Posted on 09/07/2009 5:17:06 AM PDT by reaganaut1
As it tried to help shore up the ailing housing market during the past year, the Federal Housing Administration increased its exposure, particularly to mortgages in high-cost states that have also seen some of the sharpest price declines.
Now concerns are mounting that the agency -- and the U.S. taxpayer -- may have to pay the price.
The FHA insures loans secured with down payments as low as 3.5%. But values in many markets in which it has been increasing its activity have fallen far more than that in the past year. The result: A growing number of homeowners with FHA-backed loans owe more than their homes are worth and are more likely to default.
...
As private lenders sharply curtailed credit when boom turned to bust, the FHA became one of the only places to turn for buyers who couldn't afford big down payments or who wanted to refinance but had little home equity. The number of loans backed by the agency has soared, and its market share reached 23% in the second quarter, up from less than 3% in 2006, according to Inside Mortgage Finance.
The FHA's growing role has been cheered by economists, the real-estate industry and members of Congress who felt that it prevented the housing collapse from being worse.
Even as the FHA tightened lending standards moderately last year, Congress allowed the agency to make much larger loans, up to $729,750 in the highest-cost markets. Previous loan limits, at $362,000, had kept the FHA out of more expensive markets, including some of the hardest hit during the housing bubble. In July, California accounted for 13% of the FHA's mortgages, up from 1.5% in 2006.
(Excerpt) Read more at online.wsj.com ...
>> the FHA became one of the only places to turn for buyers who couldn’t afford big down payments or who wanted to refinance but had little home equity
Say, wouldn’t another option be to NOT BUY or NOT REFINANCE until you can freaking AFFORD IT?
Just asking. I know it’s not in vogue.
Why not have the Congressional retirement program invest its pool into Freddie & Fannie.
Forgot, the representative from the Bay State is already interested in Fannie.
Because the ABA, MBA, NAHB, NAR are HARDBALL LOBBYISTS!!!!!
“Because the ABA, MBA, NAHB, NAR are HARDBALL LOBBYISTS!!!!!”
Watching the rapid growth of FHA volume in high risk states over the past couple of years, we expected to see stories like this by Spring of this year. Our estimates were only off by a quarter, it appears. Before this is over, the bailouts of Fannie, Freddie, FHA, and FDIC will make all the bailouts to date look miniscule by comparison.
Housing industry lobbyists and banksters have been picking the public pocket for decades, and will continue to do so as long as the public rolls over for them. The only thing new here is the magnitude of the looting. Those who hope to see the public NOT roll over should review the history of the last big looting exercise - the S&L’s in the 1980’s and the “Resolution Trust Corporation”. Let’s see if the “Tea Parties” are just one more “tempest in a teapot”. Based on past episodes like this, that’s the way to bet.
35 Years ago we got an FHA loan, we had to have a 20% down payment.
Today FHA gives guarantees and if foreclosure happens the bank will take the first 10% hit and the FHA takes a 90%. It has certainly helped banks to make riskier loans knowing that they are only on the hook for 10% of any loss.
FHA is the new subprime lender.
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