Posts Tagged
‘FHA’
by ilene - August 13th, 2010 4:27 pm
Courtesy of JESSE’S CAFÉ AMÉRICAIN
Weren’t FHA loans supposed to be a form a welfare for ‘poor people?’ Not since the Expanding America Home Ownership Act of 2007.
And it appears this is one ‘reform’ that can’t be blamed on ‘the liberals’ and Obama. Crony Capitalism is not a political party, it’s a way of life in which power and greed are the measure of all things.
Well, some of the New York real estate developers are poor, relatively speaking, compared to an investment banker or a trader pulling down a fifty million dollar annual bonus for packaging fraudulent financial instruments. But they are all rich in their well connected friends in the government.
The kleptocracy never sleeps; crony capitalism knows no bounds…
NBC New York
Luxury Condos Asking the Feds For Help
By JUAN DEJESUS
Fri, Aug 13, 2010
Seek FHA insurance to drive condo sales
The federal government may soon come to the rescue of stalled luxury condominiums in Manhattan.
Manhattan luxury condominiums known for posh amenities and high price tags are beginning to apply for Federal Housing Administration backing.
Condominium developers hope to open financing opportunities for their purchasers as well as guarantee a little protection for themselves. Not only will lending institutions be more willing to lend to purchasers with FHA backing, but the FHA will pay the mortgage should a home buyer default.
The FHA loosened the condo rules because of “market conditions,” Lemar Wooley, an agency spokesman told Bloomberg.com
The administration recently agreed to insure mortgages for apartments at the 98-unit Gramercy Park development, known as Tempo in Match, according to Bloomberg. That deal allowed buyers to make a down payment of as low as 3.5 percent in a complex where apartments run up to $3 million…
Tags: Crony capitalism, FHA, kleptocracy, luxury condominiums, Mortgages, OLIGARCHS
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by ilene - June 15th, 2010 11:00 pm
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Courtesy of Mish
The estimated taxpayer costs of the GSE bailouts grows by the day and has now hit as much as $1 trillion.
Please consider Fannie-Freddie Fix at $160 Billion With $1 Trillion Worst Case.
The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history.
“It is the mother of all bailouts,” said Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry.
The Congressional Budget Office calculated in August 2009 that the companies would need $389 billion in federal subsidies through 2019, based on assumptions about delinquency rates of loans in their securities pools. The White House’s Office of Management and Budget estimated in February that aid could total as little as $160 billion if the economy strengthens.
If housing prices drop further, the companies may need more. Barclays Capital Inc. analysts put the price tag as high as $500 billion in a December report on mortgage-backed securities, assuming home prices decline another 20 percent and default rates triple.
Sean Egan, president of Egan-Jones Ratings Co. in Haverford, Pennsylvania, said that a 20 percent loss on the companies’ loans and guarantees, along the lines of other large market players such as Countrywide Financial Corp., now owned by Bank of America Corp., could cause even more damage.
“One trillion dollars is a reasonable worst-case scenario for the companies,” said Egan, whose firm warned customers away from municipal bond insurers in 2002 and downgraded Enron Corp. a month before its 2001 collapse.
Foreign governments, including China’s and Japan’s, hold $908 billion of [Fannie and Freddie] bonds, according to Fed data.
“Do we really want to go to the central bank of China and say, ‘Tough luck, boys’?
The terms of the 2008 Treasury bailout create further complications. Fannie and Freddie are required to pay a 10 percent annual dividend on the shares owned by taxpayers. So far, they owe $14.5 billion, more than the companies reported in income in their most profitable years.
“It’s like a debt trap,” said Qumber Hassan, a mortgage strategist at Credit Suisse Group AG in
…
Tags: Bailout, Ben Bernanke, Congress, Fannie Mae, FHA, Freddie Mac, GSE bailout, mortgage finance industry, taxpayers, the Federal Reserve
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by ilene - May 28th, 2010 12:00 pm
Introduction, courtesy of Michael Panzner of Financial Armageddon, ‘Who Benefits?’
It’s not often that I highlight material from the same blog more than once over the course of a few days or weeks. But then again, there are not too many commentators who are as thoughtful and insightful as Charles Hugh Smith, author of Survival+ and publisher of Of Two Minds blog, a long-time favorite of mine. Last time around, he gave us a no-holds barred assessment of the so-called recovery. In "The Root of the Housing Bubble Remains Unchanged," he suggests, among other things, that for many people, there’s little to gain — and lots to lose — from pursuing the traditional American dream.
Courtesy of Charles Hugh Smith
Banks and Wall Street profited immensely from millions of unqualified home buyers reaching out for the simulacrum of middle class "ownership."
The fundamental root of the housing bubble--the collusion of the Central State and banks to extend home ownership to millions of citizens who did not qualify for that burden-- remains firmly in place.
The Federal government continues to pour tens of billions of dollars into this "home ownership should be for everyone" project via subsidies to Fannie Mae, Freddie Mac and FHA. Mortgage lenders have been delighted to write mortgages in our completely nationalized market in which the government backs literally 99% of all mortgages and the Federal Reserve bought $1.2 trillion in mortgages that no sane private investor would touch.
Fannie Mae seeks $8.4 billion from government after loss: Fannie Mae, the largest U.S. residential mortgage funds provider, on Monday asked the government for an additional $8.4 billion after the company lost $13.1 billion in the first quarter.
Because of current trends in housing and financial markets, Fannie Mae expects to continue having a net worth deficit in future periods and to need to tap more funding from the Treasury.
"Promoting sustainable homeownership and maintaining ready access to liquidity are our guiding principles in serving the residential markets," said Michael Williams, the firm’s chief executive.
The government has relied heavily on both companies, which buy mortgages from lenders to stimulate more lending, to stabilize the housing market.
In other words, the housing market would collapse without this massive Federal support, and there is no end to the losses this subsidy will require. Propping up the…
Tags: debt, default, Fannie Mae, Federal government, FHA, Freddie Mac, home ownership, housing bubble, policy makers
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by ilene - May 24th, 2010 11:20 pm
Courtesy of Mish
The US mortgage market is extremely sick and getting sicker every month. For the first time ever, the FHA is issuing more mortgages than Fannie and Freddie. The reason is the FHA has lower down payments.
Please consider FHA Home-Financing Volume Sign of ‘Very Sick System’.
FHA lending last quarter may have topped the combined volume of government-supported Fannie Mae and Freddie Mac in a home-lending market that’s still a “government-financed market,” David Stevens, the agency’s head, said today at a conference in New York, citing research by consultant Potomac Partners.
“This is a market purely on life support, sustained by the federal government,” he said at the Mortgage Bankers Association conference. “Having FHA do this much volume is a sign of a very sick system.”
The FHA, which backs loans with down payments as low as 3.5 percent, insured $52.5 billion of home-purchase mortgages in the first quarter, compared with $46 billion of purchases of the debt by Fannie Mae and Freddie Mac, according to data compiled by Washington-based Potomac Partners.
The FHA and Fannie Mae and Freddie Mac, which regulators seized in 2008, have been financing more than 90 percent of U.S. home lending after a retreat by banks and the collapse of the market for mortgage bonds without government-backed guarantees.
To sell houses the government needs to give $8,000 tax credits and the government also needs to grant the mortgage as well because the private marker won’t.
This is on top of the $trillion in mortgages on the Fed’s balance sheet. Supposedly Bernanke will sell them at some point. Any bet the Fed buys more first?
Can I ask a simple question: Who does not have a house that wants one and can afford one, and does not need money from the government to buy one, and is not in danger of losing their job?
Supposedly there is a recovery underway. Recovery my ass.
Mike "Mish" Shedlock
Tags: Economy, Fannie Mae, fed's balance sheeting housing market, FHA, Freddie Mac, houses, Mortgages, Recovery
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by ilene - November 19th, 2009 3:15 pm
Courtesy of Tom Lindmark at But Then What
Anyway you slice it or try and put a happy face on it, the news on housing over the past few days has been pretty sobering. I don’t take the decline in housing starts as all that bad a development, the last thing the markets need is more supply, but the decline in mortgage applications is significant.
The industry flacks tried to tie it to the uncertainty over the renewal of the tax credit. If that’s the case then we got a glimpse of where housing is going to be when we take the training wheels away. Maybe more to the point, a survey by the National Association of Realtors no less indicates that only 6% of the buyers cited the tax credit as the primary reason for buying a home.
In my opinion, the recent spurt in buying has been driven by low rates and cheap prices. Two pretty good reasons for people to buy. But here’s the kicker. Most of the activity has been at the low end fueled by investors and first time buyers. Two thin markets and nothing upon which a boom is going to be built.
I’ll throw in one more thing that’s driving this market. Irresponsible lending. Yup, the same thing that fueled the last spurt. At least this time it appears as if some of the buyers might recognize that this road leads to lots of grief. Don’t buy the argument. Check out this and this. At least FHA appears to be running out of wiggle room fast so the bailout shouldn’t be too drastic.
Put that together with the employment figures and it’s really hard to see how this little spurt is anything more than a blip. My guess is that aside from the investors it’s comprised of a group of people that were shut out by higher prices and jumped into the market at an opportune time but their numbers are limited.
I wouldn’t be at all surprised to see a lot of the recent investors throwing their purchases back on the market as rental rates have plummeted and the cash flow assumptions they used to justify their investments probably aren’t panning out. Prices for the low end have come back
…
Tags: delinquent borrowers, Economy, Employment, FHA, housing starts, Irresponsible lending, mortgage applications
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by ilene - November 15th, 2009 10:34 am
By Barbara Kiviat, courtesy of TIME
If you bought or refinanced a house within the past year, there’s a 1 in 4 chance you have the Federal Housing Administration to thank. The Depression-era agency, once the last resort of folks who were less-than-perfect credit risks, was practically forgotten during the real estate boom — anyone with a pulse qualified for a mortgage. Now the FHA has resumed its old role by propping up the housing market, since private lenders began shunning all but the least-risky loans. The FHA doesn’t lend directly but rather entices lenders do so by agreeing to cover any losses. The FHA stood behind fewer than 3% of new mortgages in 2006. In 2009, just three years later, the FHA insured nearly 30% of home purchases and 20% of refinances.
That hasn’t come without cost. As the FHA filled the void left by the private sector, it has assumed the risks of those loans. And now that a growing number of people have stopped paying their mortgages, the FHA has had to pay out more in claims that it forecast. The agency has just $3.6 billion on hand to cover any unexpected losses in its $685 billion portfolio. That paltry level of reserve funding, less than is mandated by the government, has left some members of Congress in a twitchy mood and some onlookers to wonder if the FHA will eventually need a massive infusion of cash.
If Congress does wind up extending emergency funds to the FHA — which is a full-fledged part of the Federal Government, unlike quasi-government bailout beneficiaries Fannie Mae and Freddie Mac — it will be in large part because of the role the agency has played in stabilizing the housing market. Last spring, as first-time home buyers rushed to take advantage of the $8,000 tax credit designed to lure them into the market, the FHA insured a full 49% of their mortgages. In October, Congress renewed a higher limit on the size of FHA loans (now up to $729,750), first put in place last year, to allow the agency to expand into pricier markets. "The government may need to inject billions of dollars into the FHA, but the alternative — another perturbation in the housing market, more foreclosure aid, more bank bailouts — could…
Tags: Federal government, FHA, Housing Market, loans, low down payment, Mortgages
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by ilene - September 30th, 2009 3:51 am
Welcome back from the break to Tom Lindmark. I was happy to click on your link and find something new!
Courtesy of Tom Lindmark at But Then What
I’ll jump back into posting with a few thoughts on housing.
First, Case-Shiller as out with its July home price survey. It followed the trend of improving prices established over the last couple of months. Nationwide prices were up 1.6% and the number of cities showing price declines dwindled to just two. Here are the numbers for the twenty cities in the survey.
(About the numbers: The Case Shiller indices have a base value of 100 in January 2000. So a current index value of 150 translates to a 50% appreciation rate since January 2000 for a typical home located within the metro market.)
Home Prices, by Metro Area
| Atlanta |
110.06 |
2.3% |
-11.8% |
| Boston |
154.53 |
1.2% |
-4.9% |
| Charlotte |
121.23 |
0.6% |
-9.0% |
| Chicago |
128.32 |
2.7% |
-14.2% |
| Cleveland |
107.93 |
1.5% |
-1.3% |
| Dallas |
121.17 |
1.2% |
-1.6% |
| Denver |
128.79 |
1.5% |
-2.9% |
| Detroit |
70.25 |
1.1% |
-24.6% |
| Las Vegas |
106.08 |
-1.1% |
-31.4% |
| Los Angeles |
163.86 |
1.8% |
-14.9% |
| Miami |
147.27 |
1.3% |
-21.2% |
| Minneapolis |
118.68 |
4.6% |
-17.3% |
| New York |
173.66 |
0.8% |
-10.3% |
| Phoenix |
106.66 |
1.8% |
-28.5% |
| Portland |
150.06 |
1.1% |
-13.9% |
| San Diego |
150.99 |
2.5% |
-12.3% |
| San Francisco |
128.86 |
3.3% |
-17.9% |
| Seattle |
149.44 |
-0.1% |
-15.3% |
| Tampa |
142.84 |
1.4% |
-18.4% |
…
Tags: Case Shiller, FHA, government subsidies, home prices, Housing Market, loans, Recovery
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by ilene - September 23rd, 2009 1:44 pm
How the Government is Setting Us Up for a Second Subprime Crisis
By Shah Gilani
Contributing Writer
Money Morning
Is the government creating another subprime-mortgage bubble?
The first time around, the three-headed federal serpent – the Bush administration, the Treasury Department and the U.S. Federal Reserve – used Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) to "legitimize" trillions of dollars worth of toxic financial waste known as subprime mortgages.
The result was the worst financial crisis since the Great Depression – a mess that was global in nature.
And we’re now headed for a repeat performance.
Some of the players may have changed since the first subprime-mortgage crisis, but the game apparently remains the same. With banks currently unwilling to lend, the new federal triumvirate of the Obama administration, the Treasury and the Fed are trying to inflate the moribund U.S. housing market. This time around, however, the FHA is the weapon of choice.
Obama & Co. are making an all-or-nothing bet that the U.S. economy will recover and bail out the housing market before the final bill for this ill-advised gambit comes due.
When this bubble bursts – and it will – U.S. taxpayers will be on the hook for more than $1 trillion in government-guaranteed debt.
Ginnie Mae: Fannie and Freddie’s Once-Quiet Cousin
As a direct result of the real-estate meltdown, U.S. banks have become reluctant lenders. And they’ve raised their loan standards considerably. Federal officials knew they had to keep the mortgage spigot open, especially to suspect borrowers, so they turned to their new "secret weapon" – the FHA.
The FHA has been cranking out new government-insured subprime loans, which it packages into government guaranteed securities for sale to banks. This frightening reflation of the subprime bubble is being engineered for two key reasons:
- To put a floor under falling house prices.
- And to let banks swap toxic Fannie and Freddie securities for new toxic debt that is 100% guaranteed by U.S. taxpayers.
The almost inevitable insolvency of the FHA could rapidly undermine the fragile recovery of the U.S. economy. And it could plunge stock prices and bank viability to new lows.
Why the FHA? That’s simple. In an era of increasingly stringent lending standards, the FHA’s standards are laughably lax.
Created by the National Housing Act of 1934, the FHA insures private mortgage…
Tags: Banks, bubble, Fannie Mae, FHA, Freddie Mac, Ginny Mae, governemnt, mortgage-backed securities (MBS), subprime crisis, taxpayers
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by ilene - September 9th, 2009 4:20 pm
Courtesy of Charles Hugh Smith of Of Two Minds
Loose lending standards in government-backed mortgages is setting up the next wave of defaults and sharp declines in housing prices.
Beneath the hype that housing has bottomed is an ugly little scenario: lending standards are still loose and the low-down payment, high-risk loans being guaranteed by government agencies are setting up the next giant wave of defaults and foreclosures.
You might have thought that the near-demise of risky-mortgage mills Fannie Mae and Freddie Mac would have cooled the supply of highly leveraged government-guaranteed mortgages--but you’d be wrong, for the Feds have compensated for the implosion of the Fannie/Freddie housing-bubble machines by ramping up their other two mortgage mills: FHA and Ginnie Mae.
These GSEs (government sponsored enterprises) have been around for decades, and have been generally successful due to tightly controlled lending standards.
But the order "save the housing market at all costs!" has been passed down, and the spigots of easy mortgage money have opened. Where FHA only underwrote 3% of the mortgages originated in 2006, now it guarantees about 25%. Between FHA and its VA mortgage sibling, these two GSEs now back fully 40% of all mortgages.
Down payments are as low as 3.5%, and so a first-time buyer making use of his/her $8,000 tax credit could essentially buy a $225,000 house with virtually no money down.
This is moral hazard writ large. Let’s see, the mortgage originator can’t lose because the FHA or Ginnie Mae assumes the risk of default, and the borrower can’t lose more than the few hundred bucks he/she "invested" in closing costs.
In other words, the Federal government has attempted to keep the housing market afloat by ramping up its remaining mortgage mills to fill the easy-money mortgage gap left by the insolvent Freddie and Fannie.
The only problem with this blatant pumping is that a staggering number of these wonderful FHA and Ginnie Mae mortgages are in default and thus doomed to enter the foreclosure pipeline.
Here is a report on the looming FHA fiasco from the Wall Street Journal:
Loan Losses Spark Concern Over FHA:
In the past two years, the number of loans insured by the FHA has soared and its market share reached 23% in the second quarter, up from 2.7% in 2006, according to Inside
…
Tags: FHA, Ginnie Mae, Housing Market, Next Leg Down in Housing
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by ilene - September 4th, 2009 11:48 am
Big sigh of relief!
Echoes of Fannie and Freddie heard in the distance.
Courtesy John Carney at Clusterstock
The head of the U.S. Federal Housing Administration has responded to the Wall Street Journal article raising concerns that the agency might need to be bailed out if its capital reserve ratio fell below the 2 percent demanded by Congress.
"Even if that level falls below 2 percent, FHA continues to hold more than $30 billion in its reserves today, or more than 5 percent of its insurance in force," according to a statement issued by FHA Commissioner David Stevens. "Given this reserve level, FHA will not need a congressional subsidy even if the congressional capital reserve calculation falls below 2 percent."
"FHA’s full faith and credit insurance means that there is no risk to homeowners or bondholders independent of the congressional capital reserve requirement," Stevens said.
You’ll be forgiven for thinking this sounds a lot like the statements issued by the heads of Fannie Mae and Freddie Mac prior to the bailout of those institutions, which happened one year ago today.
Tags: Economy, FHA, Housing, Housing Crisis, Mortgages, regulation
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.