FHA The New Subprime?

By
Mortgage and Lending with Oceanside Mortgage Group Inc
As most of you know our company does a great job with mortgage financing! I guess you could say we are one of the good guys in the mortgage industry. We have helped numerous clients get financing when no other could get the job done. We also pride our self on the way we write our book of business. So I was a bit miffed when a rep from a large bank was in our shop the other day preaching to us on how we need to use their FHA service. Normally this would not be a concern to me but the thing that caught me off guard was when she was telling us how FHA is the new sub prime... I was a bit floored by this since if indeed FHA is the new subprime, than is FHA going to be plagued by mass foreclosures in 2 years. It seems like ever mortgage person I have been talking too is touting FHA like this magical elixir, the cure for all ills. All I have to say is stop. Take a look at what we are doing. We as an industry are taking bad loans and forcing them in to a service that was designed by the government to help folks who deserved home ownership but had credit or income issues. When I look at most to the loans that I tried to help out of foreclosure they typical look like this; Bought the house at a great deal, racked the credit cards up, bought a new Hummer (or other 900 per month type of car), added 150K to the mortgage balance to pay off the bad debt, racked it all up again and again and are now fighting foreclosure. My thought are that these loans are being approved by FHA as a glitch since FHA was NOT setup to bail folks out of a BAD decision that they made. At what point do we hold the home owner accountable for their actions. I find myself twisted up on this, as I want to help as many folks out as I can, both for my financial needs and theirs, but are we building a platform for failure in the very near future?

Comments (7)

Brian Sharkey
SharkeyRE LLC - Tequesta, FL
SharkeyRE - #SouthFloridaBroker
It's got to fall on everyones shoulders involved.  The banks know risk better then the customer does.  The customer has to take personal responsibility for the actions they take.  The professionals (myself included) should advice clients.
Feb 25, 2008 10:04 PM
Lorraine or Loretta Kratz
Crescent Moon Realty, Inc. & Land N Sea Auctions. - San Marcos, CA
Certified Negotiation Consultants

George:

It seems that everyone has the Henny Penny syndrome where everyone thinks the sky is falling. Here in California the FHA new limits are being touted as being a rainmaker to help turn our market around.  As yet we have not been told what the new limits will actually be. For California if the new limit is only going to be $500,000 it will not make to much of a difference. If it will go up to the $729,000 yes I can see it changing the present real estate landscape.

Two lender told me yesterday that they are not sure when the new product will be available. Some are saying by May just in time for the tax refund.

Feb 25, 2008 11:07 PM
George Doumaney
Oceanside Mortgage Group Inc - Providence, RI

L & L,

I think your right on the mark.  

Feb 25, 2008 11:20 PM
George Doumaney
Oceanside Mortgage Group Inc - Providence, RI

Brian,

100% true about personal responsibility, and Information.  I think if we can fast forward and then look back we will see that those of us who provided greater information will have happier clients!   

Feb 25, 2008 11:25 PM
Patrice Estess
PB APPRAISALS - Kerhonkson, NY

Brian,

 I couldn't agree more.  I get more and more requests for FHA appraisals now.  I believe <some> subprime lenders are scraping the barrel to get loans done and FHA is attractive...

Feb 26, 2008 12:44 AM
Daniel J. Brudnok, REALTOR
Berkshire Hathaway Home Services Fox & Roach, REALTORS - Exton - PA License #RS-225179-L / Delaware License #RS-0025038 - Downingtown, PA
SRES, e-PRO,ABR,GREEN,CSP

George,

Keep up the good fight......I am one that believe's that there are far more good then bad in the industry....that the lenders (who were by far the main reason this all happened, yet they are not taking the main blame) have had there hat handed to them now and should take steps to not let happen again and lastly, FHA is a great product for those who truly need the product, that who believe that homeownership is the holy grail, not just an investment and if I lose I lose.

Feb 26, 2008 12:50 AM
George Doumaney
Oceanside Mortgage Group Inc - Providence, RI

Dan,

Thanks for the vote of confidence... I think FHA is the best product out on the street.  I guess it just frosts me to see folks abuse the system.

thanks

-george 

Feb 26, 2008 12:08 PM