RAISING THE DOWN PAYMENT FOR FHA INSURED LOANS TO 5% IS O.K.?????
Just wait until the folks on Capitol Hill proposing the down payment change rediscover another good source of money for income redistribution. Since the American home owner has few, if any, protectors on Capitol Hill, sooner or later I predict that, a few of them will again attack the Home Mortgage Interest Deduction. Each year, the Home Mortgage Interest Deduction puts about $70Billion in the hands of American home owners. The government spenders, Congress, want that money.
This post inspired by Jeff Belonger's thoughtful article on this subject on October 7.
WARNING: This is a political statement. It's not aimed at a party. To me they are all the cut from the same cloth. When one political party has almost unlimited power, they always appear to develop a pecular kind of hubris involving taking tax money and spending it on their contributors' interests. Whenever I want to find the motivation for a politician's actions, I just try to follow the money.
SPEAKING FROM EXPERIENCE. Jeff Belonger's article discusses the proposal by some Congresspersons to raise the FHA down payment to 5% as the solution to FHA mortgage defaults. I hope this proposal doesn't get legs. Of course, unlike the Congresspersons floating that balloon, I have actual experience with home buyers who financed their home purchase with an FHA loan.
Over the past 25 years, agents in my network or brokerage have assisted over 750 home buyers using the FHA loan to finance their home purchase. During the "boom" years of 2004-2007, FHA loans were few because conventional financed Contracts of Sale received seller preference. HA! Those eschewed FHA loans had some irritating features that protect home buyers through conservative appraisals and property condition requirements (VA borrowers received the same treatment). Those FHA loans were made when the down payment was about 2.75%, 3% and now 3.5%. Many of these loans were made with the Down Payment Assistance program whereby a seller (not taxpayers) contributed up to 4% of their net proceeds to assist the buyers with their down payment. As of January 1, 2009. Congress killed those programs, Nehemiah/Ameridream, etc. I have over 2,000 past FHA buyer/clients in my database and have not yet received any information that a single buyer using FHA financing has defaulted.
SYNONYM: "Skin in the game" is another term for "squeezing blood out of turnips".
DON'T WANT POLITICAL TALK? Folks who don't want these matters to get into political discussions, have their head in the sand.
IT'S ALL POLITICAL. The entities that are making the decisions that make or break mortgage loans are politicians. The politicians make decisions daily that determine who can buy a home and who cannot. They determine, through their power, who can keep a home and cannot. Find out who benefits from the reduction of FHA insured loans and you'll probably find PAC money going to politicians proposing an increase in FHA down payments.
WAS IT POLITICAL TO GIVE $TRILLIONS TO THE BANKS AND WALL STREET GANGS THAT PROFITTED FROM THE MORTGAGE MESS? When tax money was budgeted in the $Trillions to banks and Wall Street and the American home owner is kicked under the bus, that decision was made by politicians who have control of our tax money.
THE GOVERNMENT BUDGET IS LIKE A TAPE WORM? IT NEVER GETS ENOUGH TO EAT. Just wait until the politicians now in power get desperate for more money, they will be after the Home Mortgage Interest Deduction.
DO WE WANT A NATION WITH A MAJORITY HOME OWNERSHIP? OR, DO WE WANT A NATION WITH A MAJORITY OF TENANTS??
Raise the FHA down payment to 5% and another small percentage of prospective home buyers will remain tenants.