4
Raising the bar on mortgages
Federal Housing Administration logo
To view this content, Javascript must be enabled and Adobe Flash Player must be installed.
TEXT OF STORY
TESS VIGELAND: Given everything that's happened in the housing market over the last year or two, you'd think buyers -- and lenders -- would be a little more cautious about affordability. But the Federal Housing Authority has been backing mortgages with 3 percent down payments given to people with lower credit scores than many lenders required. Whaaaaa?
Well this week, after revealing that its almost tapped out its reserves, the FHA says it will raise requirements on both the down payment and credit scores. That may very well slow down the meager recovery in housing, because fewer home buyers will qualify for a mortgage.
But Chris Thornberg of Beacon Economics says the FHA shouldn't be in the business of artificially propping up prices.
Chris Thornberg: Does it mean the housing market's going to tumble a little more? Hopefully yes. Remember, we can always rely on the pricing mechanism. If you can't buy a house today without a subsidy from Uncle Sam, well there's a reaction to that, and the reaction is home prices will fall until people can buy them.
Meanwhile the Treasury Department put more pressure on banks and other lenders this week to modify mortgages of homeowners who are in danger of foreclosing. The government says it will issue fines to lenders who aren't helping borrowers permanently reduce the amount owed on their mortgages.
What should a homeowner do if:
* He's not in foreclosure now;
* He's fully employed;
* He's current on mortgage payments at the moment;
* His ARM has reset to a higher level than expected;
* And, HIS LENDER REFUSES TO REFINANCE THE MORTAGE TO A LOWER INTEREST RATE?
The lenders act like they want you to default, so they can put you into forecloser!!!
Please advise,
Thanks.
Hi home prices are also supported by the interest deduction on Income Taxes. The only true winners are banks, because we end up paying much more and longer for our homes.
If we ended this deduction, the benefits would mean:
- lower home prices
- more taxes into the public coffers instead of into bank profits (better for the people, bad for rich bankers)
- lower down payments
- lower property taxes
- our kids able to afford homes where we live
Chris is correct. If the FHA doesn't back the home prices then the prices on homes will fall to more reasonable prices. Then people will be able to buy. Home sales will slow for a little while but then resume. When people who are really in the market to buy have the money to afford it.
