November 25th, 2009
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The homebuyer tax credit was just extended. You know, the $8000 tax credit given to first time buyers to help them get into a home? Well, with the extension came looser guidelines. It raises the maximum income to $225,000 and applies to people who have owned a home for at least 5 years as well as first-time homebuyers.
However you feel about tax credit from a fiscal standpoint or a policy standpoint, the fact is that homebuyers can get into an FHA insured home with no money out of pocket. The FHA offers a 3.5% down program, for a modest home purchase, would be more than covered by the tax credit.
That sounds nice until you look at the fact that homebuyers with no money out of pocket are far more likely to default than are homebuyers with skin in the game. It is common sense and the numbers support it. Should I also mention, again, that the FHA is already buried and there are a lot of people concerned for the agency’s future.
I could also bring up the fraud in the program and the new expanded guidelines are not likely to improve that situation. Between the raging failure called Cash for Clunkers and now this you have to ask yourself, what are these people thinking…
Source: Homebuyer Tax Credits Threaten the FHA (online.wsj.com)
November 20th, 2009
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Toll Brothers CEO, Robert Toll, called FHA a “Train Wreck” at a New York conference for builders. “Yesterday’s subprime is today’s FHA”, Toll said. (SimQual Blog readers already knew this) He cites things like the 0.53 percent net capital loan insurance ratio being the lowest in history. His crystal ball tells him that the FHA will have their hand out for a bailout inside of a couple of months.
Hmmm. Ya think?
I have to say, for a government that told us over and over again that they were so much smarter than the rest of us you sure seem a bit late to the party. Anyone in the industry could see this coming a mile away. I remember the same talk about subprime a few years ago. It was way too much and happened way too fast.
Now there is no subprime market to speak of. FHA was charged with picking up the slack to become the “new” subprime and it would appear that they are falling victim to the same fate as the “old” subprime.
It does leave me wondering… I thought TARP, Stimulus, and Timmy Geithner were supposed to save us and our children from this… Maybe I am just not smart enough to see how much better things are…
Source: FHA-Backed Lending Is a ‘Train Wreck,’ Toll Says
November 14th, 2009
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Federal Housing Administration Commissioner David Stevens says there are no problems with FHA and that concerns about the organization needing a bailout are overblown. Steven’s was speaking at the National Association of Realtors’ annual conference.
The bulk of the concern for the agency largely comes from the diminishing agency reserves. As of September 30, 2009 the reserves ratio has fallen to 0.53%. The ratio required by congress for the agency is 2%.
Stevens credits the reserve requirement as a major factor in keeping the agency from falling victim to the same issues as Fannie Mae and Freddie Mac. I say, while that may have been true then, what about going forward. Now that the reserves are so low what happens 6 months from now?
17% of FHA loans are at least one payment behind or in foreclosure while that number is 13% across all mortgage loans. Given the rising unemployment I am not seeing the turnaround the agency needs to keep it’s hands out of the taxpayers pocketbook. FHA may have tightened up the guidelines a bit recently but there are still a lot of loans out there for a lot of people having a really hard time in this economy.
It doesn’t matter what made up number the president cites in the 10 times a week he puts himself on TV, the jobs situation is a nightmare and getting worse. Housing and mortgages will continue to be a problem until more people are working in real, sustainable jobs and that is the unvarnished truth.
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November 4th, 2009
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The annual FHA Actuarial Report was supposed to come out today but was delayed by the Federal Housing Administration. There has been a lot of talk about whether or not the FHA will need a bailout. It is all speculation until we can actually see the numbers in the report. Hopefully it will be out soon.
The most interesting part is watching the congressional machine work. Congress told the FHA to do more. The increased the size of the loans that FHA can insure. They encouraged the expansion of the “no money down” programs. FHA complied and is now in over their head. What does congress say now – your on your own buddy…
It would seem that congress does not have an “appetite” to bail out the FHA. I am not saying that the FHA is not to blame for their financial troubles but it seems that congress wants everything both ways.
Source: The Curious Capitalist
November 2nd, 2009
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The FHA, Federal Housing Administration, is starting to buckle under according to a story in Associated Content today. I watched the mortgage industry meltdown. Lenders were here one day and gone the next. Who was hit the hardest, the sub-prime borrower. It was the people whose home value dropped like a rock. It was the people who lost their job and had to settle for much lower pay in order to feed their families. The lenders that used to help these folks were disappearing. Who was going to pick up the slack?
The FHA stepped in to pick up the slack. Unfortunately, that was not what the FHA was created to do and today they may not be able to keep their head above water without a hand from the taxpayers.
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Full Story at AssociatedContent.com
