Home Mortgage Loan Demand Drops
home mortgage loans
The Mortgage Bankers Association just reported that its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended September 10 decreased 8.9 percent.
Mortgage applications for home loan refinancing fell for a second straight week, dropping to its lowest level since early August.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.47 percent, down 0.03 percentage point from the previous week.
San Diego real estate agents
New 2010 Home Mortgage Rules
home mortgage rules save cash
Federal rules now require mortgage lenders and brokers to give consumers better estimates of the costs they incur when taking out home loans, and mandate a standard three-page Good Faith Estimate that urges consumers to shop around for the best loan and helps them compare lenders’ offerings. The rules, announced by the Department of Housing and Urban Development in November 2008, are an update of the Real Estate Settlement Procedures Act, a 1974 law known as Respa. One difficulty of shopping for mortgages is that the lender with the lowest rates sometimes isn’t offering the best deal. High fees can wipe out the benefits of low rates, and little-noticed features such as prepayment penalties can burn borrowers. Read more 
FHA Home Loans Headed for Trouble?
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
FHA Home Loans – The Next Bailout?
In San Diego, one major mortgage lender's new FHA loan originations went from approximately 2% to approximately 60% of new loans! The low down payment (apprx. 3%) and relative availability of FHA home loans are helping to drive hoards of borrowers to the FHA. Many new homeowners with the most risk and fewest dollars are going to the FHA for loans.
In 2007, they handled 3% of new loans. This year it's 26%. However, these additional higher-risk loans are stressing the FHA insurance system. So, now the FHA's own somewhat lax standards are coming back to create a huge hit to their loan insurance fund. It has dropped the FHA insurance fund 39% since last year, raising concerns for the FHA requiring its own bailout.
Related prior posts:
San Diego Housing Market … Hitting the Lottery (or not)
New Relief Program For Homeowners at Risk of Foreclosure
Hope For San Diego Homeowners
Real Estate – An Innovative Way of Not Filing Bankruptcy