via The Hill: "The Federal Housing Administration, the next housing crisis?"

1 Reply

The Hill: The Federal Housing Administration, the next housing crisis?

This article popped up in my feed this morning.  Have any of you guys read it?

I know a lot of people on here are huge proponents of FHA financing, especially in an owner-occupied house hack situation. There will always be flag throwers out there, but given the FHA's recent reduction of their mortgage insurance premium, it seems they will be that much more challenged to hit the 2% Capital Reserves required of them. Also, it seems to be in reaction to Private Mortgage Insurance taking away some market share.

There are definitely similarities to the subprime crisis in 2008...loosening of standards, huge growth, underfunded reeserves.  Can anyone provide some counter arguments or insight on the real consequences of this?

I'm very small potatoes here, and don't know the ins and outs of financing, but it seems to me the entire system is consciously built to fail right now. I wonder if some are making more money selling stocks and derivatives than making money on the physical houses themselves. And if some systems are built to feed others- one hand washes the other. I don't know enough of the terminology to describe it better. In plain English I'm wondering if the banks want the houses and not the interest right now. Or rather... the titles to the houses.

What's odd to me is that someone with cash of 50 to 70% of a property's worth cannot get a mortgage of 25K to 70K with reasonable terms and interest. Yet, OTOH, someone else who just qualifies can get a loan they may not be able to afford with 3% down.

The other thing that is odd is that it seems like all of the loans that are supposedly for working class people to buy homes that need repair forbid the owner working on the home themselves. Even if the owner follows county building permit processes, which include inspections. That really doesn't make sense for a product supposedly designed for working class people.