Housing Market Update: FHA Backed loans cover more mortgages than lending giants Fannie Mae and Freddie Mac in the first quarter of 2010. According to Doctor Housing Bubble, a Southern California real estate expert, FHA Loans backed a total of 52.5 billion dollars, while Fannie Mae and Freddie Mac back a mere 46 billion.
This is startling news. Previously, before the housing market stumble, Fannie Mae and Freddie Mac were handling the majority of mortgage loans. But now there’s a new boss in town: FHA-Backed Loans.
FHA-backed loans are for the financially strained. These loans operate on low, low down payments (sometimes none) and equally miniscule interest rates. That means people are borrowing at lower prices, which some experts determine to be a direct link to our current record high delinquent rates (near 10%). Basically, the government is making easy for banks to give out loans without actually taking any risk—this is the same bothersome principle that fueled the sub-prime mortgage crisis. With banks taking on no risk, they have no incentive to ensure that a mortgage is paid of by a healthy buyer, they merely take the money from the buyer knowing that should the loan default, the government will back it up.
It’s merely another measure of market “life support” as on expert so deftly put it. Another measure to maintain the healthy image of a market that isn’t so healthy. Some people are worried that the currently influx of FHA-Backed loans could lead to more delinquencies in the future. If buyers need such low down payment rates and interest rates to afford a mortgage, then maybe it’s not the best idea to take one out. How about renting for a while until your finances are stabilized?
Archive for June, 2010
FHA Backed Loans Eclipse Fannie Mae and Freddie Mac Loans in the 1st Quarter
Saturday, June 5th, 2010Reason of the Week #13: A Quick Move
Wednesday, June 2nd, 2010Let’s say that you’ve been transferred to another branch at your job. You have to move, and move fast. So why would you leave it up to a realtor to sell you home? The average time a home sits on the market through a realtor is 45-60 days! That’s six weeks! A month and a half!
When you go FSBO, your home is the only thing on your mind, unlike realtors who have several homes to deal with. You can get your home out there and sold in a matter of weeks as we have seen on Yigdigs.com. So don’t waste your time or your home’s time and let prices fluctuate as it stagnates on the market. Go FSBO, get motivated, and get it over with!
Homeowners Stop Paying Their Mortgages and Enjoy Themselves
Tuesday, June 1st, 2010Going back to a post I made some months ago, there was talk of “underwater” mortgages and how the American public was responding to them. Brent White’s essay (you can see the post about it here) stated that Americans felt obliged to pay their mortgages in some sort of pious duty to their country and their zeal for the American Dream. It’s bred into their character, ingrained in their nature, and simply looked down upon when one defaults on their mortgage.
But now, according to a NYTimes article, we’re starting to see a different side to your average American homeowner. A Florida mother/daughter duo are now fighting the man and reveling in the extra money they are saving by defaulting on their mortgage.
By defaulting on their mortgages over a year ago, the Pemberton’s have managed find a certain tranquility in lifestyle. Instead of spending their hard earned cash on a hopeless mortgage, they invest in their business, take care of their employees, and take time to go out to eat every once in a while. The Pemberton’s are basing their decision to default on a “self-preservation thing”. Why should homeowners feel inclined to pay mortgages to lenders who sold mortgages that contributed to the collapse of our real estate economy? “They’re all crooks,” said Wendy Pemberton, the Pemberton’s matriarch. So there’s some obvious mistrust there, which may also explain their behavior.
According to the NYTimes, since evictions have to be ordered judicially, the process can take much, much longer than when a lender is involved (like in the states of Texas and California). Nationally, it takes an average of 483 days from the time of default to when residents are met with eviction. Besides, if homeowners are facing imminent eviction due to a hefty, out-of-control mortgage, why feed the banks more money if they are eventually going to get the property anyways?
This particular case study is a striking difference from the POV posited by Brent White’s provocative essay, and behavior that I find quite interesting. Maybe we are moving into a new way of thinking about homeownership in this country—or maybe they are just trying to stick it to the banks…
