Feds' fixes for housing are 'ridiculous'

Submitted by Commercial Mortgage Loans - Privately Funded - MasterPlan Capital LLC on August 1, 2008 - 3:36pm.

I’m not sure I would make a statement as broad as “United States is struggling in the world economy”. The US is struggling, to be sure. But it is struggling relative to the tremendous growth it has seen in the recent past.

For example, new purchase mortgage loans will be off more than 18% year-over-year. That’s devastating and will have a significant impact on our economy. But consider that, even losing nearly 18% in volume, there are more than 480000 new purchase mortgages being written each and every month in the US. Americans will purchase nearly $950,000,000,000.00 in residential housing this year. I’ll bet there are plenty of countries in the “world economy” who would love to struggle like that.

Things are a mess; there were excesses and malfeasance that always characterize the top of a boom cycle. And, Mr. Hubert is correct in doubting the effectiveness of Government fixes. But we’ve held up pretty well considering how bad the housing and credit markets are.

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Submitted by Steve Simon on August 5, 2008 - 6:08am.

You can't compete on a world stage when 2/3's of your worker's wages goes to insurance (health, car, home) and transportation (gas, vehicle aquisition, maint.).
The health care costs in this country and the Political manner in which they have been handled have given birth to the insurance crisis.
The irresponsibility of the US Automakers over a thirty or Fourty year period coupled with again the Political handling of traffic infractions, drunk driving, a complete lack of re-testing, has given birth to the car insurnace crisis.
The lack of policy and the free reign that has been given to speculators in the oil futures market, the lack of incentives to promote and sustain in the begining stages, "alternative sources of energy" has given birth to what T. Boone Pickens calls, "The largest transfer of wealth in the history of mankind", and for the most part we are transfering that wealth to countries that hate us.
These things must be addressed before the phrase "Affordable Housing" will have meaning again.
I am so sorry I nor can anyone else cannot fix this all by the time I will pass. I want my Granddaughter Isabella to have a chance...
If the answer to a complex problem is very simple, it is usually incomplete...
Steve Simon is the lead instructor at the Steve Simon School of Real Estate www.stevesimon.us

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Submitted by Benjamin Dona on August 5, 2008 - 7:41am.

All you have to do is read the fine print of the housing bill to know that the folks in Washington have no idea how to fix the current situation. Other than bolstering Fannie Mae and Freddie Mac and making the higher loan limits permanent, the bill does little to help the real problems in the marketplace.

Florida Real Estate | Southwest Florida Blog

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Submitted by Michael LittleBig on August 6, 2008 - 8:04am.

Congratulations to the members of Congress who passed this 700 page housing bill.

Thank God for the wealthy Congress people who had the foresight to pass this bill and take the National Debt to 10.6 Trillion Dollars.

We should remember that these are the same Congress people who will have spent over 1 Trillion Dollars on an oil war.

Let me see if I have this straight:
Freddie and Fannie will now have money to save them. These are the people who buy all the mortgages from the banks. If the wealthy and powerful banks could not sell their mortgages then they would go out of business or be accountable for their actions.
I read the other day that Fannie and Freddie have 800 billion in mortgages and those mortgages represent 60 billion in value. Thank God, we the taxpayers will only have to pay 740 billion to save Freddie and Fannie. It was either the Fannie or Freddie boss that took home 60 million in one year.
I would suggest to save money, that we combine Freddie and Fannie into the Frankenstein Mortgage Company with offices in Bad-bag Iraq.

With this bill we help the first time homeowner with $7500. Is this so that they can buy foreclosed housing which is a blessing for the wealthy and powerful Banks ?

Here is the one I like the best. It reminds me of Am Trust Bank, Cleveland Ohio, who foreclosed on my home of 7 years. This is the bank that threatened and promised me in writing that they would file a frivolous lawsuit against me for fighting my foreclosure. This is the same bank that refused to discuss the issues and the violations of law that caused the foreclosure.
Well, billions of dollars have been set aside for people that meet certain criteria to refinance their present mortgage to SAVE them from foreclosure. THEIR BANK IRONICALY HAS TO AGREE to this to make it happen. This of course involves 400,000 homeowners. What about the other millions of homeowners pending foreclosure?
Well now, these banks are the same ones that operate under the” Lynch Mob” program. The bank forecloses the home and then hangs the borrower. You see, the borrower in the USA has no RIGHT to contest or to fight their foreclosure with in the federal regulatory system, because the Congress won’t permit this to happen. Why? This protects the federally chartered savings banks.
Therefore the Bank which is regulated under the federal regulatory system operates with impunity—there are no federal consumer banking regulations. Banks accordingly conduct their mortgage lending activities knowing the borrower has no redress with in the federal regulatory system.

My question is, WHAT ABOUT THE 4 MILLION PEOPLE IN FORECLOSURE OR WHO HAVE BEEN FORECLOSURED?
Are these not the homeowners who started this foreclosure crisis? Are not these the same people who have no rights to fight their foreclosure within the same federal system that the banks in the same federal system are lending mortgage money? Can’t these homeowners fight their foreclosure doing the big dollar LEGAL DANCE? You know, the borrower’s attorney and the bank’s attorney dance before the Band (Court) until your money runs out.
And you out there who blame these homeowners who you say lived high on the hog and who demanded that the banks give them a mortgage they could understand and could not afford. You are right. No more bailouts for the lowlife home owners who were the cause of this foreclosure crisis(?), which made this lending system so profitable for the wealthy and the powerful. You are so righteous. You are so wrong.

Thank God for my Ohio Senators, “would you repeat that” Sherrod Brown and “ which way is the wind blowing” George Voinovich for spending every cent the taxpayer has, plus 10.6 Trillion dollars that we don’t have. I can sleep well in Cleveland Ohio under the 9th Street bridge knowing that my ex attorney and the bank were at the dance having a financial wrecking ball.

This bill basically protected the entire mortgage system and the way it operates and those who profit because of the system. The Bill did not protect those among us who had nothing to gain, but everything to lose. Congress dealt a low blow to the American homeowner.

The idea was to pass something, they passed nothing.

Michael LittleBig

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Submitted by Michael Farrar on August 7, 2008 - 8:42pm.

The elimination of DPA will crush our housing recovery!

Does anyone understand that the elimination of Downpayment Assistance (DPA) will mean more than 300,000 working class families will be locked out of homeownership in the next year alone. Sellers across America will take the brunt of the $50 billion in lost real estate sales, not to mention the indirect impact on the real estate, mortgage and building sectors that will be forced to shed tens of thousands of jobs due to the elimination of DPA, and not to mention Government property tax coffers all benefit from increasing numbers of homeowners, and are reasons why the Black and Hispanic Congressional Caucus, US Conference of Mayors, and National Association of Counties defend DPA.

Outside of family gifts, downpayment assistance is offered by two primary souces (1) Non-profits (Seller Funded) and (2) State/Municipal Agencies (Taxpayer Funded). Downpayment assistance by non-profits is funded by Sellers, not Taxpayers. However, State/Municipal Agencies offer bond programs that are funded by taxpayers to offer downpayment funds. If anything, it should be these agencies that are shut down, not a private-non profit organizations that are entirely seller funded. With non-profits, the Seller takes the hit from his own sale proceeds and can sell the home for NO HIGHER than a FHA "Approved" Market Appraisal. Thus, in effect, the FHA Buyer has instant equity of 3%, unlike a VA Buyer who's loan is 100% financed.

And...

1. Homebuyers who use down payment help are already FHA-approved borrowers.
2. The average home purchased with this assistance costs about $110,000. We’re not talking about Beverly Hills.
3. This is a voluntary program in which the Seller is willing to take the hit without utilizing downpayment programs that use taxpayer dollars.
4. The Seller cannot raise ("jack-up") the home price higher than the FHA appraisal to cover the downpayment assistance.
5. The Appraisals are performed by a FHA-Aprroved Appraiser.

Lenders, Not DPA Organizations, Choose Home Appraisers for FHA Loans - Downpayment gifts made by charitable DPA organizations are based on the market value of the purchased homes as affirmed by HUD certified appraisers. HUD regulations require lenders to use many different certified appraisers to ensure the appraisals are as accurate as possible. Downpayment gifts made by charitable DPA organizations are based on the market value of the purchased homes as affirmed by HUD certified appraisers.

HUD says Borrowers are defaulting because of DPA:
Not true, FHA Loans Using Charitable DPA Gifts Enjoy 94% Success Rate; Comparable To Other FHA Loans - 94% of charitable DPA-assisted homebuyers pay their mortgage without undue difficulty, according to a 2005 study by the General Accounting Office. Specifically, FHA homeowners using gifts from seller-based and other DPA assistance with 3-year old loans have a 6% and 5% default rate respectively while FHA Loans Using Charitable DPA Gifts Enjoy 94% Success Rate; Comparable To Other FHA Loans - 94% of charitable DPA-assisted homebuyers pay their mortgage without undue difficulty, according to a 2005 study by the General Accounting Office. Specifically, FHA homeowners using gifts from seller-based and other DPA assistance with 3-year old loans have a 6% and 5% default rate respectively while FHA owners using no DPA assistance have a 3-4% default rate.

Loans Using Charitable DPA Gifts are 50% of FHA’s Current Annual Volume. Seller-assisted DPA’s portion of FHA’s current loan volume is 30%. The private sector sub-prime, zero downpayment market also siphoned off the less risky pool of FHA borrowers – leaving FHA with a larger than usual proportion of higher risk loans -- contributing to an increase in all of FHA’s claim rates.

Moreover, most of the blame lies with the "novice investors" trying to flip properties and fraudulently claiming their purchase as a primary residence. The perpetrators of fraud were much more likely to use DPA in addition to their made up jobs, lease agreements, and fake W2s. As both Nehemiah and Ameridream noted in the court cases, when you look at the only meaningful measurement in HUD's defaults - actual claims - there isn't that much difference between non-profit DPA and other down payment gifts at 5 years.

Think through it, on a $110K home, FHA’s current down payment is 3% or $3,300. That is not big enough incentive to prevent a borrower from walking away from a home vs. using DPA money. It's not the reason people walk away from their homes, it's because they lost their jobs, went through a divorce, etc.. I have seen investors walk away from non-refundable deposits of $100K on condo deals alone. Regardless, whether you have 0% or 30% invested in a home as your primary residence, you don’t want to lose it.

Moreover, VA loans do not require a down payment. As a matter of fact, the VA funding Fee (ranging between 2.2 and 3.3%) is almost always added to the loan balance, resulting in a Loan to Value of up to 103.3%. If everyone wants to eliminate the Down Payment Assistance programs for FHA loans, the same logic would dictate an end to the VA Loan Guarantee. See how that flies in congress.

Charitable DPA Serves FHA’s Core Mission - The Federal Housing Administration (FHA) was established to help low-and moderate-income individuals purchase homes since they would find it difficult to qualify for loans in the traditional private mortgage market. Without charitable DPA programs, a large portion of borrowers would be forced out of FHA into high-priced, in some cases predatory, loans or be completely locked out of homeownership altogether.

Understand that FHA is in essence an insurance company that assesses MIP (Mortgage Insurance Premiums) against borrowers in the event they default. Borrowers pay an upfront premium of 1.5% and additional premiums every month to pay for this default coverage for investors that fund the loan. It is not funded by taxpayer dollars!

DPA Program Is Specifically Designed to Meet FHA Borrower Needs - Charitable DPAs programs aid borrowers who have sufficient credit to qualify for government-backed loans but have insufficient capital to meet the three percent downpayment requirement for an FHA loan. Charitable DPAs bridge the gap by providing this downpayment as a gift to the buyer, helping those who otherwise could not become homebuyers. The DPA program was developed and designed to work with FHA’s specific mortgage requirements to expand homeownership opportunities and serve the population of homebuyers that it is FHA’s mission to serve - minority, low-income, and working families with limited access to capital.

The non-profit DPA providers aren’t trying to put everyone in a home; they support putting qualified buyers in a home. They tried to fix it and proposed FHA to assess higher premiums to higher risk borrowers, as well as to ensure that providers of the downpayment assistance operate in a transparent manner to guard against conflicts of interest.. However these concessions were flatly rejected by HUD. “Throwing the baby out with the bath water!”

HUD has a political agenda behind this. Pure and simple, there is a lot of evidence for influence from private mortgage insurers who would love to see FHA volume go down. By getting rid of DPA, HUD can send the business away while still spouting all their rhetoric about helping the disadvantaged and so forth. Kind of the way they give FHA Secure loans to less than 3000 people and then issue press releases like they are solving the whole foreclosure problem.

We need downpayment assistance now more than ever! With gas prices soaring, the credit crisis and the economy tumbling these programs are no longer only for the lower income. Middle class America will now require help to buy a home. As long as there are regulations in place and the banks do their jobs when it comes to appraisals, credit scores, debt-to-income ratios and reserves, this program will help us, not hurt us credit scores, debt-to-income ratios and reserves, this program will help us, not hurt us. Please support H.R. 6694 and go to http://www.rallyforhomeownership.org/

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