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Message
One reason the market has been slow to correct - FHA bailing out delinquent mortgages
Posted on 5/31/23 at 10:15 am
Posted on 5/31/23 at 10:15 am
TL;DR Delinquent mortgages are getting restructured by the FHA so that owners don't have to sell their homes or refinance at higher rates. Gotta keep the bubble up.
Rising Rates Make It Harder to Help Distressed Homeowners. Regulators Are Trying to Fix That.
You guys complaining in my other thread about house prices outpacing wage growth (100% correct and a legit complaint) crap like this is why. Until we let the market run its natural course, it will always be an unstable bubble trending upwards.
I don't advocate for anyone to lose their house but sometimes pain has to be felt now to prevent worse pain in the future. We can't keep kicking this can down the road.
Rising Rates Make It Harder to Help Distressed Homeowners. Regulators Are Trying to Fix That.
quote:
The Federal Housing Administration is expected to propose a plan on Wednesday for mortgage borrowers who are behind on payments to get back on track by temporarily reducing their monthly bills. As part of it, borrowers would avoid giving up their super-low mortgage rates.
The FHA would essentially pay part of the homeowner’s monthly bill, using its insurance fund, then structure the repayment as a second loan due after the first is paid off, officials said. It would be available to people who otherwise wouldn’t benefit from a traditional modification that involves giving up their low rate for a higher one.
quote:
The officials are trying to address a problem that is unique to this economy. The Federal Reserve is lifting interest rates and vowing to keep them elevated to combat inflation, last year pushing mortgage rates to their highest level in more than two decades. At the same time, the economy is showing signs of strain, and more Americans are running into financial trouble.
Historically, homeowner distress has risen when the U.S. is heading into a recession and the Fed is cutting interest rates to stimulate the economy. Struggling borrowers can then take advantage of falling rates to reduce their monthly mortgage payments.
quote:
If a homeowner has an $800 monthly principal and interest payment, the supplement from FHA might cover $200 so the homeowner only has to pay $600. The mortgage company would pay the $200 to the investor that owns the loan and then get reimbursed by FHA.
The homeowner would make up the payments at the end of the loan term, a similar repayment structure to the pandemic hardship programs rolled out in 2020.
You guys complaining in my other thread about house prices outpacing wage growth (100% correct and a legit complaint) crap like this is why. Until we let the market run its natural course, it will always be an unstable bubble trending upwards.
I don't advocate for anyone to lose their house but sometimes pain has to be felt now to prevent worse pain in the future. We can't keep kicking this can down the road.
This post was edited on 5/31/23 at 10:16 am
15
Posted on 5/31/23 at 10:20 am to stout
So if you have a good credit score you pay more
And if you pay taxes you pay for delinquent mortgages of others
Sweet
And if you pay taxes you pay for delinquent mortgages of others
Sweet
Posted on 5/31/23 at 10:23 am to wileyjones
The financially responsible get screwed no matter what in the current system
Posted on 5/31/23 at 10:23 am to stout
Sweet, so I can quit paying my mortgage to pay off other stuff until FHA approaches me with a reduced payment plan at my current interest rate while they pay the balance of the payment, so my loan doesn't get extended?
fricking sweet. No way this will encourage any bad behavior.
fricking sweet. No way this will encourage any bad behavior.
Posted on 5/31/23 at 10:27 am to stout
More welfare
Posted on 5/31/23 at 10:27 am to stout
quote:
You guys complaining in my other thread about house prices outpacing wage growth (100% correct and a legit complaint) crap like this is why. Until we let the market run its natural course, it will always be an unstable bubble trending upwards.
I question the political will to let this happen in the near future.
Too many people's wealth or wealth growth potential is tied up in their housing.
I hope Im wrong because...
You're right, the correction needs to happen. But the "smart" politics is to avoid it.
Posted on 5/31/23 at 10:30 am to stout
And where pray tell is the FHA getting this money they are giving away.
Posted on 5/31/23 at 10:35 am to DownshiftAndFloorIt
quote:
Sweet, so I can quit paying my mortgage to pay off other stuff until FHA approaches me with a reduced payment plan at my current interest rate while they pay the balance of the payment, so my loan doesn't get extended?
If you have to ask, then it won't apply to you. You'll get bent over and face the full force of bankruptcy. But to half the country, they'll keep getting everything reimbursed for them to live. The law only applies to us civilized people trying to follow it. I think you have to be born into that other privileged side.
Posted on 5/31/23 at 10:38 am to kywildcatfanone
quote:
And where pray tell is the FHA getting this money they are giving away.
From their insurance fund that they currently use to insure mortgages.
The fund is typically used to pay back lenders that complete a successful repossession on a house that meets all conveyance standards. FHA/HUD takes the house back, reimburses the lender that made money off all the interest up to that point, then maintains and/or repairs the house until it sells. More often than not it is sold at a loss which is a taxpayer-funded burden. Banks lose nothing on the deal and keep the profits from the interest. Also, they typically use creative accounting to write it off still.
If a house doesn't meet conveyance standards (the standards are really low BTW) then the bank keeps and eats it. Banks are obviously motivated to ensure it meets standards at all costs especially since they get paid back for those costs.
This post was edited on 5/31/23 at 10:49 am
Posted on 5/31/23 at 10:39 am to stout
Freeeee shite for everybody !
What could possibly go wrong?
What could possibly go wrong?
Posted on 5/31/23 at 10:42 am to stout
Corruption is pervasive. It's hard to fathom.
Posted on 5/31/23 at 10:42 am to Koach K
quote:
Freeeee shite for everybody !
What could possibly go wrong?
They claim it will be treated as a second mortgage to be paid back after the first mortgage is paid but we know that will never happen.
I had a few deals I owner-financed over the years once people get behind they never get caught up and the fees just rack up until it finally has to be foreclosed on or they get lucky and sell it bailing themselves out.
This move by FHA is throwing good money after bad as I bet the vast majority that do this will get foreclosed on eventually then FHA is out more on the house than they would have been just letting things run their natural course.
Posted on 5/31/23 at 10:44 am to stout
quote:
The officials are trying to address a problem that is unique to this economy.
quote:
Historically, homeowner distress has risen when the U.S. is heading into a recession and the Fed is cutting interest rates to stimulate the economy. Struggling borrowers can then take advantage of falling rates to reduce their monthly mortgage payments.
This may be what makes me snap.
Posted on 5/31/23 at 10:47 am to wileyjones
Are you a white male?
Posted on 5/31/23 at 10:47 am to SlowFlowPro
quote:
This may be what makes me snap.
That statement is such BS considering just a few years ago everyone could have refinanced and taken advantage of sub 3% rates
Posted on 5/31/23 at 10:50 am to stout
Its all about individual perspective.
Posted on 5/31/23 at 10:53 am to SlowFlowPro
I think it's important for those who don't know the difference between FHA and FNMA/FHMLC loans to understand.
Soooo, your conventional loans (Fannie and Freddie) represent 82% of market share, while your VA and FHA represent 18%. It's a bullshite bailout proposition, but it's impact isn't as great as one would think.
Personally, when I was lending, if someone wanted an FHA loan, I would suggest they go to another lender. I did not want to frick with the additional 3 inches of paperwork.
Soooo, your conventional loans (Fannie and Freddie) represent 82% of market share, while your VA and FHA represent 18%. It's a bullshite bailout proposition, but it's impact isn't as great as one would think.
Personally, when I was lending, if someone wanted an FHA loan, I would suggest they go to another lender. I did not want to frick with the additional 3 inches of paperwork.
Posted on 5/31/23 at 10:55 am to stout
They will do fricking anything to keep housing prices propped up. I don't think there is another more valued position in American politics other than possibly abortion (on either side of the poles).
Posted on 5/31/23 at 10:56 am to stout
quote:
We can't keep kicking this can down the road.
Yet we do...
The cycle of giving other people's money away for power will not end....
Until it ends....
Badly...
Then the same idiots will be pointing fingers asking "why did this happen?"
"We need more laws to prevent this"
"Damn rich people"
"Damn Trump"
Posted on 5/31/23 at 10:56 am to The Goat
quote:
but it's impact isn't as great as one would think.
It's more than enough to affect prices on a larger scale. When bubbles pop, they don't start with a major event typically. Issues arise in smaller areas and those effects work their way up.
If 18% of the market had a 10% decline in value, that's going to have a major impact for all loans/areas.
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