Comments on: FHA Loans – ‘to the Rescue’ or ‘to be Rescued’ http://blog.mfgmortgagerates.com/2010/04/fha-loans-%e2%80%93-%e2%80%98to-the-rescue%e2%80%99-or-%e2%80%98to-be-rescued%e2%80%99/ MFG Mortgage Rates - Blog Thu, 12 Jan 2012 00:23:39 -0700 http://wordpress.org/?v=2.9.1 hourly 1 By: Pehmer http://blog.mfgmortgagerates.com/2010/04/fha-loans-%e2%80%93-%e2%80%98to-the-rescue%e2%80%99-or-%e2%80%98to-be-rescued%e2%80%99/comment-page-1/#comment-6738 Pehmer Wed, 10 Aug 2011 03:55:30 +0000 http://blog.mfgmortgagerates.com/?p=72#comment-6738 <strong>Great One...</strong> I must say, its worth it! My link, http://www.pianetablog.com/?w=annie11,thanks haha... Great One…

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]]> By: Kevin Mullins http://blog.mfgmortgagerates.com/2010/04/fha-loans-%e2%80%93-%e2%80%98to-the-rescue%e2%80%99-or-%e2%80%98to-be-rescued%e2%80%99/comment-page-1/#comment-46 Kevin Mullins Tue, 04 May 2010 14:56:31 +0000 http://blog.mfgmortgagerates.com/?p=72#comment-46 Rachel: Based upon much of the data I have seen recently, I feel we will have to "rescue" FHA. The lending parameters are much riskier than in the past and there is pressure for them to make loans. FNMA and FHLMC have seen the "fallout" for this type of pressure. It appears that the lack of jobs or the loss of jobs has been the driver for the high delinquencies. If you have any questions or need additional information, please let me know. Regards, Kevin R Mullins EVP & Chief Financial Officer Monticello Banking Company Monticello, KY Twitter: www.twitter.com/krmullins1964 Rachel:

Based upon much of the data I have seen recently, I feel we will have to “rescue” FHA. The lending parameters are much riskier than in the past and there is pressure for them to make loans.

FNMA and FHLMC have seen the “fallout” for this type of pressure. It appears that the lack of jobs or the loss of jobs has been the driver for the high delinquencies.

If you have any questions or need additional information, please let me know.

Regards,

Kevin R Mullins
EVP & Chief Financial Officer
Monticello Banking Company
Monticello, KY
Twitter: http://www.twitter.com/krmullins1964

]]> By: Barrett Peterson http://blog.mfgmortgagerates.com/2010/04/fha-loans-%e2%80%93-%e2%80%98to-the-rescue%e2%80%99-or-%e2%80%98to-be-rescued%e2%80%99/comment-page-1/#comment-45 Barrett Peterson Tue, 04 May 2010 14:55:51 +0000 http://blog.mfgmortgagerates.com/?p=72#comment-45 "To be" rescued, I fear. We seem to have severe learning difficulties. “To be” rescued, I fear. We seem to have severe learning difficulties.

]]> By: Justin Konz http://blog.mfgmortgagerates.com/2010/04/fha-loans-%e2%80%93-%e2%80%98to-the-rescue%e2%80%99-or-%e2%80%98to-be-rescued%e2%80%99/comment-page-1/#comment-44 Justin Konz Fri, 30 Apr 2010 14:38:18 +0000 http://blog.mfgmortgagerates.com/?p=72#comment-44 Because the fundamental benefit and purpose of FHA loans is to assist borrowers who do not have enough cash for a large down payment, the bottom line is that you cannot maintain healthy equity/collateral ratios. However, if you weaken one principal underwriting criterion that makes lending safe (in this case requiring less down with FHA loans), the government could attempt to strengthen other aspects in order to decrease the number of defaults: 1) Increase Credit Requirements - The idea of affordability should only apply to income and wealth. However, somewhere along the line affordability became synonymous with weaker credit. The government could increase credit requirements as a first step. 2) Decrease Ability to Walk Away - In general, borrowers who put 10-20% down are less likely to walk away or default on a mortgage. Not only do they have a significant equity buffer when home values dip, but putting that much cash into a property is significantly difficult to walk away from (psychologically). Looking back at the profile of our borrowers who defaulted or filed for bankruptcy, they had nothing to lose except a temporary credit hit. The government could make a provision that borrowers who default on FHA loans a) have increased standards in order to file for bankruptcy b) are required to put down twice as much on future FHA loans. 3) Spouses Must Co-Sign - Too many times I've seen one spouse walk away from a loan (as the only guarantor) while the other spouse lines up financing to buy a cheaper property. In many cases that I've seen, they can afford the payments and simply don't want to be upside down on a property. Because their income is strong enough to not qualify for a loan modification, the one spouse who signed for the loan just stops making payments. By requiring both to sign, the government can take away an "easy out". http://www.elitefinancing.com Because the fundamental benefit and purpose of FHA loans is to assist borrowers who do not have enough cash for a large down payment, the bottom line is that you cannot maintain healthy equity/collateral ratios. However, if you weaken one principal underwriting criterion that makes lending safe (in this case requiring less down with FHA loans), the government could attempt to strengthen other aspects in order to decrease the number of defaults:

1) Increase Credit Requirements – The idea of affordability should only apply to income and wealth. However, somewhere along the line affordability became synonymous with weaker credit. The government could increase credit requirements as a first step.

2) Decrease Ability to Walk Away – In general, borrowers who put 10-20% down are less likely to walk away or default on a mortgage. Not only do they have a significant equity buffer when home values dip, but putting that much cash into a property is significantly difficult to walk away from (psychologically). Looking back at the profile of our borrowers who defaulted or filed for bankruptcy, they had nothing to lose except a temporary credit hit. The government could make a provision that borrowers who default on FHA loans a) have increased standards in order to file for bankruptcy b) are required to put down twice as much on future FHA loans.

3) Spouses Must Co-Sign – Too many times I’ve seen one spouse walk away from a loan (as the only guarantor) while the other spouse lines up financing to buy a cheaper property. In many cases that I’ve seen, they can afford the payments and simply don’t want to be upside down on a property. Because their income is strong enough to not qualify for a loan modification, the one spouse who signed for the loan just stops making payments. By requiring both to sign, the government can take away an “easy out”.

http://www.elitefinancing.com

]]> By: Shmuel Shayowitz http://blog.mfgmortgagerates.com/2010/04/fha-loans-%e2%80%93-%e2%80%98to-the-rescue%e2%80%99-or-%e2%80%98to-be-rescued%e2%80%99/comment-page-1/#comment-43 Shmuel Shayowitz Fri, 30 Apr 2010 14:37:33 +0000 http://blog.mfgmortgagerates.com/?p=72#comment-43 I have been calling for an FHA crash/bailout for the past 2 years. Is there somoene @ Goldman Sachs I can speak to about Shorting GNMA/FHA loans? I have been calling for an FHA crash/bailout for the past 2 years. Is there somoene @ Goldman Sachs I can speak to about Shorting GNMA/FHA loans?

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