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Rising down payments and loan costs will hinder a housing recovery


By golfplan18   Follow   Mon, 19 Nov 2012, 10:46pm PST   1,508 views   22 comments
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http://ochousingnews.com/news/rising-down-payments-and-loan-costs-will-hinder-a-housing-recovery?source=Patrick.net

Besides credit qualification barriers due to low FICO scores, there are two barriers to originating more loans and selling more houses to owner occupants: (1) insufficient down payment, and (2) increasing loan costs. The FHA still originates loans at 3.5% down, and the credit barriers are limited, despite realtor pleas and rhetoric to the contrary. However, since the FHA is losing a great deal of money and facing a bailout, they are continually raising their insurance fees as they become the replacement for subprime lending. These increasing costs are making houses less affordable and thereby reducing access to credit. As...

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BobMSN   Mon, 19 Nov 2012, 11:01pm PST   Share   Quote   Permalink   Like (3)   Dislike     Comment 1

It is a crime to provide mortgage to someone with 3.5% down. What’s wrong with renting if one can’t even afford 20% down payment? With 3.5% down, you don’t have the house, but a slave certificate.

Oil Can   Mon, 19 Nov 2012, 11:32pm PST   Share   Quote   Permalink   Like   Dislike     Comment 2

BobMSN says

It is a crime to provide mortgage to someone with 3.5% down. What’s wrong with renting if one can’t even afford 20% down payment? With 3.5% down, you don’t have the house, but a slave certificate.

100% agree.

dodgerfanjohn   Tue, 20 Nov 2012, 12:25am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 3

I'm going to go one further......

Lots of the nation features homes in the $60-150K range. Family incomes in these areas often average $35-50K. Theoretically these homes are in fact affordable by traditional measures to households in these income ranges. However, any savings over a few thousand dollars is very difficult to achieve.

But a mortgage, even with only 3.5% down, is very affordable...cheaper than renting in these areas. Furthermore, if one household member loses their job, its easier to replace a low wage job. And the impact of losing a $12 an hour factory job and replacing it with an $8 Walmart job won't cause the family to miss a mortage payment.

So the deal is, cap off FHA loans around $125-150K. No fucking FHA loans for rich people with six figure incomes buying $400K homes. Yes yes?

Also, please no input from realtors. Do the decently moral thing for once and sew your piehole shut. Let the adults discuss this one.

Goran_K   Tue, 20 Nov 2012, 12:53am PST   Share   Quote   Permalink   Like   Dislike     Comment 4

FHA once it's restructured should have a limit of no more than $250,000.

Kevin   Tue, 20 Nov 2012, 1:28am PST   Share   Quote   Permalink   Like   Dislike     Comment 5

dodgerfanjohn says

I'm going to go one further......

Lots of the nation features homes in the $60-150K range. Family incomes in these areas often average $35-50K. Theoretically these homes are in fact affordable by traditional measures to households in these income ranges. However, any savings over a few thousand dollars is very difficult to achieve.

But a mortgage, even with only 3.5% down, is very affordable...cheaper than renting in these areas. Furthermore, if one household member loses their job, its easier to replace a low wage job. And the impact of losing a $12 an hour factory job and replacing it with an $8 Walmart job won't cause the family to miss a mortage payment.

So the deal is, cap off FHA loans around $125-150K. No fucking FHA loans for rich people with six figure incomes buying $400K homes. Yes yes?

Also, please no input from realtors. Do the decently moral thing for once and sew your piehole shut. Let the adults discuss this one.

$417k (current FHA limit) is barely enough to buy a condo in some cities. One limit for the whole country us a very bad idea.

But yes, there is no excuse for allowing 3.5% on a $400k house in the Midwest.

dodgerfanjohn   Tue, 20 Nov 2012, 1:31am PST   Share   Quote   Permalink   Like   Dislike     Comment 6

Goran_K says

FHA once it's restructured should have a limit of no more than $250,000.

I have a problem with an FHA limit even this high.

It really should not be any higher than 3x the average household income for the state. That is, a loan package that makes an average home affordable to the average family(if FHA 3.5% should even exist at all).

dodgerfanjohn   Tue, 20 Nov 2012, 1:33am PST   Share   Quote   Permalink   Like   Dislike     Comment 7

Kevin says

$417k (current FHA limit) is barely enough to buy a condo in some cities. One limit for the whole country us a very bad idea.

FHA isn't meant to be for high income people. An area being in a bubble or being manipulated by local culture and shyster realtors is irrelevant to how high a FHA 3.5% down loan should be. See my comment about about average household income for what the variation should be.

StillLooking   Tue, 20 Nov 2012, 1:41am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 8

All FHA does is raise the price of housing. So the best idea is just to close this agency.

What if there was an agency of government whose sole purpose was to raise the price of bread? Well maybe there is such an agency but it is bad idea nonetheless.

How does it help lower incomes to pay higher prices for houses?

dodgerfanjohn   Tue, 20 Nov 2012, 1:52am PST   Share   Quote   Permalink   Like   Dislike     Comment 9

SFace says

StillLooking says

How does it help lower incomes to pay higher prices for houses?

Yes, but what is the alternative? If FHA is not available, and in some, they will have to rent, possibly years to forever. I already told one of my tenant that their interest, property tax and insurance would be around 1K -1,2K a month, they are paying me 2.1K.

Look at the cap rate in the non-prime areas. FHA is a great program and out.

Interest, tax, insurance = $1,200 per month is like $150k sales price.

Where on earth do you have a place that's $150k renting at $2100/mo?

BobMSN   Tue, 20 Nov 2012, 2:08am PST   Share   Quote   Permalink   Like   Dislike     Comment 10

SFace says

Yes, but what is the alternative? If FHA is not available, and in some, they will have to rent, possibly years to never.

Again. What's wrong with renting?

If the difference between own and rent is so much as you said (.9k to 1.1k margin). The private investors, like you, and banks would have enough incentive to buy or lend. Why the tax payers have to take the risk?

Apparently, the government is trying to boost the price so it can control more people’s life. FHA encourages risk lending and borrowing.

APOCALYPSEFUCKisShostikovitch   Tue, 20 Nov 2012, 2:14am PST   Share   Quote   Permalink   Like   Dislike     Comment 11

It's CASH or FUCK YOU, America!

Kevin   Tue, 20 Nov 2012, 2:40am PST   Share   Quote   Permalink   Like   Dislike     Comment 12

StillLooking says

All FHA does is raise the price of housing. So the best idea is just to close this agency.

What if there was an agency of government whose sole purpose was to raise the price of bread? Well maybe there is such an agency but it is bad idea nonetheless.

How does it help lower incomes to pay higher prices for houses?

Mortgages raise the price of housing, period. Housing would be very cheap if we had to pay cash. It would also mean that 90% of us would be renters.

There is an agency that keeps the price of bread high. Its called the USDA

dodgerfanjohn   Tue, 20 Nov 2012, 4:00am PST   Share   Quote   Permalink   Like   Dislike     Comment 13

SFace says

dodgerfanjohn says

Interest, tax, insurance = $1,200 per month is like $150k sales price.

Where on earth do you have a place that's $150k renting at $2100/mo?

270000 Loan at 3.5% is about 780 in interest

Property tax = 280

Required Insurance = 50

PMI = 50-100

about 1.1K - 1.2K. I don't count principle as that is not a true cost.

Detached SFH are around 2K. The deeper in the east bay the cheaper it is. In Antioch, they can be bought for 150K, in Concord, around 250K, in San Leandro around 350K.

Interest is in fact an expense, which is arguably a more important factor for most buyers. However, point largely conceeded since expense is still cheaper than rent.

I will say that rents are rather remarkable. There's a directly on point market in LA that is the exact same pricing structure, distance from job centers, train into downtown, etc. That is West Covina.

The difference is that in West Covina, homes that sold at $275k in that condition rent at around $1700-1800/mo. The $350k remodeled places rent at $2200-2500.

If such a market as you describe existed in Los Angeles without a backbreaking commute to Downtown, I'd be a buyer too.

New Renter   Tue, 20 Nov 2012, 4:58am PST   Share   Quote   Permalink   Like   Dislike     Comment 14

APOCALYPSEFUCK is Shostakovich says

It's CASH or FUCK YOU, America!

Oh how I've missed that,

bmwman91   Tue, 20 Nov 2012, 5:18am PST   Share   Quote   Permalink   Like   Dislike     Comment 15

APOCALYPSEFUCK is Shostakovich says

It's CASH or FUCK YOU, America!

Amen! How do I join your church?

bubblesitter   Tue, 20 Nov 2012, 5:45am PST   Share   Quote   Permalink   Like   Dislike     Comment 16

APOCALYPSEFUCK is Shostakovich says

It's CASH or FUCK YOU, America!

I've been saving since the first time you said that on this forum. :)

drew_eckhardt   Tue, 20 Nov 2012, 8:42am PST   Share   Quote   Permalink   Like (3)   Dislike     Comment 17

dodgerfanjohn says

So the deal is, cap off FHA loans around $125-150K. No fucking FHA loans for rich people with six figure incomes buying $400K homes. Yes yes?

No. Your populist attitude suggests that you're not in Congress, don't have a PAC, and therefore don't matter. If that's not the case I apologize.

Such policy changes would reduce sales volume, prices, and commissions for real estate agents who would no longer reward the congress critters who allowed such a thing to happen in the next election.

With the National Association of Realtors' PAC ranking first in contributions to candidates for every election cycle since 1998 (probably before then although the opensecrets.org data stops at 1998) that's not something our elected officials want to happen.

StillLooking   Wed, 21 Nov 2012, 12:46am PST   Share   Quote   Permalink   Like   Dislike     Comment 18

Kevin says

StillLooking says



All FHA does is raise the price of housing. So the best idea is just to close this agency.


What if there was an agency of government whose sole purpose was to raise the price of bread? Well maybe there is such an agency but it is bad idea nonetheless.


How does it help lower incomes to pay higher prices for houses?


Mortgages raise the price of housing, period. Housing would be very cheap if we had to pay cash. It would also mean that 90% of us would be renters.


There is an agency that keeps the price of bread high. Its called the USDA

Why shouldn't banks lend for people to buy a house If there is a sufficient down payment and sufficient collateral without all the government interference?

Kevin   Wed, 21 Nov 2012, 12:52am PST   Share   Quote   Permalink   Like   Dislike     Comment 19

That government "interference" is the only thing that allows the mortgage industry to work at all.

dodgerfanjohn   Wed, 21 Nov 2012, 12:57am PST   Share   Quote   Permalink   Like   Dislike     Comment 20

drew_eckhardt says

dodgerfanjohn says

So the deal is, cap off FHA loans around $125-150K. No fucking FHA loans for rich people with six figure incomes buying $400K homes. Yes yes?

No. Your populist attitude suggests that you're not in Congress, don't have a PAC, and therefore don't matter. If that's not the case I apologize.

Such policy changes would reduce sales volume, prices, and commissions for real estate agents who would no longer reward the congress critters who allowed such a thing to happen in the next election.

With the National Association of Realtors' PAC ranking first in contributions to candidates for every election cycle since 1998 (probably before then although the opensecrets.org data stops at 1998) that's not something our elected officials want to happen.

I was thinking that even though theres a range of opinions on this thread, that all of us here working together would be able to hammer out a reasonable solution. Perhaps it wouldn't be a cap at $150K, but slightly higher based on local incomes. Perhaps it wouldn't be 3.5% down, but 5 or 7.5% or whatever. But the people that posted in this thread...we'd come up with something that is better than the current situation.

But as you state, thats without anyone being beholden to NAR for funds to run for re-election.

Interestingly enough, I notice that realtors have in fact kept their pieholes sewn shut, at least as far as this thread is concerned. If I knew it was this easy to stuff a sock in a realtors mouth, I would have made the simple request quite some time ago.

Kevin   Wed, 21 Nov 2012, 1:05am PST   Share   Quote   Permalink   Like   Dislike     Comment 21

Coming up with a better solution isn't the hard part. Coming up with a better solution that meets the FHA objectives and can get approved by a divided congress is.

The Professor   Wed, 21 Nov 2012, 1:17am PST   Share   Quote   Permalink   Like   Dislike     Comment 22

Kevin says

FHA objectives

"FHA’s Objectives
Allow access to everyone to safe, reasonably priced mortgage financing under fair terms;
Educate consumersto make informed choices and protect them from unfair lending practices;
Expand access to home ownershipby offering flexible loan qualifying criteria to include buyers with less than perfect credit or less available cash to close, simplify the home buying process and remove regulatory barriers;
Embrace innovative financing options–such as down payment assistance and secondary financing options –to further expand homeownership opportunities;
Encourage home retention with extensive default counseling and assistance."
(from http://www.nifa.org/downloads/johnthorstonfhapresentation1172007.pdf )

FHA doesn't seem to be meeting it's objectives.

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