We need to ABOLISH FHA Loans!!!!

I wanted to thank everyone for their comments… I will try to get to each one of you sometime today… but I did want to make a reference to comment # 54, because I think this comment was spot on and some of the answers could be scary.

C. Loyd states.... "There has been a major heist, and the fat cats are tossing mis-directions at us.  Why haven't they been arrested?  Freddie, Fannie, and FHA....they should all be spared.  Reform, yes, but not abolished.  Let's start be getting rid of the Federal Reserve and open up an American National Bank.  Let's Get Rid of the current Election Finance Laws and Let's start over." 

Overall, there is a lot of truth in his comment about the Federal Reserve and why it was founded in the first place. I am reading this book... I am not finished with it.... but if anyone of you get a chance, please read : "The Creature from Jekyll Island".... by G.Edward Griffin .  This actually might scare you more than your greatest fears... thanks & I will be back later..

JAMES.. comment # 29 ... . I think many of us can say that FHA is being used a lot. And yes, fear is huge. I personally believe that even if you have 20% to put down, that you put as little down as possible. Just so many unknowns out there now, even if you think your job is stable. Now, I would still work all the numbers for the client, and go over their options. On a FHA mortgage, even if you put 20% down, you still have monthly mortgage insurance for 5 years. And even if you got rid of mortgage insurance on a conventional, it still depends on your pricing hits and such, just to get a conventional mortgage. Just more things that loan officers need to do for their clients.

MICHAEL... . who is that question to?  But I will answer it from my own point of view and I will be writing a blog about this today. Putting an additional 10% down, depending on credit scores and such, might not drop your mortgage payment as much as you would think... even if you lose the monthly mortgage insurance. I know this because I do these types of numbers daily. and I will be writing about it.  thanks

LEIGH... . comment #32... . I am not going to disagree with some of your statements. But you have me confused, because some of your comments point to that getting rid of FHA would be good and having it around is a must. You talk about the fact that it could lower prices if not around, but if not around, that are market would suffer. And then in your last comment, #32, you ask me a question if prices would go down. I will say this.. yes, many of those no docs and stated income loans helped push prices up some. But there were many other factors than just that. You could point the fingers at 4 different things. Overall, my whole point to this post is if FHA would disappear tomorrow, we might as well kiss are butts and the real estate market goodbye.  thanks for adding to this..

LEIGH... .  you had stated this.. "I'm just asking that people take more responsibility...asking too much?"  I agree.. many people don't take responsibility, even when things were going good. You again bring up some excellent points. Many things that I could talk about. But part of what I talk about is to not only educate the average consumer and realtor about mortgages and real estate, but that is to possibly get business.. helping these borrowers directly. Not sure if you have subscribed to my blog..  but please do so.. Not today, but in a few days, I will be writing about how even good loan officers have hurt us. And when I say good, I am talking about ones that claim they can close a loan and give very good rates. That is great... but when the borrower is still not educated on the types of mortgages and or that the loan officer has not gone over the borrowers goals and explain on how refinancing works , etc, etc.. this is another major issue.

In regards to your other statement about people putting 30% to 40% down... that just won't happen in 98% of all cases. Yes, there are more cash buyers now than before.. but these are usually investors that were smart... and have the money to gobble up houses that have dropped in prices. Thank god for some of these investors, otherwise our market would be more in a tank.  In regards to some other great points that you brought up, about the average American and their 401-k.. another excellent yet scary topic... I agree.. it's scary... and maybe home buying should not be the main focus as so many put out there. But it should come with education..and it really doesn't. Who does one trust when getting a mortgage?  Just because the loan officer gives you the best rate?  In my opinion, hell no... and I will tell you why in my blog that I will be writing on Saturday, about this and what I mentioned above.  thanks again for your excellent feedback.

AARON... . comment  #34.. . I am going to semi disagree with you... a better score is not always the answer. Stricter underwriting guidelines won't change a lot of this mess, even if we had it before. Even putting 5% down wouldn't have stopped the bleeding... or even slowed it down. My main point and focus to this was unemployment. There have been thousands of families that even put 5% down and qualified easily, that have now lost their house and or face foreclosure. Yes, there were many bad loans from 2002 - 2005, those COFI arms and stated loans, when loan officers inflated the borrowers income to make the deal work.. we could be here all day on this. We both will agree though that FHA loans are an essential part of our market today.. thanks

MIKE... . comment # 37.. . is Richard Smith trying to do what's right for this housing market? Or maybe trying to make a name for himself?  Or has an agenda?  I see many that sell theory and other things out there, in this real estate market, scary to me... I am leery and careful. Manly because they make it sound easy or that it makes sense.  But they don't give their reasons as to why. They skate around those issues. Hence why I am leery of people like Richard. Please, ask Richard why it really would matter if someone put 5% down?  I still haven't heard direct statements to this fact. All I keep hearing is that people would have more skin in the game, and that it could help.  It could?  An extra 1 1/2% down?  Here is the reality to that argument of his... if I lose my job and I am the primary wage earner in my family, what do you think will happen with my house in a few months?  As I mentioned to Leigh above, in one of my comments..  I will be writing about this on Saturday, if I don't do this tomorrow.  Some of these messes come down directly to the loan officer and on how they educate borrowers. I will get detailed with this in that post.

Overall.. these small numbers that you talk about don't mean much to me.  Look at VA loans and USDA loans. They allow for 100% financing, yet their default rates are lower... I am not sure how much lower. And I would bet that USDA's numbers climb some since it has become more popular in the last year. Which is one of the points that I made above, in my post, that FHA mortgages have increased buy like 30% in the last 2 years. That and with bad loan officers, underwriters, and more jobs being lost, these are the reasons to why more FHA loans are defaulting. People have been putting 2.25% to 3% down on FHA loans since I have been in the business in 1992. FHA has been around since 1934...  why is there such a problem now, with having more money down and harsher underwriting?  I will say this again.. a very bad and unpredictable economy.

About 3 years ago, I spoke with 3 borrowers in one month, all who had gone conventional with 20% down...  all 3 were going to walk away from their house because of financial reasons.  This is huge and not talked about...  and part of the reasons some walk away is because their house is upside down, under water... they don't care about the lost money, even if it ws 20% down. Overall, I am just trying to make some strong points to the fact that you have some of these.... I will be nice..  these people pushing for a little more skin in the game. We need to fix the larger problem at hand.. Jobs.. unemployment.. economy.. making things more affordable... IE. food such as milk, eggs, and so many other things that seem to get lost.. thanks  PS.. I am not singling you out with this loan comment to you.. just the fact that it's long, I didn't want it to be lost in the other comments.. thanks