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TMFBent (99.85)

FHA "Reform" and Bad Reporting

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March 10, 2008 – Comments (4)

typical story.

Taxpayer dollars don't directly support the FHA loan insurance program - the premiums paid by homeowners with FHA loans do. But taxpayers could end up footing the bill if too many FHA loans go south.

Oh really?

Try this on for size, straight from the CBO.

 FHA home loan guarantees are unusual among federal credit programs in that they are generally estimated to produce net income for the government, rather than net costs. That is, the value of collections from guarantee fees is expected to exceed the value of outlays from defaults. The projected gain to the government from those guarantees during the 1992-2002 period was about 2.5 percent of the dollar volume of loans guaranteed. Actual program performance, however, has fallen short of expectations. Credit subsidy reestimates for guaranteed mortgages disbursed during that period reduced the expected gain to the government by about 0.5 percent of the total dollar volume. On nearly $900 billion in guaranteed loans, that downward revision amounts to more than $4 billion in anticipated net collections that are no longer expected.

Yeah, and that's from 2003. And it's before they added these crummy borrowers jacked up on big loans with almost zero equity (the new rules).

4 Comments – Post Your Own

#1) On March 10, 2008 at 4:43 PM, cabuilderboy (86.16) wrote:

You have to remember, FHA loans practically went away, when the sub-prime and Alt-A programs became the norm during 2003-2006. While you are right, I don't think the exposure is as bad as you may believe. FHA loans are now coming back, as they are the only real viable low down product out there.

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#2) On March 10, 2008 at 6:11 PM, TMFBent (99.85) wrote:

My problem isn't that they're coming back, it's that short-sighted politicians looking to get their A$$ets out of a bind are expanding the program beyond its mandate (low and moderate income housing) and all logic. Now, they want to let people use the FHA process to get houses into the $700K mark, and to let people use ZERO money down.

That will only ensure that people walk away from these loans, as they'll have no equity worth preserving. That, in turn, will mean FHA loans, which were going worse than expected in 2003, are probably worse than that now, will be absolutely ludicrous in the future.

That, of course, doesn't matter to the politicians pushing this plan. They only care about making sure their sorry butts are in the photo op so they can claim they did something to "fix the subprime crisis." What it will mean is more public bailout money, failed attempts to prop up prices. It will ultimately just be a waste of time.

My kingdom for a politician brave enough to look America in the eye and say, "You paid too much or your houses. Now they're dropping in price. Deal with it."

Sj

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#3) On March 10, 2008 at 6:15 PM, AnomaLee (29.20) wrote:

Hey, I'm not the only one posting Congressional Budget Office reports...

We're already going to back the bills of mortgages, and the problem facing the FHA, GSE's (Fannie & Freddie), and taxpayers is that a lot of people in high places want these programs expanded to protect hundreds of thousands(~million plus) from losing their home. Thus, backing both the irresponsible lender & borrower with your tax dollars.

It's the only scenario(trump card) I can see that would restore liquidity to levels that would satisfy the market and move it higher and encourage the financials to lend money...

Besides, it's election year:
    Why not try and buy your vote with your money? 

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#4) On March 11, 2008 at 3:15 AM, FleaBagger (33.44) wrote:

I've set my C-Span alarm (not a real thing) to wake me when someone with integrity runs for major political office. I had to hit the snooze button on Ron Paul because he lost the primary before my state got a chance to vote.

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