Skip to comments.Obama Slashes Mortgage Insurance Premiums For Subprime Borrowers With Just 10 Days Left In Office
Posted on 01/11/2017 3:17:33 PM PST by Lorianne
What do you do when a quick rise in mortgage rates suddenly threatens to tame home buying demand from subprime borrowers who, despite the lessons from the past, are still purchasing homes, en masse, with only 3.5% down payments and just enough monthly cash flow to cover mortgage payments? Well, if you're the Obama administration then you simply socialize the problem and force those higher mortgage costs on taxpayers. Anything less would just be a hateful attempt to deny minority and low-income citizens their "right" to home ownership.
And while the Obama administration isn't directly passing out tax dollars to subprime borrowers to make their monthly mortgage payments, its recent decision to lower the FHA's annual mortgage insurance premiums by 0.25% is essentially the same thing since tax payers are still on the hook for the same risk but receiving lower premiums in return.
The FHA doesnt make mortgages. It sells insurance, paid by borrowers, on loans protecting investors in case of default. The program allows borrowers to get a mortgage with a down payment of as little as 3.5 percent and a credit score of as low as 580, on a scale of 300 to 850. That makes it one of the most forgiving mortgage programs and popular among first-time home buyers.
Some in the real-estate industry have been calling for another fee cut and heralded Mondays move.
Dropping mortgage insurance premiums today will mean a whole lot more responsible borrowers are suddenly eligible to purchase a home through FHA, William Brown, president of the National Association of Realtors, said in a statement.
The FHA last cut premiums two years ago. That cut, which came as rates dropped and lowered the annual fee for most borrowers to 0.85 percent from 1.35 percent, led to a wave of refinances.
(Excerpt) Read more at zerohedge.com ...
Why on God’s green earth do people think that mortgages or mortgage insurance is an appropriate function for the federal government?
Doing his best to create havoc on his way out.
If anyone hasn’t seen “The Big Short,” do so.
We didn’t have problems like that up here (banks weren’t forced to loan to “subprime” borrowers), but my sister and her husband really took a bath. They bought at the top of the market, right before it crashed. They have improved their home, made investments, and I think their home equity is still pretty low.
Housing bubble redo.
Oh, btw, it just shows how much he cares for his “fellow” Americans. The ones who voted for him.
down payment of as little as 3.5 percent and a credit score of as low as 580,
WHen I bought my first house, 20% was The Standard and there was NO DEVIATION. And a 580 Credit Score would get you escorted OUT BY SECURITY.
This will not end well! just like before
I have a better idea. Link mortgage insurance to credit scores and payment history.
In 2010, I had to sell my home and move due to a job loss. I was unemployed for six months, and the next 8 months, I was paying for two households, my family back home and mine where I had moved to.
I never missed a payment, nor was I as much as one minute late.
We bought another, mush smaller and more expensive house (cost of living higher) and because we had lost nearly all of our equity, could only plunk down 10%. 7 years later, we still haven’t missed a payment and home values are somewhat flat, so we haven’t hit the magic 20% equity number yet to refinance and cancel PMI.
The mortgage companies and government care all about new homebuyers, subprime and those who can’t afford houses, but as usual, not a thought is given to good citizens with 800 credit ratings and helping them save money.
I hear the Bill Clinton music playing
Even better idea: get the feds OUT of the mortgage business. Get the FHA out of mortgage insurance, there's plenty of private mortgage insurers. Get Fannie Mae and Freddie Mac off the federal teat.
The current beneficiaries of subsidized house mortgages will scream RACISM, but screw them.
PMI is a scam. It should be illegal.
What’s in it ($$) for him and his cronies?
Yea, that too
Here are a few things that make the situation even better:
1) the US Government gives grants to local governments who then administrate GIVING subprime borrowers their down payments for HUD loans. It’s illegal for anyone else to give the borrower the down payment for HUD loans, but considered fine when the taxpayers foot the bill.
2) those receiving Section 8 rent subsidies can continue apply those subsidies to mortgage payments if they “buy” a home, including homes bought using the granted down payments.
3) Lenders are required to consider Section 8 subsidies as “income” when evaluating a borrower’s ability to pay.
I’ll leave it for others to decide if this is “good” policy.
[ Obola will be long gone.charging $1.5 million for a 45 minute speech. ]
With an “Obama Foundation” modeled on “The Clinton Foundation”.
[This will not end well! just like before]
Yes, I fully expect that. The gutting of the Middle Class has had a terrible effect. I’ll be happier if we can rebuild some of it under President Trump.
Get them out of the bailout business, too. Let these outfits fail. Eliminate the moral hazard that gov't seems to think is their job to create.