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FHA providing buying opportunities to those who defaulted on homes
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After two foreclosures and two bankruptcies, Hermes Maldonado is as surprised as anyone that he's getting a third shot at homeownership.
Last summer, the 61-year-old machine operator at a plastics factory bought a $170,000 house in Moreno Valley, Calif., that boasts laminate-wood floors and squeaky-clean appliances. He got the four-bedroom, two-story house despite a pockmarked credit history.
The last time he owned a home, Maldonado refinanced four times and took on a second mortgage. He put a Cadillac and Mercedes-Benz C300W in the driveway and racked up about $45,000 in credit card bills and other debts. His debt-fueled lifestyle ended only when he was forced into bankruptcy.
The FHA, which backs nearly 8 million loans, is helping rebound buyers recapture the American dream, boosting the housing market in the process. But that has touched off a fierce debate about the financial and ethical wisdom of bankrolling borrowers who contributed to the last housing bubble — and the potential cost to taxpayers.
"After everything that happened, thank God I was able to buy another house," Maldonado said in Spanish. "Now, it's good because the interest rates are low and there are lots of homes."
Critics worry that the FHA is foolishly allowing marginal buyers to get loans just three years after foreclosure with as little as 3.5 percent down. What's more, the agency doesn't even track how many rebound borrowers it backs.
According to Bloomberg, House Financial Services Committee Chairman Spencer Bachus, R-Ala., said Thursday that FHA officials have told him the agency will need a bailout from the U.S. Treasury within a month.
Read more: FHA providing buying opportunities to those who defaulted on homes - The Denver Post http://www.denverpost.com/business/ci_22014797/fha-providing-buying-opportunities-those-who-defaulted-homes#ixzz2CasgGVe0
So in order to get someone elected we start the whole housing bubble again which led to the still unresolved financial collapse - again?!?
And the FHA is $16 billion in the Red?
Most of the politicians in Washington don't have even the slightest problem with either issue.
A friend of mine lost her job 4 years ago, prior to this was gainfully employed and lived in a fiscally responsible manner.
After her job loss she worked several jobs, all of them part time, to make ends meet. A few months ago she just couldn't keep up due to even further PT hour cuts...lost her modest yet homey house.
I'm sure she'll love to read this article. :mad:
The Reaper
11-18-2012, 15:18
A friend of mine lost her job 4 years ago, prior to this was gainfully employed and lived in a fiscally responsible manner.
After her job loss she worked several jobs, all of them part time, to make ends meet. A few months ago she just couldn't keep up due to even further PT hour cuts...lost her modest yet homey house.
I'm sure she'll love to read this article. :mad:
Maybe she should spend beyond her means and learn Spanish.
Then the government might help her.
TR
Maybe she should spend beyond her means and learn Spanish.
Then the government might help her.
TR
Funny, that's what she said.
Paragrouper
11-18-2012, 17:38
and we can pay for this by simply redefining the 'rich' we'll tax.
Now maybe you're 'rich' too.
ddoering
11-19-2012, 07:49
"The last time he owned a home, Maldonado refinanced four times and took on a second mortgage. He put a Cadillac and Mercedes-Benz C300W in the driveway and racked up about $45,000 in credit card bills and other debts. His debt-fueled lifestyle ended only when he was forced into bankruptcy."
The good ole American dream.....
:munchin
ddoering
11-19-2012, 10:33
He just one example of a parasite that has learned how to ride the system. There are millions of them.
The Reaper
11-19-2012, 17:01
Ten or twenty years in debtors prison or indentured servitude might change that spending habit.
Certainly, giving him more credit is not a viable solution.
TR
charlietwo
11-20-2012, 00:22
So... how much more of evidence like this is needed to convince people that this is all part of a plan? Destruction of the American economic foundation is essential for social justice. This is not 'stupid policy' or 'ignorance of economics'. This is planned destruction.
After the election, I vowed to cease giving people the benefit of the doubt for not seeing the desired end state. If you do not see it now, you are a fool.
Dozer523
11-20-2012, 10:45
He just one example of a parasite that has learned how to ride the system. There are millions of them.
I'm not sure he was born a parasite (although there is that ferrin-sounding name) after all the guy is 61 and holds a good job and initially bought a modestly priced home - he's in CA.
I suspect he wasn't born this way but was taught.
For those of you unfamiliar with the housing market in CA a few years ago it was wild. And the folks running the show were the mortgage refi folks from companies like Country-wide. These folks figured out a way to bypass only really efficient way to keep the mortgage industry safely afloat. And listen up! That safety valve was not the FHA, the VA or Fannie/Fredie. It was the BANKs!! In the old days mortgage-backed securities were boring but safe and a lot like securities with utilities (until assholes like Enron . . . ) Country-wide created a whole new way of doing business. They didn't underwrite like a bank because they weren't ever going to hold any of the business they created and they sold it directly to investors.
Another thing they did was sell the idea that home equity was some sort of self refilling piggy bank.
We bought a reasonably priced home in So CA in 2003. Watched our neighbors sell at twice and thrice the original price. We got out just as it started to suck. I ended up paying. $10,000 fee to the buyers rep (in addition to his slice of the regular arrangement.) we were lucky. We got out with a profit. The folks who bought it were foreclosed on and we only got 1/3 of the seller carry-back second. My neighbor did the cash out refi and has toys and a nice car. He will live in that house until the day he dies. It will probably never be worth the appraised value of his refi.
As for debtor prisons. We don't do that in America. But there are plenty of real prisons and the head of Country-wide is in one. Truth is there are lots of loan originators that should be there too. Who were the most aggregious resellers? Real estate sales people.
Lots of people were taken advantage of.
ZonieDiver
11-20-2012, 11:05
... there are plenty of real prisons and the head of Country-wide is in one.
Unfortunately, Angelo Mozilo is free as a bird (are birds really free?). He 'settled' with the SEC a little over two years ago for a 'fine' of $67.5 million dollars (and a lifetime ban of being an officer or director of a public company).
As a result of this 'fine' - all criminal investigations were dropped.
As part of BofA taking over Countrywide, BofA agreed to pay any fines that were leveled on Mozilo. Nice deal, if you can get it.
http://www.cjr.org/the_audit/bank_of_americas_disastrous_co.php?page=all
The list of the "Friends of Angelo" is very enlightening.
Dozer523
11-20-2012, 11:38
Unfortunately, Angelo Mozilo is free as a bird (are birds really free?). He 'settled' with the SEC a little over two years ago for a 'fine' of $67.5 million dollars (and a lifetime ban of being an officer or director of a public company).
As a result of this 'fine' - all criminal charges were dropped.
Is this a great country, or what?
Maybe he owes someone some money and we can start up a debtor's prison. I like that idea.
...we can start up a debtor's prison.
And bring back "indentured servitude"...??? ;)
Richard :munchin
I'm not sure he was born a parasite (although there is that ferrin-sounding name) after all the guy is 61 and holds a good job and initially bought a modestly priced home - he's in CA.
I suspect he wasn't born this way but was taught.
For those of you unfamiliar with the housing market in CA a few years ago it was wild. And the folks running the show were the mortgage refi folks from companies like Country-wide. These folks figured out a way to bypass only really efficient way to keep the mortgage industry safely afloat. And listen up! That safety valve was not the FHA, the VA or Fannie/Fredie. It was the BANKs!! In the old days mortgage-backed securities were boring but safe and a lot like securities with utilities (until assholes like Enron . . . ) Country-wide created a whole new way of doing business. They didn't underwrite like a bank because they weren't ever going to hold any of the business they created and they sold it directly to investors.
Another thing they did was sell the idea that home equity was some sort of self refilling piggy bank.
We bought a reasonably priced home in So CA in 2003. Watched our neighbors sell at twice and thrice the original price. We got out just as it started to suck. I ended up paying. $10,000 fee to the buyers rep (in addition to his slice of the regular arrangement.) we were lucky. We got out with a profit. The folks who bought it were foreclosed on and we only got 1/3 of the seller carry-back second. My neighbor did the cash out refi and has toys and a nice car. He will live in that house until the day he dies. It will probably never be worth the appraised value of his refi.
As for debtor prisons. We don't do that in America. But there are plenty of real prisons and the head of Country-wide is in one. Truth is there are lots of loan originators that should be there too. Who were the most aggregious resellers? Real estate sales people.
Lots of people were taken advantage of.
Sorry my friend, but you are completely taking away any repsonisbility folks like the gentlemen in the story have for the situation. I don't care how predatory the lenders were. If you are not smart enough to read the fine print of the contract you are signing, or if you think you can own a $400K home making 30K a year, you are stupid and deserve what you get.
When you sign your name on a contract, that is your word. And if you don't have your word, you don't have shit.
No one FORCED these folks to sign a contract.
Sorry my friend, but you are completely taking away any repsonisbility folks like the gentlemen in the story have for the situation. I don't care how predatory the lenders were. If you are not smart enough to read the fine print of the contract you are signing, or if you think you can own a $400K home making 30K a year, you are stupid and deserve what you get.
When you sign your name on a contract, that is your word. And if you don't have your word, you don't have shit.
No one FORCED these folks to sign a contract.
It is your word and it is a contract.
But on the other hand if the those pushing through the mortgages knew (like a certain party I know) that 60% of those that signed on the dotted line would default.....
And the parties answers/excuses were:
As long as I get my commission I don't care.
It's not my money.
If they are 'stupid enough' to sign something they can't afford 'F-em,' it's not my problem.
It is the industry standard, every one knows and everyone does it.
They even got the appraisers and underwriters in on the scam by over valuing homes and turning a blind eye to credit risk.
That is crime and it might even have a glimmer of intent defraud investors and tax payers.
The Reaper
11-20-2012, 17:13
Okay, if we can't have a debtor's prison, how about 20% down and no more than 35% debt to income ratio?
You know, like it used to be when your bank loaned you money for a mortgage, and Congress didn't press companies (or their boyfriends at Fannie and Freddie) to lend money to people who were bad risks.
TR
GratefulCitizen
11-20-2012, 17:28
Quit bailing out the banks.
Get the federal government and the fed out of the mortgage business.
Absent interference, the market will correct the problem.
Banks which make foolish loans will go out of business.
Quit bailing out the banks.
Get the federal government and the fed out of the mortgage business.
Absent interference, the market will correct the problem.
Banks which make foolish loans will go out of business.
No VA loans? Welcome to Pottersville.
Richard :munchin
ZonieDiver
11-20-2012, 19:13
No VA loans? Welcome to Pottersville.
Richard :munchin
Everyone always talks bad about Pottersville. I always thought it looked like more fun than Bedford Falls. It kind of reminded me of the 'old' Fayetteville! :D
Dozer523
11-20-2012, 22:22
okay, we don't know the time frame of these BKs and Foreclosures. IIRC you suck financially for 7 years and get a restart. After all the purpose of a BK is to stop wasting the creditors time and energy so they can recover something and for the debtor to have a chance to become a regular citizen. The days of a mortgage being a death pledge (thats where it comes from) are done.
I hope this guy is an outlier. News stories can focus on the weird sometimes.
Heres how it should work. You get a job, save some money, pay your bills, find a nice house that fits your life style.
You take the missus to the BANK meet with a loan OFFICER and you talk about buying a house.
A good Loan Officer will spend more time then you'd like educating you because it isn't your job to know everything but it is your and the loan officer's responsibility. Some people call it "due diligence". (IMO, that was the second thing that went out the window after training loan originators. And probably concurrent with paying them a salary plus incentive and going to straight commission.)
You need to know how to get a loan. The five things that really matter.
1 You need a job. Your job determines your income, and a portion of your income determines what your monthly payment can be. That's called your front-end ratio. Loan programs have different percentages. There is also a back-end ratio that is all your debt (installments) and the new mortgage compared to your income. you shouldn't be spending everything on the house and the bank wont let you.
2 You need an employment track record. A year in the job is good, two or more is better.
3 You need some cash money. That's called "cash to close"it will include your down payment, loan fees, pre-paids like setting up your escrow account so the bank can pay your taxes and insurance.
4 You need good credit. Why should the bank trust you if you don't pay your VISA bill?
5 You need a house that is worth the price. That's why the bank has trusted appraiser who dont have the same stars in their eyes as you do when they look at that dump, i mean "palace". It has to be legally transferable so the bank has a title company do a title search to see if anyone else has a claim. And the bank makes sure it isn't sitting in a flood zone.
A good loan officer and a reputable bank realizes this isn't a sale, its a long term relationship . I expected you to be so thrilled with the loan we crafted for you that you would write me a "thank you note" every month and i better get it before the 15th or you owe me 5% more "thanks".
craigepo
11-21-2012, 08:13
Quit bailing out the banks.
Get the federal government and the fed out of the mortgage business.
Absent interference, the market will correct the problem.
Banks which make foolish loans will go out of business.
Exactly.
Badger52
11-21-2012, 08:59
FHA seems to be trending on a positive track to catch the Postal Service.
These things always work out. There is a fine selection of repo'd refugees from the Cash-for-Clunkers program out in front of the local credit union.
:rolleyes:
I'm not sure he was born a parasite (although there is that ferrin-sounding name) after all the guy is 61 and holds a good job and initially bought a modestly priced home - he's in CA.
I suspect he wasn't born this way but was taught.
For those of you unfamiliar with the housing market in CA a few years ago it was wild. And the folks running the show were the mortgage refi folks from companies like Country-wide. These folks figured out a way to bypass only really efficient way to keep the mortgage industry safely afloat. And listen up! That safety valve was not the FHA, the VA or Fannie/Fredie. It was the BANKs!! In the old days mortgage-backed securities were boring but safe and a lot like securities with utilities (until assholes like Enron . . . ) Country-wide created a whole new way of doing business. They didn't underwrite like a bank because they weren't ever going to hold any of the business they created and they sold it directly to investors.
Another thing they did was sell the idea that home equity was some sort of self refilling piggy bank.
We bought a reasonably priced home in So CA in 2003. Watched our neighbors sell at twice and thrice the original price. We got out just as it started to suck. I ended up paying. $10,000 fee to the buyers rep (in addition to his slice of the regular arrangement.) we were lucky. We got out with a profit. The folks who bought it were foreclosed on and we only got 1/3 of the seller carry-back second. My neighbor did the cash out refi and has toys and a nice car. He will live in that house until the day he dies. It will probably never be worth the appraised value of his refi.
As for debtor prisons. We don't do that in America. But there are plenty of real prisons and the head of Country-wide is in one. Truth is there are lots of loan originators that should be there too. Who were the most aggregious resellers? Real estate sales people.
Lots of people were taken advantage of.
I watched this happen to my brother twice. No bankruptcy, but 2 divorces in CA where the houses had to be sold well below original value. One with negative equity despite a 50% down payment. He rents now. ;)
Lenders make money lending. They are not the most regulated group but do manage to break the few rules that count while they follow the ones that create all those signature pages less than .01% of buyers read.
As for the gentleman above (term used loosely), he is either an astute user of the system or a naive one. I have seen my share of both, but candidly, usually at higher income brackets and involving trust funds.
Many of the very wealthy milk the system better than you might think. Farm subsidies in GA is where you meet the elite of the state who hardly need those "hand-outs." Their hobby pecan groves have a bad year? Watch the USDA money flow their way. When I follow the math, the guy bilking the system may make a more outrageous story, but the wealthiest ones abusing the system blow away those numbers. They are just not as obvious a line item to track.
My 2 cents (cash not credit...)
My wife and I were able to enter the housing market as a young couple because of the VA - purchased a VA repo with no money down and relatively affordable payments ($164/mo) - sold it 3 year later when PCSing and reinvested in a newer house giving 15% down - bought and sold several since using conventional loans or owner financing agreements - always made the payments (never took a home loan which exceeded 20% of our foreseeable income) and personal improvements to our investment which is why our credit scores remain excellent.
Thanks to a "pump priming" .Gov loan program.
Richard :munchin
My wife and I were able to enter the housing market as a young couple because of the VA - purchased a VA repo with no money down and relatively affordable payments ($164/mo) - sold it 3 year later when PCSing and reinvested in a newer house giving 15% down - bought and sold several since using conventional loans or owner financing agreements - always made the payments (never took a home loan which exceeded 20% of our foreseeable income) and personal improvements to our investment which is why our credit scores remain excellent.
Thanks to a "pump priming" .Gov loan program.
Richard
Good for you Richard. I'm sure you know that comparing the VA process to the FHA is a bad bet. With the VA, there is a small subset of a tiny fraction of the population that are eligible who use these loans. And these veterans only get one bite of the apple. While the FHA process is open to everyone and they can use it again and again and apparently again if they default.
ZonieDiver
11-21-2012, 11:50
Good for you Richard. I'm sure you know that comparing the VA process to the FHA is a fools game. With the VA, there is a small subset of a tiny fraction of the population that are eligible who use these loans. And these veterans only get one bite of the apple. While the FHA process is open to everyone and they can use it again and again and apparently again if they default.
Actually, there is - or was - process by which Veterans could get subsequent 'bites at the apple'.
At the time, it depended upon whether or not your VA loan was 'replaced' or if it had been 'assumed'. Due to the housing market, my first VA loan was assumed. I kept checking until the home was sold, and new financing was obtained. At that time, I could renew my "Certificate of Eligibility". Not sure if it is still like this or not.
Paragrouper
11-21-2012, 18:11
Actually, there is - or was - process by which Veterans could get subsequent 'bites at the apple'.
At the time, it depended upon whether or not your VA loan was 'replaced' or if it had been 'assumed'. Due to the housing market, my first VA loan was assumed. I kept checking until the home was sold, and new financing was obtained. At that time, I could renew my "Certificate of Eligibility". Not sure if it is still like this or not.
That is generally the process now, but there are limits. For example, in addition to your certificate of eligibility, your VA financing fee is raised to 3% for subsequent loans (unless you're disabled).
The FHA on the other hand, is engaging in risky loans, again. They may adding traction to our weak housing market, temporarily, but this is not a mistake our government should repeat.
Here ya go....it goes way beyond poor decisions by individual home buyers.
Credit Crisis Explained (http://www.youtube.com/watch?v=qqUGoVez8xg&feature=related)
What was not explained in this video...the third tranche of the CDOs often had leftover subprimes that no one wanted. So, they bundled up all the trash and made new CDOs, which somehow were sliced into the same 3 categories of Safe, Okay, and risky. Yes, the garbage mortgages made it back to the top! Also not explained in this, is that the rating agencies are paid services, so CountryWide simply paid for the CDOs to be declared AAA. Sweet deal. Everyone was to blame from the home owners, to the regulators, to congress, to the banks. AIG fell because they were the Credit Default Swap honchos, insuring these AAA rated sub-prime CDOs.
The new FHA debacle just goes to show what short memories we have. But then again, the Community Reinvestment Act was supposed to mean that folks would be more responsible as homeowners!
I'm sure you know that comparing the VA process to the FHA is a bad bet.
I wasn't comparing anything; I was responding to these statements.
Get the federal government and the fed out of the mortgage business.
Exactly.
Richard :munchin
GratefulCitizen
11-21-2012, 20:15
My wife and I were able to enter the housing market as a young couple because of the VA - purchased a VA repo with no money down and relatively affordable payments ($164/mo) - sold it 3 year later when PCSing and reinvested in a newer house giving 15% down - bought and sold several since using conventional loans or owner financing agreements - always made the payments (never took a home loan which exceeded 20% of our foreseeable income) and personal improvements to our investment which is why our credit scores remain excellent.
Thanks to a "pump priming" .Gov loan program.
Richard :munchin
The problem is the market distortions created.
Yes, government intervention helps some people.
Mainly, it helps the people who are able to recognize the market distortions and get ahead of them.
While I might not agree with the policies that create market distortions, I won't fight with one hand tied, either.
I made the most of the opportunities created by the distortions.
Unfortunately, the nation as a whole will be poorer for these policies.
Right now, it's still a big game of musical chairs.
The music will stop.
Dozer523
11-22-2012, 00:25
The problem is the market distortions created.
Yes, government intervention helps some people. . . .
Right now, it's still a big game of musical chairs.
The music will stop.
WTF? Ahhh, nevermind, its thanksgiving. And happy thanksgiving to you too.
I'm not sure what you mean by "Market distortion"? What are you talking about? How is a VA loan program is a market distortion?
As the Second World War came to a close there was real concern that a deluge of discharged service men (7 million IIRC) would flood the job market just as the American war machine was shutting down. It would take a while to retool for civilian production. Not to mention that there was a sense that those who survived (nearly 500,000 KIA) had earned something more then "thank you, now go away".
The Reaper
11-22-2012, 09:54
WTF? Ahhh, nevermind, its thanksgiving. And happy thanksgiving to you too.
I'm not sure what you mean by "Market distortion"? What are you talking about? How is a VA loan program is a market distortion?
As the Second World War came to a close there was real concern that a deluge of discharged service men (7 million IIRC) would flood the job market just as the American war machine was shutting down. It would take a while to retool for civilian production. Not to mention that there was a sense that those who survived (nearly 500,000 KIA) had earned something more then "thank you, now go away".
I believe that he was referring to the topic of the OP, the FHA giving people who had defaulted on home loans, multiple chances to fail again, with more taxpayer money.
I doubt that many here have an issue with the VA loan program, which does have significant standards and requirements for qualification.
GC is correct. Eventually, the government will run out of other people's money to spend, or be held accountable for monetizing the federal debt.
TR