More Californians turning to the FHA

Almost 10% of California mortgages were FHA-backed in 2008, compared with 2% in 2007. "Agency Copes With a Mortgage-Insurance Overflow" in Friday's Wall Street Journal calls into question the Federal Housing Administration's ability to handle the increase from across the nation:

Hundreds of private lenders, using the latest technology and paying high salaries, failed to adequately manage mortgage credit risk during the housing boom. Now, the Federal Housing Administration, using 24-year-old computer programs and civil servants who still handle some loan documents by hand, is trying to do better.

"Can the agency handle the responsibility it has already been given?" the WSJ story asks.

Steve Preston, the outgoing secretary of Housing and Urban Development, of which the FHA is a part, says the answer is yes. "We are handling the volume," he said in an interview, adding that the department moved resources from lower-priority projects earlier this year. The FHA, which insures lenders against defaults on home mortgages that meet the agency's standards, saw its share of new mortgages increase to 26% in this year's third quarter, up from 3% for all of 2007, according to Inside Mortgage Finance.

Not everyone agrees, however:

Congress in March increased loan limits on FHA-backed loans to $729,000 in the most expensive housing markets, up from $329,000. Next year, those limits will fall to $625,000 in the most expensive housing markets. Still, some housing experts worry that an outsized share of the FHA's new business is coming in these high-cost housing markets. "It's getting into markets that are a lot riskier than it has in the past," says Ann Schnare, a housing consultant.

Interesting that the FHA hasn't changed its ground rules while other lenders have been tightening standards. Down payments as low as 3% will increase to 3.5% next month, but still. Who else is accepting 3% down these days?

-- Lauren Beale

Thoughts? Comments?   

Photo: Steven C. Preston. Credit: Gerald Herbert / Associated Press

Comments

[Christopher Spencer]

This sounds great. We'll avoid any messy mortgage failures by just having the govt. increase its exposure to risk in the real estate market. We can't lose! Ask Donald Mudd!

[Laker]

The government today is the largest subprime lender.
3.5% down payment. As a renter, i had put more than that....
Funny, but that subprime lender is also called the tax payer...and who is going to get screwed by all the defaults coming to roost? The tax payer. Brilliant.

[Mo]

This is going to end up being yet another financial disaster. And no one from government will be able to say this was unforeseeable. But still nothing will be done about it until it's too late... I really love the people who are in charge of this country.

[joan jett]

"Interesting that the FHA hasn't changed its ground rules while other lenders have been tightening standards. Down payments as low as 3% will increase to 3.5% next month, but still. Who else is accepting 3% down these days?"

The answer is we are, The FHA is us (the US Governement) we tax payers are the only ones they can pawn these 3%, sure to default loans, when the knife catchers buying today realize they jumped the gun. Another bailout will ensue. Along the way those same people risking tax payer money thinking the bottom is in (circa 2008/2009 "investors") will pay more than sensible people and keep housing too higher for longer than it needs to be. 3% is rediculous, throw in a touch of closing time money changing and that 3% becomes 1-1.5%, which is nothing to walk away from when these soon to be fingerless "investors", even on a $600k loan!

So rest assured Californians there are still folks out there searching long and hard to snap up the good deals and flip them. Have we learned nothing?

[joan jett]

From the Venture County Star:
“Michael Greaves has two words when asked to describe the real estate market. ‘It’s dead,’ the Ventura real estate investor said. ‘This whole year has been a joke.’”

“Greaves said he doesn’t think prices will drop much more than they already have. But if prices continue plunging, he said he’d be able to weather the storm. He paid cash for a five-bedroom house he bought in Ventura eight months ago that he fixed up and listed for sale by owner three months ago for $435,000.”

“He hasn’t had a ton of calls, but there’s been some interest among investors and ‘ridiculous’ offers as low as $280,000. As much as he’d like to snatch up more bargains, he said, he can’t because his money is tied up in the Ventura property.”

Until we purge the market of these gamblers housing will not come down to sane levels.

[Jonah1979]

My wife and I are considering FHA because of the 3.5% down payment requirement. The question was asked...who else is excepting 3% these days? My question is who has $40,000 to put down these days?

[E]

FHA? Who needs FHA?

What we need are owners who are selling, banks that are selling, and the manipulative RE agents that slimily work for the industry to wake up and smell the damn coffee.

Here's two houses in 90068. One I would like to call the "superdelusional I wanna sell my trailer-like P.O.S. house for 500k as a shortsale"

http://www.redfin.com/CA/LOS-ANGELES/6215-GLEN-OAK-St-90068/home/7130346

And this house that was recently sold for 520k, which I am happy to use to pronounce bottom and it wasn't even an REO.

http://www.redfin.com/CA/Los-Angeles/2910-Belden-Dr-90068/home/7130034

If the formatting didn't work, the addresses are...

6215 Glen Oak St 90068

2910 Belden Dr. 90068

Feel free to do a driveby to compare.

Moral of the story.

THE LONGER IT TAKES REALTORS AND SELLERS TO LOWER THEIR PRICES TO REALITY, THE WORSE THINGS GET FOR ALL OF US.

all of us.

Now you know who to blame when you get laid off.

[Laker]

E, Great findings, You knocked me down of my chair as i laughed my a$$ off of that P.O.S dog house.
In fact, this is the first time i see a dog house with a chimney. You can buy a nicer dog house at Pets mart, Petco, or Costco for $500. Why pay $500,000.....

I can question you call for a bottom on the 2910 Belden Dr. Check out property shark, you'll find that the owner that bought the house on 12/02/2008 had actually pulled a permit to remodel the kitchen back on 7/7/2008 ??? (5 months before he bought the house....)
I think this is intra family sale or contractor that took the house from the previous owner by some deal/trick/whatever....
BTW: That place was bought in 1967 for $6,000.....and their property tax is $1200 annual!!! I would buy it and let the previous owner carry the paper....huge tax savings....