The Observation Deck

The federal government has learned nothing from the deflation of the housing bubble.

Traditional banks, savings and loans and mortgage companies have restablished traditional lending standards. You remember those, the borrower should have a job, a down payment, a credit history.

Obama's FHA has stepped into the breach. No Job? No Income? No Credit? No Problem!!! FHA will loan you money anyway.

The result? Thousands of FHA borrowers never even make the first payment.:

Slightly Smaller Link

The FHA is guided by ideology and not sound banking principles. The result is that the FHA encourages home ownership by people who have no business owning a house. The final result is vacant homes and neighborhoods destroyed.

Liberals love the beauty of this scheme. The problems created by one government institution can only be solved by the creation of another. More and more government, more and more destitution requiring more and more government. The problem, of course, only gets worse.

Liberalism run wild.

Now, now, now, Mr. Call
My (now ex) husband and I bought our first home FHA in 1981 and sold it through the same program 10 years later.
It made mortgages marginally affordable but as I recall both we and the person we eventually sold to had to jump through some hoops.
We got a break on interest rates was all. Nobody gave us "free" money and we had to pay PMI. Also as I recall we had to go through some pretty rigorous property inspections.

If thats different now Ill concede your point but it sure wasn't that way when we bought and sold FHA.

Dee Martinez wrote:If thats different now Ill concede your point but it sure wasn't that way when we bought and sold FHA.

I financed my first house with a VA mortgage so I'm not in complete disagreement with non-conventional financing. However...

Systems designed by social engineers to assist home buyers start out with high hopes and reasonable standards. Eventually entropy intervenes.

http://dictionary.reference.com/browse/entropy

(I do these definitions as much for myself as for the reader. I wish someone would invent a speaking, listening dictionary. When I read an article and run across a word I don't understand I'd like to be able to say the word and have the definition spoken back to me.)

Anyway, back to FHA. Here is an article about FHA:

http://www.interest.com/mortgage/fha_lo ... uyers.html

The highlights:

Down payments: Don't have it? No problem!
Credit score: It doesn't matter.
To much debt: FHA will accept much higher debt ratios.
PMI: You must have PMI but the fact that virtually all the PMI companies are out of business should tell you something.

Home ownership is not for everyone. FHA's efforts to make home ownership a right does great damage to communities like Lakewood. In the Cleveland area HUD is the biggest slum landlord.

Since I have a home and family in Lakewood my concerns are centered on the affect of these policies on Lakewood. Encouraging and helping marginal buyers to buy in Lakewood encourages solid buyers to buy elsewhere.

The foreclosed properties deflate values for other homes. Buyers without financial reserves are left helpless when the roof leaks, the paint peals, the sewers back up or the furnace fails. In this political environment that means a government program to pay for roofs, paint, furnaces and sewers.

After all, isn't home ownership a right?

OK, Ill cry uncle on this one.
Based on the link, FHA HAS changed.
We put about 10% down on our first house and I dont think we could have done less.
The limits for loan amounts are astounding.

I believe in the concept of a "grubstake" You need to put a little of your own money into buying a house. Otherwise its like signing on for a cell phone account.
FHA should be an encourager not an enabler.

"conventional" loans for houses also involve terms never realized by the hypothetical free market of the 1800s. It is enabled by fed policies. it is only okay when the right people get it. In the good old days it was 50 percent down and paying it off in 5 to 10 years.

It took a lot of social engineering to build the highways and off ramps that enable suburbia and big box retail and thus our oil addiction. it was okay when mostly only the right people could afford it. Not sure why there was a "housing shortage" after world war II: fewer people came back than had left.

The giant waves of empty newer houses are in subdivisions of the bible belt and southwest.