Friday, November 13, 2009

Our Government's No Money Down Efforts

Who knew the FHA was growing so rapidly:
But the New Deal-era agency has seen its market share swell, to around one-quarter of the mortgage market today, up from 2% in 2006, according to Inside Mortgage Finance.

During the second quarter, the FHA backed nearly half of all mortgages made to first-time home buyers, and today it accounts for around half of all new home loans in some of the nation's hardest-hit housing markets.

The agency expects defaults on 20% of those backed in 2008, when it should have known better. Considering they are politically afraid of foreclosure, they seem intent on learning the hard way that a pushover lender can lose a lot of money when the word gets out. But, heh, it's not their money, it comes from Obama's magic stash!

From the WSJ, we see that Rep. Scott Garrett (R., N.J.) introduced a bill last month that would raise minimum down payments to 5%, up from the current 3.5% minimum. He might also address the fact that the $8k tax credit can be transmogrified into the down payment, making no-money down quite common for first time homebuyers, but already he has substantial opposition.

4 comments:

Anonymous said...

Propping up housing prices in an era of declining family wages is sheer, unmitigated lunacy.

Not that things are good now, but this entire effort will not end well.

Anonymous said...

The rules should and can be made more restrictive. But why do that while the bubble is crashing? Why not wait until a rebound?

Anonymous said...

What is surprising here? The mortgage market recently was at the center of a financial collapse. Bank balance sheets are weak ... and they are not taking any risks.
So private originations are down. And Fannie/Freddie have access to unlimited capital, so theirs are up.

john said...

FHA loans information is a great way to modify your loans