Philip Gvinter

Big New Housing Problem: Mortgage Insurers Back Off

Don't worry guys FHA loans are still available and are filling in the hole that MI pricing created by making it very expensive to buy a house without 20% down!

Please pardon my sarcasm but I agree with Karl and the above comments in principle but not entirely on the details. ALT-A and option ARMs are fortunately already gone and should never come be allowed to come back. Lending standards are still too lose with 50DTIs and 3.5% down payments being allowed. We need to tighten some more but not all the way back to 20% down and 36DTI. The old standard on DTI used to be 33housing 38 total debt. That is perfectly reasonable and I can even accept up to 40 total DTI regardless of the housing ratio. Really since at least a part of the mortgage payment is tax deductible it is better for the housing payment to make up a part of the DTI than for other debt. As to 20% down, that is just unrealistic. 2nd mortgages and MI have existed within reasonable limits for decades and should not be taken off the table. I think that FHA guidelines should be 5% down and reasonable access should be made for private MI with 10% down. We do want to let the housing prices correct themselves but want some level of orderliness to the process. By tightening standards from where they are today we would take out one of the remaining props to the market and let it reach true equilibrium. Tightening the standards too much will lead to even lower prices more rapidly and can bring about undesirable levels of instability. As to having to produce three years of tax returns as the only viable alternative to W2s, I think that allowing 2 years of bank statements should do just as well since tax tricks are legal and are not outright fraud. Many business owners simply find ways to write down their taxable income below its true level. The consequences of this should not include an inability to secure credit.