that's what the headline said.
well I've been a mortgage lender for over 30 years so I was interested in what the hidden fees might be, but what I found out was
there weren't any, still looking
Behind the headline was an article written by Stephen Gandel, Sr. Editor, for CNNMoney.com.
Apparently Stephen felt that the real article entitled
FHA's solvency plan isn't fair
might not draw the attention he wanted, so
well credibility isn't really important anymore, now is it?
so on to the unfairness
what is being questioned here is the FHA's requirement for homebuyers to pay monthly mortgage insurance premiums for the life of the loan. he compares the cost to that of getting a conventional mortgage with a 20% down payment.
on old cliche' here please
that's comparing apples and oranges
the FHA allows a homebuyer to acquire a mortgage with a minimum payment of 3.5%, a credit score of 640 (and in some cases lower), with fairly reasonable ratios, and guidelines. Also the source of the down payment, closing costs, and prepaids may come from a DPA (down payment assistance program), a gift, or the seller may contribute up to 6% of the sales price toward the buyers cost.
there's no comparison to the requirements of a 20% down convention mortgage, the risk is substantially different
and for some reason Stephen feels the cost and terms should be the same. Well I disagree.
Anytime we see a structural change of significance, initially there is some resistance, but upon further examination we realize that the impact may not be as dramatic as originally thought, and/or the change may be necessary.
There was no data provided in the article as to what the average time is that FHA buyers keep their mortgage, to me that might have been helpful. Also, I found it interesting that he stated that with a 5% down payment previously the FHA insurance would be dropped in 7 years.
Now I've done a plethora of FHA mortgages and I can probably count on one hand, and may not need all of my fingers, how many times an FHA buyer made a 5% down payment. Most FHA buyers choose the minimum 3.5% down payment. I mean if he can't get the simple stuff straight maybe he shouldn't have written the article.
Now, as for the premise, as to is it fair?
FHA loans are higher risk, without question, therefore applying different guidelines is okay with me. Also, while that is the guideline today, as anyone who has been involved with FHA buyers knows this guideline may not be forever.
These rules change a lot.
Do we need it at this time?
To keep FHA stable, and a viable alternative going forward it's safe to say we probably do. With these increases the buyers will bear the burden of keeping the program solvent, and not the taxpayers in general.
Personally, I think that's appropriate.
Okay, back to the beginning;
Hidden costs?
doesn't appear to be any. The costs are very much out in the open, for all to see.
Unfair?
I really don't think so, and if you disagree please offer some alternatives, as for the past few years FHA has played a vital roll in financing, as the traditional MI companies backed off, while licking their wounds.
I guess my conclusion would be that it's fair and/or necessary
for now
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