Posted on 06/03/2011 6:35:44 AM PDT by jazminerose
Yesterday’s Case Shiller housing data was scary enough all by itself–housing prices have dropped a whopping 5% just in the past year. What nobody is factoring into the equation yet is one of the government’s favorite weapons of mass destruction–FHA loans.
Taxpayer insured mortgages are all the rage as conventional loans have become harder to come by. Now that all of the cows have escaped and been run over by semi trucks, lenders have sealed the barn door shut and requiring borrowers to prove they can actually repay their loans as well as put up some kind of down payment.
FHA borrowers, however, can get away with shaky credit and 3% down. Too often, that 3% and closing costs are rolled right into the loan. FHA loans are what keeps many mortgage brokers and appraisers in business these days.
If that doesn’t scare you, consider that in my market, I’ve noticed that FHA loans are often closing with significantly higher sales prices than comparable units sold via conventional financing. Something is very wrong with this picture.
As prices continue to drop, these food stamp backed mortgages are going to go very bad.
A distinct possibility, but I will add that traditionally, losses on FHA loans have been low...only in the last few years when FHA was treated as a subprime alternative were they getting hairy.
I think they have somewhat scaled back (i.e., stricter requirements for credit and income) but Obama’s pushing to hand them out like candy again these days.
It didn't work last time...
a: because zero was not in charge.
b: but we will keep doing it until it does.
c: but we can blame it on the Republicans this time.
my sister qualified and shouldn’t of.
the home appraiser put her house as 385k because she begged him. Her house is only worth 315k. She got the 385k and put her old mortgage and her maxed out credit card into a super mortgage that she won’t be able to pay. After that she then bought a new car..
Oh she’s a democrat too!
The latest news I heard on this subject was that the stricter requirements had been put back on the shelf. Can’t forget to pay back the electorate for their vote, you know.
BTW, imagine what real estate prices will do, as we Baby Boomers die off more quickly.
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