Did we learn nothing? FHA relaxes lending guidelines

While I'm not for No-Doc loans coming back, I don't think that you can blame the current market conditions on stated-verified loans. Many people, particularly small business owners, structure their taxes in a way that it makes it seem as if they don't make that much money. Yet these same people can easily afford a mortgage... hence the portion you "verify". Thanks for the post.

Robert - a cynic?  That would only apply to a person who might view an outcome with an optimistic vent.  In this case optimism is pointless, abuse is a sure thing.  I'd call you a realist.

Maybe the rules were too tight, and they have been able to swing back to a healthier state. We will see in a few years looking back, I'll bet.

There is reason to be concerned aboout high ratios.  When the economy (or health or accidents or divorce or whatever reason) causes a drop in income, people are already stretched too thin.  Logical exceptions might be a situation like a medical residency or a building trades apprenticeship program where the income is lower for the present but there are scheduled increases down the road.

There are parts of the country that rate very well for housing affordability. If housing is not affordable in one part of the country, then there are other areas where home prices are quite reasonable relative to household income.

As an ex FHA underwriter, I still keep up with HUD notes.  I haven't seen this.  They used to have an extended guideline that said if the potential homeowner could prove they were already used to living with this debt load, they would relax the "ratios" that they've never really had.  It would be typical for a lower income person to have a higher DTI (debt to income) ratio) simple because their income level would require that. 

I'll have to check with the HUD notes and will follow up on this.

Welcome to the new subprime and it is backed by you the American Tax Payer.

I can't blame the investor for trying to protect their interests as much as possible.  However, the lenders still have to tighten their belts or we are only going to dig a deeper hole that we will never get out of.

Hi Robert -- I just heard that for Fannie Mae 10% conventional loans that the lender often elects to only do drive-by appraisals and not require interior inspections -- I found this shocking.  Is this an acceptable guideline have you heard?