TLAWLER

Time for an FHA Shakeup?

Clearly, the FHA program is "losing money" . That is no surprise. I mean, after all it is a monoline mortgage insurance business insuring low down payment loans in the worst housing downturn in the post world war II period!

The "tightening" credit standards announced today were well in the works for months, and there are more coming. But the FHA needs to do more. Simply raising premiums ain't the answer. Rather, increase required down payments for loans with a 30 year amortization schedule, which have a "slow as molasses" repayment of principal. And for folks who don't have a sizable down payment, put them into a 20-year or 15-year amortizing loan where principal is paid down faster, to offset the small down payment. If you don't have much money for a down payment today, you should be put into a loan where you pay down principal faster. Sorta "Duh".. (Hud spelled backwards, of course!). FHA/HUD programs should be focused on loans that promote "sustainable" homeownership, which invovles home owners building equity in their home over time without relying on home price apprectiation. This is not rocket science.

Obama's Foreclosure Plan Du Jour: Own-to-Rent

Your point about "what about renters" is right on. Renters who lose their job and as a result can't afford their rent -- and as a result face eviction -- are getting no help from the government. Moreover, the demographic data on the unemployed suggest that renters have been hit harder than homeowners in terms of job losses/unemployment rate increases. The adminstration's whole approach to the housing mess has been a spit in the face to folks who rent homes.

Housing Recovery: Where Will Demand Come From?

In re "has anyone been able to secure a mortgage today on a new purchase for under a 20% down payment?" Well, actually the answer is at least 30% of folks buying homes -- that is the current share of fha financing. It is actually pretty easy to get a mortgage with a small down payment, provided you go through all the FHA hoops!

Wells Fargo's Record Quarter - Really?

From LEHC, 4/9/09

Wells: Pulling the TARP Over Folks’ Eyes

In a “pre-announcement” in which it said it expects record earnings in Q1/09, Wells Fargo used slights of hand (and FHA and the GSEs!) to attempt to show it was “using” its TARP money received from taxpayers to extend credit in a leveraged fashion to taxpayers. Here is what they said they’ve done.

• More than $225 billion of credit extended to U.S. taxpayers since early last October, nine times the amount received from U.S. taxpayers through the U.S. Treasury’s Capital Purchase Program investment.
It also noted the following for Q1.
• Funded over $100 billion in mortgage loans, helping over 450,000 homeowners either purchase a home or lower their payments through refinancing;
While I don’t know what the “over’s” are, those numbers suggest an average loan size of around $222,222, and obviously the vast bulk are conventional conforming eligible to be delivered to Fannie/Freddie, or FHA loans.
As I’ve noticed numerous times, while Wells has been decently aggressive on pricing conventional conforming loans eligible for delivery to the GSEs, or on FHA loans, it has posted extremely un-aggressive rates on jumbo mortgage loans – including those where borrowers put down 20%. This behavior suggested that Wells wasn’t keen on expanding mortgage lending if it was taking on mortgage credit risk, but it was “happy as a clam” to make mortgages, send ‘em to a government or government-sponsored enterprise, and pocket a fee.
Now for loans that it originates but plans to deliver to the GSEs or be insured by FHA, Wells isn’t “using” TARP money to make loans. It doesn’t NEED TARP money to make such loans! So these mortgage loans shouldn’t count in their estimate of credit extended since “early October.”
Wells originated about $50 billion in mortgages in Q4/08, and the vast bulk of those originations appear to have been eligible for GSE/FHA delivery. And, as noted above, Wells funded “over $100 billion” of mortgages in Q1/09, and based on its behavior I’m pretty sure the vast bulk of THOSE mortgages were GSE/FHA eligible.
Ex mortgages, Wells $225 billion of “credit extended” since early October falls to around $75 billion – and surely not all of that was “net” credit extended!
Of course, tying “credit extended” to TARP money is sorta silly; after all much of the TARP money was to re-capitalize banks. But throwing in silly statements to a press release in order to “show” that the TARP money is being “put to work” is simply BS, and on this issue Wells Fargo went too far.

Housing Market Tracker - It's About Affordability, Stupid.

I'm sure you saw that the greater las vegas association of realtors reported that residential home sales by realtors in march were down only 13.87% from a year ago, and the median SF sales price, at $243,169, was off 20.3% from a year ago, and was the lowest monthly price since march 2004.

Lawler Economic & Housing Consulting