are tougher requirements than have been historically needed on it).
SDEngineer
Participant[quote=Arraya]They also fail to mention that the FHA’s mortgage insurance is more costly (and can handle a higher default rate WITHOUT passing that on to taxpayers) and that the FHA historically “cures” defaulted loans at a higher rate than the banks.
http://www.bostonherald.com/business/general/view/2009_05_11_Home_loan_quagmire:_Rep_warns_another_U_S__agency_may_need_big_bailout/srvc=home&position=also
Rep warns another U.S. agency may need big bailout[/quote]
None of which addresses the fact that the loans that are going heavily bad on the FHA side are the 0 down (through seller funded DPA) loans to folks with sub 620 scores – which simply aren’t available any longer. As far as I can tell, this is a problem that has already been solved by both eliminating the seller funded DPA and requiring a minimum standard of creditworthiness.
Given the changes, I expect the FHA to return to historical norms for it’s performance (especially considering that the requirements in place now are tougher requirements than have been historically needed on it).
SDEngineer
Participant[quote=peterb]Every “investment” is speculation. Unless you can predict the future, it’s a gamble.
The one exception being Goldman Sachs, of course. Mainly because they can write the future as needed.[/quote]This may be objectively true, but it’s specious.
The fact is that if a real estate investment cash flows as a rental, it’s FAR less of a gamble than if the investment fails to cash flow and the basis of the investment is solely to capture appreciation.
SDEngineer
Participant[quote=peterb]Every “investment” is speculation. Unless you can predict the future, it’s a gamble.
The one exception being Goldman Sachs, of course. Mainly because they can write the future as needed.[/quote]This may be objectively true, but it’s specious.
The fact is that if a real estate investment cash flows as a rental, it’s FAR less of a gamble than if the investment fails to cash flow and the basis of the investment is solely to capture appreciation.
SDEngineer
Participant[quote=peterb]Every “investment” is speculation. Unless you can predict the future, it’s a gamble.
The one exception being Goldman Sachs, of course. Mainly because they can write the future as needed.[/quote]This may be objectively true, but it’s specious.
The fact is that if a real estate investment cash flows as a rental, it’s FAR less of a gamble than if the investment fails to cash flow and the basis of the investment is solely to capture appreciation.
SDEngineer
Participant[quote=peterb]Every “investment” is speculation. Unless you can predict the future, it’s a gamble.
The one exception being Goldman Sachs, of course. Mainly because they can write the future as needed.[/quote]This may be objectively true, but it’s specious.
The fact is that if a real estate investment cash flows as a rental, it’s FAR less of a gamble than if the investment fails to cash flow and the basis of the investment is solely to capture appreciation.
SDEngineer
Participant[quote=peterb]Every “investment” is speculation. Unless you can predict the future, it’s a gamble.
The one exception being Goldman Sachs, of course. Mainly because they can write the future as needed.[/quote]This may be objectively true, but it’s specious.
The fact is that if a real estate investment cash flows as a rental, it’s FAR less of a gamble than if the investment fails to cash flow and the basis of the investment is solely to capture appreciation.
SDEngineer
Participant[quote=Arraya]Anytime you have a low down payment program somebody will figure out how to game the rest of the system. Once, someone figures it out, it spreads like wildfire.
http://online.wsj.com/article/SB124139474675481713.html
Everyone knows how loose mortgage underwriting led to the go-go days of multitrillion-dollar subprime lending. What isn’t well known is that a parallel subprime market has emerged over the past year — all made possible by the Federal Housing Administration. This also won’t end happily for taxpayers or the housing market.Last year banks issued $180 billion of new mortgages insured by the FHA, which means they carry a 100% taxpayer guarantee. Many of these have the same characteristics as subprime loans: low downpayment requirements, high-risk borrowers, and in many cases shady mortgage originators. FHA now insures nearly one of every three new mortgages, up from 2% in 2006.
The financial results so far are not as dire as those created by the subprime frenzy of 2004-2007, but taxpayer losses are mounting on its $562 billion portfolio. According to Mortgage Bankers Association data, more than one in eight FHA loans is now delinquent — nearly triple the rate on conventional, nonsubprime loan portfolios. Another 7.5% of recent FHA loans are in “serious delinquency,” which means at least three months overdue.[/quote]
This is a little misleading.
Historically, the FHA has accounted for about 20% of mortgage originations, going up during bad economic times. 2% was a historically low mark for it. It’s not unprecedented for the FHA to insure 1 out of every 3 mortgages.
There was also some problems in 2007 and early 2008 in terms of regulation – primarily allowing seller funded down payments. That loophole was finally closed, and loans originated since then have performed significantly better. The loans using seller funded down payments were some of their worst performing loans.
They also fail to mention that the FHA’s mortgage insurance is more costly (and can handle a higher default rate WITHOUT passing that on to taxpayers) and that the FHA historically “cures” defaulted loans at a higher rate than the banks.
SDEngineer
Participant[quote=Arraya]Anytime you have a low down payment program somebody will figure out how to game the rest of the system. Once, someone figures it out, it spreads like wildfire.
http://online.wsj.com/article/SB124139474675481713.html
Everyone knows how loose mortgage underwriting led to the go-go days of multitrillion-dollar subprime lending. What isn’t well known is that a parallel subprime market has emerged over the past year — all made possible by the Federal Housing Administration. This also won’t end happily for taxpayers or the housing market.Last year banks issued $180 billion of new mortgages insured by the FHA, which means they carry a 100% taxpayer guarantee. Many of these have the same characteristics as subprime loans: low downpayment requirements, high-risk borrowers, and in many cases shady mortgage originators. FHA now insures nearly one of every three new mortgages, up from 2% in 2006.
The financial results so far are not as dire as those created by the subprime frenzy of 2004-2007, but taxpayer losses are mounting on its $562 billion portfolio. According to Mortgage Bankers Association data, more than one in eight FHA loans is now delinquent — nearly triple the rate on conventional, nonsubprime loan portfolios. Another 7.5% of recent FHA loans are in “serious delinquency,” which means at least three months overdue.[/quote]
This is a little misleading.
Historically, the FHA has accounted for about 20% of mortgage originations, going up during bad economic times. 2% was a historically low mark for it. It’s not unprecedented for the FHA to insure 1 out of every 3 mortgages.
There was also some problems in 2007 and early 2008 in terms of regulation – primarily allowing seller funded down payments. That loophole was finally closed, and loans originated since then have performed significantly better. The loans using seller funded down payments were some of their worst performing loans.
They also fail to mention that the FHA’s mortgage insurance is more costly (and can handle a higher default rate WITHOUT passing that on to taxpayers) and that the FHA historically “cures” defaulted loans at a higher rate than the banks.
SDEngineer
Participant[quote=Arraya]Anytime you have a low down payment program somebody will figure out how to game the rest of the system. Once, someone figures it out, it spreads like wildfire.
http://online.wsj.com/article/SB124139474675481713.html
Everyone knows how loose mortgage underwriting led to the go-go days of multitrillion-dollar subprime lending. What isn’t well known is that a parallel subprime market has emerged over the past year — all made possible by the Federal Housing Administration. This also won’t end happily for taxpayers or the housing market.Last year banks issued $180 billion of new mortgages insured by the FHA, which means they carry a 100% taxpayer guarantee. Many of these have the same characteristics as subprime loans: low downpayment requirements, high-risk borrowers, and in many cases shady mortgage originators. FHA now insures nearly one of every three new mortgages, up from 2% in 2006.
The financial results so far are not as dire as those created by the subprime frenzy of 2004-2007, but taxpayer losses are mounting on its $562 billion portfolio. According to Mortgage Bankers Association data, more than one in eight FHA loans is now delinquent — nearly triple the rate on conventional, nonsubprime loan portfolios. Another 7.5% of recent FHA loans are in “serious delinquency,” which means at least three months overdue.[/quote]
This is a little misleading.
Historically, the FHA has accounted for about 20% of mortgage originations, going up during bad economic times. 2% was a historically low mark for it. It’s not unprecedented for the FHA to insure 1 out of every 3 mortgages.
There was also some problems in 2007 and early 2008 in terms of regulation – primarily allowing seller funded down payments. That loophole was finally closed, and loans originated since then have performed significantly better. The loans using seller funded down payments were some of their worst performing loans.
They also fail to mention that the FHA’s mortgage insurance is more costly (and can handle a higher default rate WITHOUT passing that on to taxpayers) and that the FHA historically “cures” defaulted loans at a higher rate than the banks.
SDEngineer
Participant[quote=Arraya]Anytime you have a low down payment program somebody will figure out how to game the rest of the system. Once, someone figures it out, it spreads like wildfire.
http://online.wsj.com/article/SB124139474675481713.html
Everyone knows how loose mortgage underwriting led to the go-go days of multitrillion-dollar subprime lending. What isn’t well known is that a parallel subprime market has emerged over the past year — all made possible by the Federal Housing Administration. This also won’t end happily for taxpayers or the housing market.Last year banks issued $180 billion of new mortgages insured by the FHA, which means they carry a 100% taxpayer guarantee. Many of these have the same characteristics as subprime loans: low downpayment requirements, high-risk borrowers, and in many cases shady mortgage originators. FHA now insures nearly one of every three new mortgages, up from 2% in 2006.
The financial results so far are not as dire as those created by the subprime frenzy of 2004-2007, but taxpayer losses are mounting on its $562 billion portfolio. According to Mortgage Bankers Association data, more than one in eight FHA loans is now delinquent — nearly triple the rate on conventional, nonsubprime loan portfolios. Another 7.5% of recent FHA loans are in “serious delinquency,” which means at least three months overdue.[/quote]
This is a little misleading.
Historically, the FHA has accounted for about 20% of mortgage originations, going up during bad economic times. 2% was a historically low mark for it. It’s not unprecedented for the FHA to insure 1 out of every 3 mortgages.
There was also some problems in 2007 and early 2008 in terms of regulation – primarily allowing seller funded down payments. That loophole was finally closed, and loans originated since then have performed significantly better. The loans using seller funded down payments were some of their worst performing loans.
They also fail to mention that the FHA’s mortgage insurance is more costly (and can handle a higher default rate WITHOUT passing that on to taxpayers) and that the FHA historically “cures” defaulted loans at a higher rate than the banks.
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