FHA Hit By Seller-Funded Down-Payment Loans
It took the Congress a while but the Seller-Funded Down-Payment Assistance Loans which nearly brought the FHA into bankruptcy itself, had been finally blocked off.
Though these seller funded assistance loans for down payment are only a small fraction of the over all FHA mortgage budget. They have a high impact on the FHA financial bottom line.
Wall Street Journal has this on the subject:
The audit said that had the FHA not allowed the programs to go forward, then the mortgage program’s $13.5 billion net worth deficit would have turned to a positive $1.77 billion. It’s possible, of course, that some of these loans might have been made anyway with buyers putting their own money down, and some of those, of course, could have also defaulted.
Overall, the FHA says it is now facing $70 billion in claims it will have to pay on mortgages that it insured between 2007 and 2009.
The fight over no-money-down programs turned into a yearslong battle in Washington. Read more..
Federal Housing Administration’s Losses Hit $16.3 Billion
Since there are no ‘free meals’ it is the tax payers who will have to dig deeper in their pockets and reach out to cover these losses. The LA Times brings some of the FHA future programs which may reduce such losses in the future and put a stop to irresponsible tax payer leaks.
Other changes on the FHA horizon:
• More financial counseling for applicants who have low FICO credit scores, are purchasing their first homes and are seeking to make minimum 3.5% down payments.
• A new short-sale program that reaches out to existing FHA homeowners who are seriously delinquent and heading toward foreclosure. FHA Acting Commissioner Carol J. Galante said the agency plans to streamline the short-sale option — where owners are permitted to sell their house for less than the balance on the mortgage — to avoid the huge costs of foreclosures.
• Structural alterations to the FHA’s reverse mortgage program, which enables senior homeowners to withdraw funds based on the equity in their properties. The program dominates the industry and accounts for the vast majority of outstanding reverse loans in the country, but has produced inordinate losses to the FHA insurance fund because of home-value declines and the failure of some borrowers to make their property tax and insurance payments, thereby triggering foreclosures. Although few details are yet available and Congress would have to approve any statutory changes, Galante said the agency plans to restrict the amounts that seniors can draw down in a lump sum upfront, among other remedial actions next year. Read More..
Unless some serious adjustment are done, the tax payers will need to save the Federal Housing Administration.
Helping citizens with hope for buying their own home, with programs like FHA Seller-Funded Down-Payment Loans should not be on expense of those who have worked hard for their home.
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