News Flash!! FHA is squeezed for money!

This is not much of a shock, although I wish it was.  When the Sub Prime market went out like a match in a rain storm everyone looked to FHA as the new Sub Prime.  So why is it a shock that the rate of defaults is as high as it is?  Until the number of people employed starts to increase instead of decrease these numbers will not change.  Also remember that the unemployment rate does not take into account people who lost an $80K job and replaced it with a $25K job or worse.

Yet after spending more money that has ever been spent the currernt government hasn't created any new jobs except for the Czars that fill the west wing of the White House.  This is not a knock against Obama or his administration.  It is a comment on the severe flaw in our entire government.  They think that they can control the free market, they can smother it, but they can't control it.  Government cannot create wealth, only redistribute which others have created.  Or print money non-stop until it has no value at all.

If the FHA needs more money they will just have to raise interest rates on the bonds they sell until they can garner interest in investors.  Which in turn will raise mortgage rates, which in turn will make Congress whine and cry about affordable housing, which will make Congress do something more stupid than the things they've done in the past.

Do we see a patern arrising here??

So the FHA health is dependent upon wishful thinking?  Without FHA this market will tank even worse.  I suspect Obama and company will just switch on the printing press.

This is such a scary prospect. As was waid earlier... No more bad news!  Unfortunately, that is not up to us.  I hope that those to whom we trust our lives and careers, I hope we can get our act together and build a future we can all be proud of.

FHA has been through times like this in the past.  What they usually do is change the MIP.  Default rates on FHA sky rocketed with the advent of Ameridream and Nehemiah.  At the same time those programs were outlawed, the real estate bubble burst and unemployment went thru the roof.  FHA will change a little but it will be fine.

What really scares me is that Barney Frank wants to be appointed Secretary of HUD.  THAT will be a crises.

I am going to have to come back when I have time and read all of the comments as it sounds like there is much more to this than you wrote about.  Thank you for getting the dialogue going!

Since the demise of the sub prime market, I have always viewed FHA as the next mortgage crisis. Some, not all, people who got subprime loans and have defaulted were homeowners that should have remained renters until the saved some money. Although the rapid downturn in the economy including job loss expedited the situation, home ownership is a responsibility some are just not ready for. FHA has just replaced sub prime loans as another avenue to make this very specific group of people glorified renters. When they cannot pay their "rent" anymore they just want to ditch the property.

Having said all that, I do believe it is a good program when used correctly.

Wow Ted. I guess that the FHA people are now wising up a bit.

Wow. You sure sparked some controversy here Ted!

We must remember that over the last 2 years FHA has experienced jumps in producition numbers higher than they have seen in years. Combine these numbers with desperate homeowners, mortgage brokers/bankers, foreclosures, tighter lending guidelines and we find a HUGE increase in loan fraud. FHA MUST make appropriate changes to remain in the game. I applaud the changes, (although it willmake our jobs more difficult, and like we needed THAT) but in order for us to continue to have a product for our borrowers that actually DO qualify for a mortgage we must hang tight and allow for the bad seeds to be weeded out (again).

This product WILL continue to be available, and I believe WITHOUT government bailout!

Another fine mess you have gotten us into, Ollie! Mu, mu, mu.

Thanks for the post Ted. FHA has always been a fantastic alternative to conventional lending. I work at a Brokerage that refuses to get FHA licensed. In my mind that is Lending suicide. I am however an expert at VA Loans and that is what has carried me through the craziness. I would advise all Real Estate professionals to ask their potential clients if they have ever served in the service. Ted one thing I don't understand is why the FHA loan  guidelines become harsher. It is a full qualification program. IF we look at he over all default rate wanst 95% of the mess caused by subprime crap?

Any ideas what might happen to the manufactured home industry if FHA ran out of money. Presently the lions share if not nearly 100% of all Manufactured Home loans are FHA if not VA, guarneteed. Our company www.onthelevelcontractors.com does the engineered certifications and foundation retrofitting and inspections on manufactured homes throughout the USA. If FHA goes down so do we in a heart beat.

Wow, and we want to do FHA loans right now since we can still use our own appraisers and not the stupid HVCC appraisal fiasco.

I wouldn't worry too much about it in the short term.  I'm sure that the current administration will just print up some more money and dump it into the FHA reserve account.  All is well with the world...well, at least until the dollar becomes worthless, inflation goes through the roof, and China stops lending us money.  But until then...all is well with the world...

Tighter loan restrictions = less loans = less houses sold for us.  Ugggg........