While the F.H.A. is certainly strengthening the high-end market in the Bay Area by prompting more sales, there are growing concerns that it might become a destabilizing force.
Kenneth Donohue, inspector general for the Department of Housing and Urban Development, the parent agency of the F.H.A., said the higher loan limits were increasing the potential risk to the F.H.A. Last week, the agency said its cash reserves had fallen below their Congressionally mandated minimum because of the large volume of foreclosures.
“If one of these higher-limit loans fail, that’s equivalent to two or three cheaper loans,” Mr. Donohue said. “You have to ask yourself, was the F.H.A. ever intended to address these markets?”
He sees another risk: larger loans will be a greater draw for those who want to commit fraud. That would exacerbate a problem already besetting the agency.
I recently sold my house when I moved to a buyer who was using FHA as a loan. Man, talk about a bureaucratic red tape mess in getting the house finally approved for sale. I will never sell a house to an FHA buyer again.
As an FHA buyer, I did appreciate the protections it provided, such as a mandatory termite inspection, etc.
Didn’t we do this before? And didn’t this kind of lending practice end in utter failure and financial ruin for multiple institutions?
The F.H.A. commissioner, David H. Stevens, said recently that its loans were relatively safe because the buyer was required to live in the property. They “are for shelter. They aren’t speculative-type investments,†Mr. Stevens said.
Oh, I’m so relieved then. NOT!!! And to see that miscreant Barney Frank, who ought to be in jail (or at least out of office), involved in this scheme, the mind boggles.
And in the final analysis that “million dollar property” would sell for about 40 thousand here in Arkansas. What a dump.
Here’s a quick rule-of-thumb to evaluate what a house is worth [i]as housing[/i]:
What would this house rent for, per month, in its location? Add two zeroes (multiply by 100) if you’re being generous. Multiply by 80 if you’re being moderately conservative. That’s what the house is actually worth as a place to live … because it covers the range of those who purchase houses to generate rental income.
A house that would fetch $1200 per month in rent is most decidedly not worth more than $120,000. Anything above that amount is pure speculative fluff.
Would somebody please grab all the droids at FHA, Fannie, Freddie, and the others … grab ’em by the scruff of the neck and shake them until they finally absorb this basic economic reality.
#1-the red tape and high cost are the univeersal knocks on FHA. Even if ou put 50% down, you still pay mortgage insurance, both up-front AND monthly. That is why I have always characterized FHA as legalized predatory lending. Its self-created adverse selection explains why it is now bankrupt; only those unable to do better default to FHA.
#2- any buyer who does not do pest/structural inspection is foolish. No advantage for FHA.
#4- some mistake; FHA does rental loans.