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Location: central, between Pepe's Tacos and Roberto's
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It seems like there is a concensus here regarding FHA loans. I, however, do not agree. You see, unlike subprime programs of the past FHA loans are underwritten. This means that the first sentence of the article snapshot "Once again thousands of borrowers are getting loans they do not stand a chance of repaying" is utter garbage. To receive an FHA loan you absolutely must prove the ability to repay. Now, if one decides to obtain a loan and not pay on it at all then that is extremely unfortunate, and in my opinion very irresponsible on the part of the borrower (yes, it's the borrower's fault if they default before the first payment is due). However, you cannot demonize a program that has had an overall sucess rating of over 90% in the course of it's history.
That being said, I do agree that many of the old subprime originators have moved on to originating FHA loans and it sickens me. Lender turntimes are ridiculously long now for the most part due largely to the "throw it against the wall and see if it sticks" mentality of these ex-subprimers.
However, you cannot demonize a program that has had an overall sucess rating of over 90% in the course of it's history.
That being said, I do agree that many of the old subprime originators have moved on to originating FHA loans and it sickens me. Lender turntimes are ridiculously long now for the most part due largely to the "throw it against the wall and see if it sticks" mentality of these ex-subprimers.
I'm just so afraid that the FHA program will be turned into the new subprime game by the old originators of the subprime mess.
My worry is by the time the government regulators catch on to these brokers (they are in the minority....but you know the rules 10% of the crooks create 90% of the crimes). But by the time the government catches on, it will be another 12-18 months before these brokers/lenders will shut down but by that time they would have processed billions in FHA backed mortgages again.
It's already starting to happen. I'm just surprise its just starting to be published by the major newspapers. I'm not sure why the Prime Time news shows haven't started broadcasting about it yet.
It's like the "Buy and Bail" fraud last year. Everyone in the mortgage internet blog sites knew it was going on by March 2008 (in fact it had started as early as 2007). But the major news network finally started reporting on "Buy and Bail" in August 2008 and Fannie/Freddie shut down that loophole on month later in September 2008. Judging by that it took over 12 months before the government intervened. Major fraud and abuse had been done in those 12 months.
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 6,853,748 times
Reputation: 958
Quote:
Originally Posted by aneftp
I'm just so afraid that the FHA program will be turned into the new subprime game by the old originators of the subprime mess.
My worry is by the time the government regulators catch on to these brokers (they are in the minority....but you know the rules 10% of the crooks create 90% of the crimes). But by the time the government catches on, it will be another 12-18 months before these brokers/lenders will shut down but by that time they would have processed billions in FHA backed mortgages again.
It's already starting to happen. I'm just surprise its just starting to be published by the major newspapers. I'm not sure why the Prime Time news shows haven't started broadcasting about it yet.
It's like the "Buy and Bail" fraud last year. Everyone in the mortgage internet blog sites knew it was going on by March 2008 (in fact it had started as early as 2007). But the major news network finally started reporting on "Buy and Bail" in August 2008 and Fannie/Freddie shut down that loophole on month later in September 2008. Judging by that it took over 12 months before the government intervened. Major fraud and abuse had been done in those 12 months.
I don't necessarily disagree with you but if you have ever tried to originate an FHA loan, particularly in this current market climate, you would realize just how difficult it would be to originate any type of fraudulent FHA loan.
Then again, maybe I just don't see the loopholes (if they do exist) as I just don't have that type of mindset.
Well, there is another side to this. As an FHA borrower within the last year, I got in even before the actual 3.5% down payment was required as I used one of the "down payment assistance" programs. Now, in my case I did it in order to keep my reserves intact to cover any unforeseen events, and Im glad I did given the utter collapse of the economy in the last few months, that few, if any foreshadowed.
BUT, IF good underwrtiting is done as has been suggested FHA loans require (I am NOT advocating writing bad loans!), it seems that the many of the people that currently have INTEREST in buying a home right now are the people that fit the FHA profile - not alot of savings, some past credit problems etc.
My point is, that if FHA wasnt here, alot of the homes that are selling, and we know that isnt many at the moment, wouldnt even be selling and who knows what that would mean.
That said, I agree, its unfathomable to me that someone would default before making a single payment??
P S - At loan application time I had a 700+ FICO, good income that was documented and 6 months of reserves. All I was lacking was a large downpayment.
For what it's worth, over the last five years we have closed around 200 FHA loans and so far not a single default.
And as for dismal credit histories? I haven't dealt with a single lender in the last several years who would approve anyone FHA with a dismal credit history in the past two years. I guess I get the tough underwriters lol and thank God for that.
And as for dismal credit histories? I haven't dealt with a single lender in the last several years who would approve anyone FHA with a dismal credit history in the past two years. I guess I get the tough underwriters lol and thank God for that.
Well, a 580 score or even a 620 score (I understand that is the new minimum?) is pretty dismal if you ask me. What score are your lenders requiring?
Well, a 580 score or even a 620 score (I understand that is the new minimum?) is pretty dismal if you ask me. What score are your lenders requiring?
Most are still pretty lenient although I have one or two requiring 620 although they are making exceptions. The rule is pretty much no lates in the last 12 months. I have had plenty of clients with scores lower than 620, even had one in the low 500's, who have either had lots of medical collections run their scores down or just little to no credit at all in which case I submit them FHA with alternative forms of credit. Thankfully FHA is still kind of open to looking at the credit report itself rather than looking only at the score and dismissing it from there. God only knows what will happen next week lol.
I admit it, I am ashamed but am fessing up. I...gulp...bought a house with an FHA loan last year...
Buying in a declining market in a metro area where houses strart at 400K, choices are limited. How many people have 100K in cash for a starter house? That's 80K (20%) down and partial closing costs. Of those who do have 6 figures in cash assets, who wants to tie it all up in a house?
With a 5.5% rate and a PITI well within budget made we are very pleased with the purchase. The credit market has constricted so tightly that I suspect if FHA were not available the housing mess would be exponentially worse.
Count me in with what I suspect is the silent majority, along with sh9730, who have good credit and used FHA to finance their home.
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