Free Republic

I was just interviewed by WMAL radio in Washington DC on real estate and mortgage rates. Of course, I was asked what is happening to mortgage rates. I mentioned that the US economy is in a liquidity trap (where injections of cash into the private banking system by a central bank fail to lower interest rates and hence fail to stimulate economic growth). In fact, interest rates have been rising over the past several months. Since last November, the 10 year Treasury yield has risen. The yield curve has risen since November. And mortgage rates have risen as well. The...

The Federal Housing Administration has played a major role supporting housing markets through the downturn, but there are signs that the agency is beginning to cede market share back to the private sector. Data from CoreLogic underscores the first point. In the aftermath of the housing bust, private lenders have required down payments of 20%, while loans to the most creditworthy borrowers can have down payments of 10% if borrowers purchase mortgage insurance. For borrowers with less money to put down, government insurance programs are the best bet. The FHA, for example, allows borrowers to make down payments of just...

The following fhatestimony3 is my testimony to the House Financial Services committee on Wednesday at 9am. I. Introduction Chairman Hensarling and distinguished members of the committee, thank you for the invitation to testify at today’s hearing on “Examining the Proper Role of the Federal Housing Administration in our Mortgage Insurance Market” and to provide my perspective on the ongoing mortgage debacle, the resulting decline in the private mortgage insurance market and the need to return the FHA’s share of the insurance market back to pre-bubble levels. I am Anthony B. Sanders, Senior Scholar at George Mason University. The Federal Housing...

What is your prediction on mortgage spreads after the private sector almost vanished by 2008? The red line denotes non-GSE market share and the green line denotes GSE market share (e.g., Fannie Mae, Freddie Mac, etc.). The government essentially became a monopolist (although the government entities including the FHA compete with each other for market share). There are barriers to entry that would promote competition with Uncle Sam – it is called Dodd-Frank and the Consumer Financial Bureau. The vast majority of residential mortgages will continue to be purchase and/or insured by the Federal government. But after the effective nationalization...

A new and extensive analysis of 2.4 million loans insured by the Federal Housing Administration in recent years shows a pattern of risky lending that could generate $20 billion in losses and harm thousands of the nation’s most vulnerable borrowers. By ignoring risks in loans it insured in 2009 and 2010, the study concludes, the F.H.A. is imperiling both borrowers and taxpayers who stand behind the agency. The analysis emerged less than a month after the F.H.A.’s auditor submitted a troubling report on the financial soundness of its insurance fund. In mid-November, the auditor estimated that the fund, which backs...

Subprime Scandal: Now that the president's mismanagement of FHA has led to its insolvency, how will he avoid the embarrassment of a bailout? By squeezing banks, how else? Under Obama, the Federal Housing Administration has increasingly backed new home loans to so-called rebound borrowers who recently defaulted on past mortgages. The agency is allowing lower-income borrowers to get loans just three years after foreclosure with as little as 3% down and lousy credit scores. In fact, a whopping 40% of newer FHA-backed loans are subprime. The risky lending has led to higher delinquencies. In fact, at 17%, delinquencies on FHA...

Vindication is overrated, especially in a losing cause, so it brings no satisfaction to have predicted that the Federal Housing Administration would sooner or later threaten taxpayers. That day has arrived. Safely past the election, the feds announced Friday that the FHA's liabilities exceed its assets by at least $16.3 billion—and the gap could reach $93.7 billion in the worst case. Yet it's worth recalling that when we warned about FHA's troubles in September 2009, we got an accounting lecture from HUD Secretary Shaun Donovan and a letter from FHA Commissioner at the time, David Stevens, that we were "just...

The Federal Housing Administration is expected to report this week it could exhaust its reserves because of rising mortgage delinquencies, according to people familiar with the agency's finances, a development that could result in the agency needing to draw on taxpayer funding for the first time in its 78-year history. Such a report would likely set off a political fight over the government's role in housing, as it raises the prospect of billions of dollars being added to the U.S. government's effort to stabilize the hard-hit sector in the aftermath of the 2008 financial crisis, which already includes $137 billion...

A very important article came out from the Wall Street Journal yesterday titled “FHA Nears Need for Taxpayer Funds,” and it outlines the serious financial problems facing the Federal Housing Administration. For those that are unaware or need a refresher, the FHA has been the key element to the phony “housing recovery” the government has been trying to create. In the wake of the collapse of 2008, Fannie Mae and Freddie Mac blew up and what was left to pick up the pieces was the FHA. No private player would issue loans with down payments of 3%, but this was...

The Federal Housing Administration is so loaded with delinquent mortgages that its reserves are running low, according to a report from The Wall Street Journal. The Journal, whose Nick Timiraos cites people familiar with the matter, notes that 9.6% of the FHA’s $1.08 trillion mortgage guarantees are more than 90 days past due or in foreclosure. (Snip) The good news for the FHA is that it won’t have to go to great lengths to get access to bailout funds. Enter the U.S. Treasury. Because the FHA operates on a so-called ‘permanent and indefinite’ budget it won’t need to ask Congress...

With the presidential race entering the homestretch, most of the political world is wondering: Will there be an “October surprise”? But this year the real surprise may come in November, when the American people learn about the need for a taxpayer-funded bailout of the Federal Housing Administration (FHA). The FHA guarantees mortgages on loans made by FHA-approved lenders throughout the United States and insures mortgages on single-family homes. Traditionally, it has participated in a fairly small segment of the overall mortgage market. In 2006, the FHA’s market share was just 5 percent. But as credit availability tightened and underwriting standards...

Misuse of the FHA Preforeclosure Sale Program may have cost the Department of Housing and Urban Development (HUD) over a billion dollars for claims that did not meet program according to an audit released this week by the HUD's Region 7 Office of Inspector General (OIG). OIG initiated the audit after noticing significant deficiencies in borrower qualifications during an audit of program claims at one large lender. The Preforeclosure Sale Program allows borrowers in default due to an adverse an unavoidable financial situation to sell their home at fair market value and use the proceeds to pay off an FHA-guaranteed...

ight now, the U.S. Federal Housing Authority is offering historically low interest rates on home loans as part of an effort to kick-start the housing market. Under a plan introduced by President Barack Obama, an FHA-qualifying U.S. homebuyer can apply for a 30-year mortgage with a fixed interest rate of 3.75 percent and a 15-year fixed mortgage at 3 percent. FHA loans require as little as 3.5 percent of the home’s value up front in the form of a down payment. SNIPAccording to Edward Pinto, a resident fellow at the conservative American Enterprise Institute, FHA loans are allowing a repeat...

The U.S. Federal Reserve estimates that of the 12 million American homeowners who have negative equity, 3 million--or 1 out of every 4--are borrowers with FHA-insured loans.

Today, FHFA updated their study of principal reductions and Director Ed DeMarco presented the new results. He did NOT announce any trial program or agreement with the Obama Administration about using Fannie Mae and Freddie Mac to salvage the housing market. But he did say that an announcement will be out in a few weeks. As I said at Brookings, we have very little empirical evidence (other than anecdotal stories) that principal reductions work. We have not been through 3-4 years of mortgage modifications with principal reductions to see if they are as effective as forbearance in preventing defaults. FHFA...

Newsy had a nice summary of the principal reduction debate. It focuses on California Attorney General Kamala Harris requesting that mortgage giants Fannie Mae and Freddie Mac cease foreclosures (at least in California) and perform principal reductions. FHFA Acting Director Edward DeMarco is resistant to the idea saying the principal reductions would cost taxpayers $100 billion. “Only” $100 billion? A recent Fed study covered in HousingWire found that negative equity in the U.S. is approaching $4 trillion. $100 billion is a big number, but pales in comparison to the cost of wiping out all negative equity. So, the tab to...

The Bureau of Economic Analysis (BEA) released the Personal Income and Outlays report for February. The Good: Personal income increased $28.2 billion, or 0.2 percent in February and Personal consumption expenditures (PCE) increased $86.0 billion, or 0.8 percent (mostly consumer durables like autos and computers). Real Personal Consumption Expenditures (PCE) increased 0.5 percent in February, compared with an increase of 0.2 percent in January. Personal income rose 0.2% in February. The Bad: REAL personal income fell 0.1% in February. So, personal spending increased 0.5% while personal income FELL 0.1%. That means that households … are boarding the Debt Train again!...

I have heard that the government has started selling lots of foreclosed homes to government approved real estate management firms or property liquidators. 1. Where is more information on this process? 2. Who is getting to bid on lots of homes, how do we find out who is awarded the properties? 3. What are the long term ramifications of this?

<p>This seems like a really bad idea to me. Talk about crony capitalism. Individual buyers will be shut out from buying these properties.</p>

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