Jane

As Housing Market Struggles, Homebuilders Focus on Survival

It is amazing how many experts write articles on homebuilder stock, the new home market, etc, without ever mentioning that factors that just MIGHT matter include: rampant shoddy construction and code violations; worthless warranties; abusive arbitration clauses; hidden complaints due in large part to arbitration clauses; builders having a big part in creating a housing bubble with artificially inflated prices and mortgage fraud, and so on. These problems, despite being ignored by mainstream media and many "experts," exist and have had a hand in the current economic problems...more than most casual readers know. I doubt the casual reader of economic information realizes that six of the big builders were fined last year alone, (plus I don't know how many smaller builders), for lending law violations. Despicable that they just pay a fine instead of being really held accountable for their hand in this mess. That's just one example. Investors who are really doing their homework would do well to research and consider these things. If they had, perhaps many Americans would not have seen their investments go up in smoke by leaving their retirement funds in the hands of "experts" who failed to "see the housing crash coming." Many saw it coming,and warned. Far too few experts paid attention.

Is the FHA Effectively Condoning Mortgage Fraud?

Matt, the "gift" from a DPA isn't necessarily something they don't have to pay back. Sometimes it's rolled into the price. I don't think anyone's targeting DR Horton but other articles on this have said builders are the largest users of DPA's. The fact sellers use them too doesn't really matter. What matters is that these purchases are far more likely to go into foreclosure. Bannning DPAs will not ban true gifts from one's family members.

FHA can't handle the loss and it may fall on tax payers. Getting buyers into homes with toxic financing isn't charitable, it's irresponsible. IMO we're pushed way too aggressively to become homeowners in this country. Renting isn't evil, and sometimes it's a better option. I have been both a renter and an owner. It's astounding how renters are vilified no matter how responsible they may be, no matter how senseless or unaffordable buying may be for them. But we treat them as if they're deadbeats for not owning, then expect them to become shining examples of financial responsibility when they buy a house they can't afford with a loan that's a ticking time bomb.

Is the FHA Effectively Condoning Mortgage Fraud?

HUD (FHA) did try to shut down some of these down payment programs but they were defeated: Mar. 2008, Sacramento Bee: sacbee.com/103/story/7... ("Sacramento-based Nehemiah Corp. of America won a key federal court ruling Monday that again blocked plans by the U.S. Department of Housing and Urban Development to ban its controversial down payment assistance program. The housing agency announced in September it would ban the program within months, arguing that it triggered foreclosures and unfairly raised the price of housing for those who could least afford it. Monday's U.S. District Court ruling followed its earlier temporary ruling that HUD had failed to supply a reasoned analysis for its decision and didn't consider reasonable alternatives.")

The IRS has called some of these programs a scam because they don't operate as non profits under IRS rules. irs.gov/newsroom/artic...

Other sources over the past few years said down payment assistance programs are a way for sellers/builders to launder money. This is the only way they can make sales, and yesterday a builder was quoted in news about this saying exactly that; that it's the only way they can sell.

I'm not a fan of HUD. IMO they sat by and watched builders build shoddy new houses and breach the warranty and so long as HUD didn't eat too much of the cost the agency didn't seem to care much. They didn't seem to care if 3rd party home warranty co's were more a marketing tool than actual protection for home buyers either. But when they (HUD/FHA) started having to absorb the PREDICTABLE losses as a result of mortgage fraud, they suddenly started caring about WHY these things were happening. HUD isn't going to ride to any consumers' rescue, but they may be trying to ride to their own. If there's something good that comes out of that for consumers, it's incidental, but I'll take it.

What Happens When Builders Fail [Housing Tracker]

At least 4 yrs ago I could see this mess was going to happen and I was not alone. I think it's time the experts started paying attention to what's really going on out there instead of thinking they're insulated from it. Housing bubble blogs, consumer sites, some economists, and many others, all pointed out the bubble was unsustainable and not a good thing. Too many people thought of houses as 'investments' that never went down in value. There was a lot of push from the real estate industry and our own government to buy a house. Toxic loans were praised as "increasing homeownership" with no thought to the FACT many of these buyers could not afford it, and/or were flippers. Mortgage fraud was going on and still is. Without the industry complying with the sham, it could not have reached these proportions, and the industry created the toxic loan products, pushed them, approved them, and sold them as 'investments.' The FBI found two yrs ago that 80% of the fraud was being done by the industry. This industry shot itself in the foot. For anyone in the know to claim this wasn't predicted, wasn't predictable, is ludicrous. Even ordinary people with no special training saw this coming.