Posts Tagged ‘FHA’

Housing Watch highlights

I’ve been blogging at Aol’s new Housing Watch site, sharing my take on the mortgage/financial crisis, regulatory reform (what little there is of it so far), and what it all means for consumers.

Some highlights. Dig the traffic-bait headlines! See all my posts here.

The New Mortgage Revolution: Walk Away

Borrowers Pay to Refill FHA’s Pot

U.S. Cracks Down on “Reverse Redlining”

Forget Congress. Real Reform Lies With the Federal Reserve

Showdown for Fannie & Freddie

Consumer Protection? Read the Fine Print

Monday, February 1st, 2010 | Tags: , , , ,
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Prop Up Those Prices

I said it in my book, and as Calculated Risk points out today it’s becoming more and more true with each passing week: If there’s one consistent federal policy for the housing market, it’s to prop up prices at any cost. The new homebuyer tax credit, generous FHA underwriting, the awfully high loan sizes accepted by Fannie and Freddie, the Fed’s mortgage securities purchase program, iffy loan modifications – these are all crutches that most likely forestall an inevitable reckoning. Letting the air out slowly is one thing, but this is more like holding one’s breath on the theory that the oxygen will last.

CR shares a rather alarming – one could charitably call it sloppy – quote from Barney Frank about the tons of shaky FHA loans made over the last couple of years and now threatening the insurance fund:

I don’t think it’s a bad thing that the bad loans occurred. It was an effort to keep prices from falling too fast. That’s a policy.

It’s policy like hair-of-the-dog is policy. Not good.

Monday, October 12th, 2009 | Tags: , ,
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Oh, boy

What’s more troubling than a world in which all home loans come from Bank of America and Wells Fargo? One where Fannie Mae and Freddie Mac guarantee lines of credit for smaller mortgage bankers, which is what the Mortgage Bankers Association is now asking the Federal Housing Finance Agency to do.

Today’s Journal also has a story about how default rates for FHA-insured mortgages are rising fast, and that should give you an idea of what’s at stake here. Most FHA lenders are the very kinds of institutions that are now seeking the Fannie/Freddie guarantee on their credit lines — mortgage banks, which don’t do any other kind of business and therefore don’t have deposits or any other sources of funds to turn to. While many mortgage banks are solid and valuable institutions, over the last few years mortgage brokers seeking to increase their profit margins have also opened up their own banks, and quite a few mortgage banks are basically new incarnations of sleazy subprime loan mills.

So let me get this straight: the credit markets won’t take the risk of guaranteeing warehouse lines of credit for mortgage bankers, but the federal government should?

Tuesday, March 31st, 2009 | Tags: , , ,
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All too predictable

A couple of years ago, when Reps. Barney Frank and Maxine Waters were pleading for a huge increase in the size of loans that could be insured through the Federal Housing Administration, my first thought was: Are they nuts? But that was the thinking at the time — with the price of real estate spiking, they thought (or at least Waters did, judging from her statements on the House floor) that bulking up the size of permissible morgtages was doing a favor to their constituents, who after all lived in very expensive cities, real estate-wise.

Well, FHA is now shaping up to be a pricey disaster, thanks to even more idiotic policy decisions that were supposed to help FHA compete with subprime. The Washington Post has an alarming story today about a surge in FHA loans that have recently gone into foreclosure without a single payment, a sure sign of fraud. HUD in the last couple of years has permitted FHA lenders to do direct marketing of loans (junk mail/telemarketing), insta-refinances for existing customers, and (ohmigod) cash out mortgages. Government-insured cash-out mortgages!! HUD might as well have been asking lenders to set up bogus deals. And this time around, the government is automatically on the hook for any losses the insurance fund can’t cover.

Sunday, March 8th, 2009 | Tags: , , , ,
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F(raud) H(ere) A(lways)

Wow. I’m not sure which act was weirder — President Bush giving a pardon to a Long Island developer convicted of fraud under the Federal Housing Administration mortgage insurance program or his subsequent reversal of that pardon, which I learned of while writing this.

Better to look ahead, and I worry. Business Week had a great cover story earlier this month about the perils of HUD’s aggressive expansion of FHA as a source of mortgages as the private sector pulls back on lending. As of the new year, the agency will insure loans that in some parts of the country will near $700,000. Again and again in its history, FHA mortgages, sold by independent brokers, have been fodder for fraud, including many of the practices — flipping, rigged appraisals, and the rest — that later became synonymous with subprime lending. Usually, the companies selling the mortgages have been central players in the schemes. See City Limits‘ series on FHA fraud in the late 1990s, which I edited.

FHA at its core is a deeply valuable institution. If it’s going to once again serve as the backbone for homeownership as a source of security for middle-class Americans, instead of fodder for a Sopranos plotline (third season), FHA is going to need as big an overhaul as any government agency in the Obama administration. Obama’s nominee for HUD Secretary, Shaun Donovan, is as capable as anyone of fixing FHA. The bad news is that some very talented people tried to set it straight under President Clinton, only to be thwarted by the Contract With America crowd. Housing and health care are now in the same boat — Obama’s people are going to have to win the fights that Clinton’s lost.

Wednesday, December 24th, 2008 | Tags: , , , , ,
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