Bush to Outline Aid to Mortgage Holders

Statement in question:
"Private single-family mortgage insurance covers a smaller portion of the loan balance, typically 25% to 35% of the home value, compared to FHA, which pays claims on up to 100% of the loan balance."

Yes...it's quite wrong. Drddan pulled that from an organization that advocates for low-income housing. Needless to say, it's biased, worded poorly and full of twisted facts.

I explained this in an earlier post, although if not well...I apologize.

Any loan is a risk. You can't lend money without risk. It's always there. In the even of default, there is going to be loss. As an economy, we can either refuse to allow money to be lended, or we can understand there is always that risk. With that said...

The borrower assumes some of the risk because they pay the monthly MIP. It it collected by the FHA and goes into a pool to pay for losses if there is a foreclosure. The lender gets none of this premium.

The lender assumes risk because if there is a default, they may not recoup all of their losses. Same with FHA.

If the borrower defaults on the loan, and there is a foreclosure, there will be losses.

The property and the debt
Unless somone buys the property at foreclosure, the FHA will take the property back and sell it, thus also taking on the debt and getting repaid for that debt when the property sells on the market. This is the most common scenerio. So yes, the lender will get paid for the property...but they also give up the property. So the lender is not getting any profit here. In fact, more often than not, the lender will not even get full market value from the FHA when they take the property back. The lender will take a loss.

On the rare occasion, the lender will keep the debt and the house and they will be the ones to market it. This typically happens if FHA decides the lender did not follow all of the FHA's guidelines in qualifying the borrower for the loan.

Either way, there is no "something for nothing". One or the other is stuck with the debt...but they also get the house to sell to recoup as much of that debt as possible.

Foreclosure costs
During foreclosure, the lender must pay costs such as attorney fees (which can be in the thousands), costs to secure the property against invasion and the elements, appraisal costs, costs to keep grass mowed, etc.

Once the property/loan debt is settled, it's time to settle the matter of the foreclosure costs the lender paid. There is a pool of money the FHA has that is funded by the FHA borrowers who are paying a MIP premium each month in their mortgage payment, and that the lender sends to FHA each month.

From this pool, the lender is reimbursed their foreclosure costs - up to a point. It's not unusual for the lender to have to take a loss here...especially if there are extraordinary attorney fees. This can happen if the borrower files repeated bankruptcy during the foreclosure to try to stall the sale. I've seen people in judicial states like NJ, file 4 bankruptcies...Hubby files 7, it gets dismissed by a judge, wife files a 7, it gets dismissed, hubby files a 13, wife files a 13, they file a 7 jointly, they file a 13 jointly. This can take years and during that time, the lender is having to pay taxes, insurance, attorney fees, mow the grass, etc.

So you see, no...FHA does not pay claims up to 100%. They either take the house and the debt...or the lender takes the house and the debt. And f/c costs are paid out of the insurance the borrower pays.

 

i spend enough time here to know that which is why i'm surprised by your stance on this.

still, if the documents are too hard to understand, i wouldn't sign them.

 

oh, gotcha

 

so, the lender takes part of the loss, the borrower takes part of the loss, and the fha takes part of the loss. ok. isn't that as it should be? if the deal goes sour, all parties are partially damaged.

i still don't see why the rules should be altered, or the government should step in in any way whether it be monetarily or legislatively, to rescue people who got in over their heads or who wrote shifty loans....

 

Yeah. Folks often get upset about paying the MIP, but they wouldn't get the loan if they didn't. It's how the borrower is forced to take on some of the risk.

Well, the biggest concern is deflation. As you know, deflation happens when prices go down over a period of time, and it's not a good thing for an economy in debt. It's not a good thing when the value of your assets is less than the debt that covers it.

As more houses are foreclosed on and hit the market at a discount - sold by FHA and/or lenders - those houses will compete with houses already on the market that aren't a result of foreclosure...and this can push prices down. Also, folks facing foreclosure tend to try to sell the house for whatever they can get...this too helps push prices down.

This would affect all of America.

 

I agree. Unfortunately, it's sometimes like a shell game. What you think you are seeing is indeed something else entirely.

 

but this sounds like a market correction. which is a natural progression of a rapidly increasing market. maybe the higher values that are being pushed down are in fact unnaturally inflated in the first place. a booming housing market is what created the conditions for this "crisis", right? maybe it boomed too much too fast and now the market is correcting it. i love capitalism.

 

A lot of people don't know that under most mortgage contracts, they can cancel the MIP once they have 20% equity in their home. Something to think about for those who have been paying on their mortgage for a few years.

 

that would suck.

and yes, i paid PMI. until i got to where i didn't have to. that sucked, too, but it was part of the requirement for me to get the loan, and i agreed to it. i understood the reasoning behind it, and played the game with the rules the market dictated. more capitalism for me to love.

 

The equity must be 22%. In other words, the Loan to Value ratio (LTV) must be 78%.

Also, for the purpose of cancelling MIP, the LTV is calculated using the lower of the sales price or appraised value at origination. You can't go out and get a new appraisal because your property value has gone up, and submit that for the LTV calcuation. FHA won't accept it. Only sales price and origination appraisal will be used to figure the LTV.

For 30 year loans, the borrower also has to have been paying MIP payments for at least 5 years. AND they must have a sterling record of paying their mortgage payment.

So you can't pay extra principal and go out and get a new appraisal and submit that. You have to have the loan for at least 5 years, go by the LTV based on the value of the property when you bought it, and you have to have paid all of your mortgage premiums on time each month.

 

I agree. My pet peeve are the DSI loans. My advice to anyone....watch for these 3 words: PAYMENT TO PAYMENT. If you see that...run.

 

I no longer am surprised by his politics anymore. Too many of the rich will be affected by the drop in mortgage stocks. He has to.

 

Magnolia, you seem to be flip-flopping on all your statements.

First you said: “The catch-22 for lenders is already showing itself. When they turned down the low-income, high-risk people, for loans on low-value homes....they were called racist and accused of red-lining. When they were extorted to go ahead and extend the credit to these folks, they are now being called "predatory" and claims are flying around about how these banks "took advantage" of low-income minorities. The lenders can't win for losing.

Then you said: “The programs Bush is calling for would call for the banks to loosen up on their credit requirements enough to allow these same folks to refinance to a fixed. Due to the indexes used in ARMS, the fixed rates can indeed be lower than the increased ARM payments, thus allowing a more affordable payment.”

Then you said: The proposals are not to help speculators and those who made a decision to buy a home they couldn't afford. These programs are to help those who got the "toxic" ARMs. Those with inflated ceilings and caps. Those based on unusual indexes. Those who got loans from unscrupulous brokers.

In analysis, you said sub-prime loans were being forced on lenders and then called predators. Then you said, we need to mandate lenders to loosen up on credit requirements. Then you called the lenders of sub-prime loans unscrupulous brokers. All 3 statements contradict each other.

I’m not going to spend the time to post all of your contradictions because there are just to many similar to the one above.

Now there’s a common radical conservative comment. If you can’t dispute the facts lay obscurity on them.

Oh right, the MBA. The organization that stood by quietly while its members sold these predator loans. The organization responsible for policing it’s own industry.

Nationally since 2005 nearly 19% of all new & refinance loans were sub-prime. If we get these people government mandated new fixed financing it means your industry will see a very large portion of those people coming your way. That means you guys are going to make a pot-load of money off the re-finance. And the potential loses for your industry will be drastically reduced. Dispute that.

You can feed the "compasionate" BS to some, but money is the key here and big business has no compassion when it comes to profit.

 

Nope...not at all. May I ask what possessed you to take paragraphs out of different posts, involving different discussions... and try to put them together as contradictions of each other? Are you that desperate to avoid saying "I misunderstood the issue"?

Context...it means everything. Learn about it.

No, I didn't say sub-prime loans were being forced on lenders. You need to learn the difference between sub-prime loans and bad loans. A sub-prime loan is a reasonable loan agreement with a person of higher-than-normal risk. They still have to qualify, and do qualify. They have a blemish somewhere, be it a few late payments on their credit, or a short job history.

A "Bad" loan is a loan given to someone who has no business getting a loan. People with no or totally dubious credit, no job history and/or no real verifiable income to get a loan. Due to the race-baiters, lenders have been required for years to lend a certain allotment of money to these kinds of people for loans they neither deserve, nor should have. The defaults have been in the background...but now they are showing up because with the defaults on the "unscrupulous" loans as well as the speculator loans, the bucket has been tipped.

No, I did not say we need to mandate lenders to loosen up on credit requirements. What I explained to you was that the programs that the President is talking about involve loosening up the credit requirements on refinances through HUD specifically for those who got unscrupulous loans in the recent buying boom, so that those folks can refinance to a reasonable loan. As I explained to you before, this is not for just anyone. These are people who had good credit and qualified when they got their loans, but due to the increases in their payments due to unscrupulous terms, they have recently been unable to pay on time or at all, and thus the programs the President is talking about will allow them to refinance to a loan that matches the responsibility they've shown, as well as their qualifications...one that is on the up-and-up.

Wrong again. I never said sub-prime lenders are unscrupulous brokers. Sub-prime lenders aren't even brokers. You need to really avoid getting into conversations when you don't know what you're talking about. A broker and a lender are two entirely different entities.

Well, I would certainly hope not, since they are non-existant. You can't be part of a discussion by mixing and matching what a person says in discussions of different topics, copy and paste it out of context..and try to make an argument out of it.

Not sure what ocean your boat floats in, but I will tell you that to quote people out of context, especially in cut-and-paste fashion...and then try to discount them with that is typically liberal in fashion.

Stood by quietly? What, pray tell, do you think they should do? The MBA doesn't make laws. They don't "police" anything. They can't tell any lender or broker what to do. They are essentially a trade organization, that's it. They share news. They serve as a networking organization for real-estate related businesses. You act as though they are some kind of governing body. They aren't in the least.

See...there you go again. Talking about that which you know nothing about. Explain how "we" [using your term "you guys"] will make a pot-load of money off the refinances. I'll await your answer.

 

Hmmm...I have mortgage stocks. I'm certainly not rich....far from it.

Most folks who have a 401K have some type of stocks, often mortgage-related stocks.

Do you think only rich people have 401K plans? Do you think only rich people have stocks?

Is your BDS that far advanced?

 

BDS...BDS...BDS...I can't think of a logical argument to support that sorry excuse for a human being in the white house, so ...BDS...BDS...BDS...moonbat...BDS...

I can tell you, I'd rather be a moonbat than a warmonger.

 

Then you go right ahead. The rest of us need a little entertainment in this rough and tumble world. And moonbats with BDS supply plenty of it.

Besides when the toilet overflows, or the car won't start or the hamster dies... it's great to have a catch-all person to blame it on, isn't it?

:mrgreen:

 

If you are taking a risk on giving a mortgage to a high risk candidate then it would only make sense to hike up the interest rate and fee them to death!!! Way to go!!

 

magnolia doesn't have any blond moments,does she?:lol:
She's one smart woman,,remlnd me never to get in a debate with her
It's not the beating that would bother me, it's all the crying I would be doing:lol:

Damn,if she could only cook she would be my hero
Carry on

 

:lol:

:lol: :lol: :mrgreen: