Monday, September 07, 2009

Oh boy, here we go again...

I know that this is just one couple and they live in San Francisco and house prices have "tumbled" in the Bay area, but oh my, what knucklehead gave this couple a loan.....

He's a crane operator and she's a hairdresser paying three quarters of million for a three bedroom house. Again it's just anecdotal evidence but all of the most questionable loans in the CNN piece seem to be FHA loans.

Including this masterpiece - "The house was $257,000, and I needed to put down 3.5% to meet the FHA rules. I didn't have all of the $9,000 required, but then I found out about the FHA's new program where you can use the tax credit for the down payment."

Maybe I'm old school, but if you don't have nine thousand dollars, maybe you should be buying a house for a quarter of a million dollars.

This has lead some to question if the FHA is the next big bailout looming on the horizon...

"The FHA's aggressive lending programs have continued throughout the housing downturn, causing its market share of the mortgage industry to grow from 2% in 2005 to 23% today. ...

The FHA insurance fund, however, is likely running dry. ...While almost all of the experts believe that Congress would support the FHA if necessary (it's currently self-funded), we wonder if FHA officials will be under pressure to continue tightening their lending policies, which currently allow 96.5% mortgages to people with 600 FICO scores. ... Claims against the insurance fund have climbed, with roughly 7% of all FHA-insured loans now delinquent."

The FHA has increased it's market share ten-fold because they still issue 3 percent down even if you have a terrible credit score.

Well, what's another couple of hundred billion among friends...

Cheers!

No comments: