Here's a real estate up date that's part of my Wall Street Journal RSS feed you'll find at the bottom of http://www.valuesarasotahomes.com/ and my reply
By Nick Timiraos
As the Federal Housing Administration begins considering how to pull back from its expanded share of the U.S. mortgage market, the agency could face pressure from some lawmakers and those in the real-estate industry who don’t want the FHA to do anything too dramatic.
Lawmakers from high-cost housing districts, for example, want to ensure that the FHA doesn’t disappear from their neighborhoods. They’ve introduced a bill that would make permanent the higher loan limits that Congress temporarily expanded last year. That allowed the agency to insure loans as large as $729,750 in the nation’s most expensive housing markets, up from a $362,000 national cap. California now accounts for around 13% of FHA-backed loans, up from less than 2% during the housing boom, partly because of the higher limits.
Without the higher county-by-county adjustments, “many areas of the country will not get the benefit of the FHA,” said Rep. Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee. “We didn’t think it was fair for California to be frozen out of the program.” Mr. Frank said he thinks limits should be increased to around $800,000.
Shaun Donovan, the secretary of the U.S. Department of Housing and Urban Development, said the agency believes the expanded loan limits should be temporary. The larger loans account for less than 2% of all FHA-backed loans. While default rates are slightly lower than on all FHA-backed loans, the loans have little seasoning, because the FHA only began insuring larger loans last year.
Other lawmakers, meanwhile, want to bring back programs that allowed borrowers to receive FHA-backed loans without making down payments. Congress last year ended widely-used programs that had allowed sellers to fund down payments to borrowers through non-profit charities, and the FHA says that those programs have eroded the net worth of the agency’s reserves by $10.5 billion. At Wednesday’s hearing, Reps. Al Green (D., Texas) and Gary Miller (R., Calif.) pressed for the FHA to find new ways that would let buyers qualify for FHA backed loans without making down payments.
“Let’s develop a program for persons who can pay for a home but who are without the necessary down payment,” said Mr. Green, who said he nonetheless understood why there was “a great deal of consternation” over the seller-funded down payment programs.
FHA borrowers are still able to use gifts from state housing finance agencies or relatives to make down payments. Housing officials are unlikely to support any effort to bring back the seller-funded gift program. “The biggest concern and issue is about having an interested party in the transaction providing a down payment,” said Mr. Donovan. “That has been what has led to the incentives that led the program in the wrong direction.”
1:39 pm December 7, 2009
Bill Garrison wrote:
I certainly agree with Al Green and Gary Miller. Why not lower the down payment requirement to 0% for those who would otherwise qualify for a mortgage. Does a few thousand dollars down payment really make a difference? Maybe someone has a 6 year old medical collection on their credit report due to a health insurance error and that has lowered the borrowers credit score to a 639 instead of the new 640 minimum. Does that really have a Bering on the likelihood of a future foreclosure?
How about 0% down only for those persons buying an existing foreclosure property and lowering the credit score requirement back to 580? I bet that would eat up a lot or those foreclosed homes and condos.
It;s more about cash flow thn it is about downpayment. There are many people than don’t have the DP but do have a great income stream. Let’s use up all of this excess housing inventory and put people in these homes vacant homes before they deteriorate into unusable tear down properties. The whole purpose FHA was created was to help people get into homes that did not qualify for a Fannie or Freddy mortgage. If FHA is going broke then they could recoup some of their losses and resale these properties. Maybe the FED should subsidise the monthly insurance premium giving FHA more income and helping the new home owner afford the new mortgage. A few bucks a month from Uncle Sam is better that letting FHA homes set empty only to be eaten up by termites and rotting away until they are uninhabitable.
I am a Sarasota, Florida Realtor and have seen many nice homes and condos turn into really awful shacks due to neglect. http://www.ValueSarasotaHomes.com/BANKOWNED
It seems like there is took much finger pointing and not enough common sense and an unwillingness to take action. That’s my $000,000.02 Bill Garrison Sarasota, Fl
