Posted on 08/22/2007 7:34:43 AM PDT by reaganaut1
But many buyers who got subprime loans are beginning to have trouble making their mortgage payments as the attractive initial "teaser" interest rates are reset at much higher levels. While many of those buyers believed they could refinance their loans, that has become much harder as mortgage lenders tighten their standards in the face of defaults and foreclosures. The Center for Responsible Lending estimates as many as 2.2 million loans will reset over the next two years.
FHA says it is constrained from doing more now because of limits on the size of the loans it can back and some requirements that borrowers must meet. While its refinancing business has picked up and the agency expects to refinance about 120,000 loans this year, FHA officials say they could easily double that amount if given greater flexibility.
Among the options being discussed in Congress is eliminating or reducing the required 3% down payment, raising the size of the loans FHA can insure to as much as $417,000 from $362,790, and being able to charge insurance premiums based on a borrower's risk instead of a one-size-fits-all rate.
(Excerpt) Read more at online.wsj.com ...
Isn’t this the same as the huge freddy mac scandal and now want it to expand to the entire industry?
The VA has offered 100% financing to veterans for years.
This article is about loan originators. Freddie and Fannie deal with the secondary mortgage market. One originates the loan (qualifies, verifies, does the paperwork), the other two purchase the note(mortgage) from the lender at a later date.
Better to help the home buyer, who may have been misled or misinformed, rather than the lender who over appraised and over loaned.
In the end, someone is going to get help. I’d prefer it be the homeowners, rather than bailing out the lenders who KNEW BETTER but loaned anyway.
Nothing sounds unreasonable. It is not like they are giving free money to bail out individuals. They are basing premiums on borrower's risk which is the market-based thing to do. Increasing the limit that FHA can insure is necessary for many markets like California, where you can't buy anything for under $400K. Eliminating the 3% down just competes against other loan options. It is not like they are loaning 125% of the value. If the people qualify under tougher standards, it makes sense. Besides, if this can help the housing market and reduce the subprime worries, it will reduce the pressure on the fed to lower the interest rates too much which will be much more inflationary. I like the idea.
This will help some, and it will hurt some. More (much more) paperwork is generally a pain but it would have prevented a large number of the no down, no documentation loans that should have never been done in the first place. Fly by night loan officers will have a much harder time with these.
Why in the hell should responsible borrowers have to pay for the mistakes of irresponsible borrowers and bail out lenders who made stupid loans. Let the market work itself out and don’t punish those of us who are responsible. Irresponsible exuberance always causes these problems. Much like the tech stock bubble and the speculation before the Great Depression. If you bail these folks out, it only encourages them to make more stupid decisions.
This is in no way a bailout in any way shape or form.
While I agree, wholeheartedly, with your stance. I've lived long enough to know that 'something' is going to happen.
I just prefer to assist the home owners, rather than the lenders who KNEW BETTER.
That is true but virtually all the GI benefits have been diluted severely over the years, ironically by the same congress that passed them. No doubt the default rate was very low - in any event contrary to popular lore VA doesn’t loan any money to anyone but guarantees the loan, the borrower must still meet the prevailing credit requirements.
Why did you out “at taxpayer expense” in the title?
When people default on no-downpayment mortgages insured by the government, it will be at taxpayer expense. Who do you think paid for the S&L bailout?
These problems are mostly caused by the Fed's boom and bust credit cycle. And I've never seen speculation yet that is nearly as bad as the government's cure for speculation.
If the Fed lowers rates a little now, it would be a lot better than lowering them a lot more later, which would be inflationary. Besides, the funds rate should always be in line with the market.
And there was no bailout in the S&L crisis. The government paid depositors their insurance, and the bad S&L's were liquidated.
Well you keep that condescending attitude when your 401k goes in the crapper, we have 10% unemployment and milk is 6 bucks a gallon. We let the “market” work itself out in 1930 with Herbert Hoover. How’d that whole depression thing workout? You John Birch Society types are all puffed up with your brilliance thinking like the hardcore lefties that you’re the smartest guy in the room. Same myopic thinking as the “Nuke Iran” morons. Most folks who pontificate on mortgages know dick about them. With sinking property values who knew that ARMS couldn’t be refi’d back in 2004.
For people in the real world with real bills and real expenses like 500 per month health insurance, a 10% down mortgage on a 300k home was all we could afford. Sure could we live in some 100k home in BFE , but some like me had sick parents and had to stay local. Hate to break it to some of you, between sending my kids to a crappy school in the 100k neighborhoods and taking the risk with an ARM, the decision was a no brainer. Think McFly before you speak. I’m not saying the government should bail out lenders but letting the market work itself out as you dumbly pointed out would be a worse disaster. There is no WORKING out if you know about who buys mortgages and the way the whole money wheel cycle works.
Well I mentioned it only because other people may be reading this... Broadly speaking I think rewarding military veterans makes good sense and esp. after world war II but as mentioned there isn’t much advantage to VA loans (well, at least up to a few weeks ago); the nostrom of no-money down ninja loans was applied liberally for everyone. It’s just got to end badly.
I was not speaking out against a rate cut, but it is a good idea to use other methods instead of relying completely on rate cuts. If we can limit the rate cuts by easing the credit squeeze in other ways, the better it is for inflation.
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