FHA Needs More Tax Dollars : Housing Default in Millions

One has to wonder how much of this FHA problem isn't intended - yeah I know, that sounds like outside the realm of reality, but given the past twenty years of driving the housing industry into the toilet, the government insisted that mortgages be given to anyone that wanted one even though they had no money or a job.

Why would we think all these people are in default? If you have a chance, talk to Barney Frank or Chris Dodd about their reasoning insisting their idea of having everyone own a home even if they have no money to pay for it.

Politics? Just Ignorance? Ideology?  Millions now will have to depend on the government to survive or lose everything. Really, politics have nothing to do with this?

Too Many Americans Are in Homes They Can't Afford
Source: Edward Pinto, "Too Many Americans Are in Homes They Can't Afford," Guardian (U.K.), October 8, 2013.
October 14, 2013

Recently, the Federal Housing Administration (FHA) said it needs $1.7 billion to cover losses, the first taxpayer-funded bailout in the organization's 79-year history. To put that in perspective, if FHA were held to the same standards as private mortgage insurers, it would be insolvent to the tune of $25 billion, says Edward Pinto, a resident fellow at the American Enterprise Institute.

While this is bad news for the taxpayers, FHA has an even more troubling problem. For decades FHA's underwriting practices have put families into homes they can't afford. By financing failure, FHA has made foreclosures commonplace.

• One in eight families getting an FHA loan from 1975 to 2011 has already been or will end up in foreclosure. That's over 3 million families.
• Today, families in low- and moderate-income zip codes have a 40 percent higher expected foreclosure rate than those in zip codes with a median income greater than 110 percent of the metro area median.
• Families living in metro area zip codes where the minority percentage is 80 percent or more have a projected foreclosure rate 60 percent higher than zip codes where the minority percentage is 20 percent or less.

FHA must stop inflicting these high rates of default and foreclosure on lower income and minority borrowers. FHA should be providing responsible mortgage credit by balancing down payment, loan term, FICO credit score and debt-to-income level. It should assure that borrowers are not taking on obligations in excess of one's reasonable ability to pay and result in a strong probability that the debt will be paid off in accordance with its terms. FHA should also advise each consumer as to his or her foreclosure risk based on an applicant's risk profile, and ask Congress for authority to hold lenders more responsible by reducing its insurance coverage from 100 percent to 50 percent.

These common sense reforms will provide these families with the opportunity to achieve meaningful equity and be mutually advantageous to lenders and the FHA.