FHA Home Loans Headed for Trouble?

2009 July 2
by Bob Schwartz

On 12-16-08 I published a post entitled FHA Home Loans – The Next Bailout? . In that post I noted that the FHA insurance fund had dropped 39% since last year, raising concerns for the FHA requiring its own bailout. Currently, I’m receiving information from FHA insiders that since March, FHA loans are going from current status to 30 days delinquent on a monthly basis almost as fast as sub-prime, and certainly worse than any of the other types of loans.

FHA home loans allow borrowers to buy a home with only 3.5% of the sales price as a down payment (and that can be a gift). The seller can pay all the closing costs (up to 6% of the sales price which usually covers all closing fees and escrows for taxes and insurance). HUD does not require monthly payment reserves in the event the borrower gets laid off, gets hurt and is out of work or incurs some other financial stress. In some cases, the 3.5% down is ALL they have. No safety net is a big problem. In addition many of the people getting FHA mortgages tend to be lower on the socioeconomic scale and are blue collar workers. This leads to higher percentages of layoffs, firings, and injuries which can have a dramatic impact on income.

When you make high loan to value ratio loans the default rate rises. This is very predictable and therefore you must assume that this is a policy choice by FHA leadership. We will pay for this as usual.

The facts are simple. As an American, you do not have the right to OWN a home. Life choices and social status should limit a purchase such as this, just as one would with regards to a yacht.

When food, gas, and utility costs go through the roof with Cap and Trade, more people will be renting. We have to start facing the facts here.

Another FHA loan problem seems to be the fact that many real estate investors used sub-prime loans to flip their properties. However, the sub-prime  loans have vanished and it’s speculated that now these real estate speculators are using FHA loans. To flip their properties, these real estate speculators  gift the borrower the 3.5% down payment, pay their closing costs, even do credit repair to put buyers into their property, so they can turn a quick profit. A lot of this is done with fake pay stubs, W-2’s and falsified gifts. These straw buyers make a few payments and then default.

Even if the buyer’s intent is to make the payments,  many of them are obviously failing at being responsible homeowners.

San Diego home listings

San Diego Property Tax Assessements Drop $9+Billion

2009 July 1
San Diego

San Diego

San Diego county Assessor/Recorder/Clerk David Butler issued a report showing the assessed value of all taxable property in San Diego County decreased 2.3 percent, or $9.46 billion, in 2008.

Butler believes the decrease in total assessed value reflects the continued decline in residential property values and a slowdown in commercial sales and new construction.

The largest downturns in residential market were in Chula Vista, Lemon Grove, Escondido, San Marcos and Oceanside. Increases in assessed values were seen only in Del Mar, Coronado, Solana Beach, Poway and Encinitas.

San Diego home values

Home Prices Fall Again in April

2009 June 30
Home Prices

Home Prices

Standard & Poor’s Case-Shiller index of 20 major cities fell 18.1 percent in April. The good news was that the April home prices marked the third straight month the decline was not a record.  Eight of the 20 metro areas tracked in this report showed price gains from March.

Robert Shiller said:

“My guess would be that home prices are going to level off — they’re not going to keep falling. I am not optimistic that we’re going to see any sharp rebound.”

One should note that the Case-Shiller 20-city index is off almost 33 percent from its peak in the second quarter of 2006. This equates to home values around 2003-levels.

San Diego California home listings

Cap and Trade: Another Hurdle for the Housing Market

2009 June 30

Did you know The American Clean Energy and Security Act requires all homes sales to be conditioned upon an energy audit and an energy rating assessment/ labeling program.  

The American Clean Energy and Security Act of 2009, a 1,200-page behemoth consisting of a cap-and-trade program for greenhouse gas emissions, a federal renewable electricity mandate, and a suite of new mandatory energy efficiency standards, will impose 397 new federal regulations (which require traditional federal agency rule makings) and 1060 new mandates on an American public already overwhelmed by extensive federal regulation.

Congressmen Ron Paul, on 6-29-09 said:

The Cap and Trade Bill HR 2454 was voted on last Friday. Proponents claim this bill will help the environment, but what it really does is put another nail in the economy’s coffin. The idea is to establish a national level of carbon dioxide emissions, and sell pollution permits to industry as the Catholic Church used to sell indulgences to sinners. HR 2454 also gives federal bureaucrats new power to regulate a wide variety of household appliances, such as light bulbs and refrigerators, and further distorts the market by providing more of your tax money to auto companies.

Just like the TARP bill, this is all happening too fast. Anyone who thinks that Washington can craft a respectable bill in this short period of time is dreaming. The specifics of the bill aren’t being publicly discussed. The Democrats are trying to push this through so fast no one will know what hit them. The media is complicit in this. This is not the time to increase energy costs, either.

Kansas City Power & Light said the bill will force them to buy so many carbon allowances for coal that electricity rates could rise 50 percent by 2012, and another 70 percent by 2020.

Let’s get some positive economic growth first, not minus 6.6%, before we kick in some expensive program/tax.

Over 7,000 climate scientists have spoken out and signed a petition that states “climate change” is NOT caused by man, more than the number of scientists who wrote the UN charter on the topic.

This, along with the “stimulus” and “health care reform” is able to succeed to a degree because the American people are, for the most part, sheep who demand to be led, do not care to be involved in the process, do not care to know what is happening in their government, do not care to act on their own behalf and figure that Obama is more intelligent than they are. In fact he is leading them down the road to higher taxes, higher inflation and higher costs on all natural resources, all because of a false theory that curtailing carbon emissions can make a difference.

Kim Strassel, published in the (June 2009) Wall Street Journal:

“Among the many reasons President Barack Obama and the Democratic majority are so intent on quickly jamming a cap-and-trade system through Congress is because the global warming tide is again shifting. It turns out Al Gore and the United Nations (with an assist from the media), did a little too vociferous a job smearing anyone who disagreed with them as ‘deniers.’ The backlash has brought the scientific debate roaring back to life in Australia, Europe, Japan and even, if less reported, the U.S.

“In April, the Polish Academy of Sciences published a document challenging man-made global warming. In the Czech Republic, where President Vaclav Klaus remains a leading skeptic, today only 11% of the population believes humans play a role. In France, President Nicolas Sarkozy wants to tap Claude Allegre to lead the country’s new ministry of industry and innovation. Twenty years ago Mr. Allegre was among the first to trill about man-made global warming, but the geochemist has since recanted. New Zealand last year elected a new government, which immediately suspended the country’s weeks-old cap-and-trade program.

“The number of skeptics, far from shrinking, is swelling. Oklahoma Sen. Jim Inhofe now counts more than 700 scientists who disagree with the U.N. — 13 times the number who authored the U.N.’s 2007 climate summary for policymakers. Joanne Simpson, the world’s first woman to receive a Ph.D. in meteorology, expressed relief upon her retirement last year that she was finally free to speak ‘frankly’ of her nonbelief. Dr. Kiminori Itoh, a Japanese environmental physical chemist who contributed to a U.N. climate report, dubs man-made warming ‘the worst scientific scandal in history.’ Norway’s Ivar Giaever, Nobel Prize winner for physics, decries it as the ‘new religion.’ A group of 54 noted physicists, led by Princeton’s Will Happer, is demanding the American Physical Society revise its position that the science is settled. (Both Nature and Science magazines have refused to run the physicists’ open letter.)

“The collapse of the ‘consensus’ has been driven by reality.”

Scientists – the ones without a political agenda – have shown that solar activity correlates with temperature changes. In fact, it correlates stronger to changes than CO2 does, and changes in CO2 levels FOLLOW changes in temperature by about 800 years. The only reason that CO2 and temperature would be increasing at the same time NOW is that temperature increased about 800 years ago. By the way, temperatures have been decreasing for a couple of years now.

Go ahead, be ignorant and say this is great. Believe that our government is saving us from disaster when they’re really creating one. What we should be doing is using nuclear power in the same way as France.

San Diego real estate