And the imperialist presidency continues apace:
Wth no authorization from Congress, President Barack Obama has announced that his administration — through the Federal Housing Administration — will insure refinanced mortgages for 2 to 3 million borrowers without verifying their income or even if they hold a job, according to the Department of Housing and Urban Development (HUD).
Obama announced his latest mortgage program at a White House news conference on Tuesday.
Any American with a mortgage insured by the Federal Housing Administration (FHA) endorsed on or before May 31, 2009 and who is current with their mortgage payments would qualify, according to HUD.
No additional underwriting, or examining the verification of income, employment status or creditworthiness, will be done.
[…]
Underwriting is generally done for both initial mortgages and refinancing, said Reed Piano, managing director of the National Association of Mortgage Underwriters. He said the normal mortgage underwriting process checks “employment verification, income verification, analysis or thorough examination of a borrower’s creditworthiness based on a lender’s requirements, any federal or state requirements.”
When an institution does the underwriting for a mortgage, it is “validating the entire process. They are validating the appraisal, the title, the credit, income verification, pretty much everything from A-to-Z and they’re seeing if the file is good and meets the requirements,” Piano told CNSNews.com.
The White House estimates 2 million to 3 million FHA borrowers are eligible. […]
[…]
“Today we’re taking it a step further–we are cutting by more than half the refinancing fees that families pay for loans ensured by the Federal Housing Administration,” Obama said at the press conference on Tuesday. “That’s going to save the typical family in that situation an extra $1,000 a year, on top of the savings that they’d also receive from refinancing. That would make refinancing even more attractive to more families. It’s like another tax cut that will put more money in people’s pockets. We’re going to do this on our own. We don’t need congressional authorization to do it.”
Banks issuing loans to borrowers who could not afford them led to the housing crisis in 2008.
Asked if a lack of underwriting requirements for this refinance program could create similar problems, Piano, with the National Association of Mortgage Underwriters, said it was too early to know.
“There’s always a possibility that it could create problems. Lenders need to be always cautiously optimistic,” Piano said.
[…]
“It’s a little too new to know what the president’s plan is going to entail,” Piano said. “From an underwriter’s perspective, they’re kind of the last person in the process. They’re going to determine ultimately if the loan is going to get approved. As long as the underwriter is doing their job, that’s going to help in the process. But again, they’re following whatever regulations and requirements are already set forth. If requirements are low, one has to be reasonably cautiously optimistic that it doesn’t present problems in the future.”
From Obama’s perspective, there’s really no reason to worry about the fiscal soundness of the loans, however: the President is essentially circumventing Congress to promise a those with FHA loans taxpayer money to refinance, and if those people default, he’ll simply turn around and blame the original “predatory lending practices” or some such for “fooling” these people into buying a house in the first place.
So it’s a win win for Obama; he is able to buy votes by promising to redistribute taxpayer money at no real risk to him (what’s another trillion or so to the debt?), and if this latest gambit to prop up poor credit risk voters fails, well, guess who will rush in to champion those families that the greedy banks are heartlessly foreclosing on…?
It’s win-win-win for B. Hussein Obama. Like the earlier bailout for deadbeats, not many people will actually get assistance, so this fascistic ploy isn’t even costly to gubmint. There was the prediction that HAMP (I think that was it) would assist millions of mortgagees, yet ultimately of the applicants less than a third were approved and got sweet, sweet sugar. Something on the order of three hundred thousand people.
Same thing here. Despite the liberal terms, gubmint will again deliver less than promised. You’ll have to fill out more forms, wait, call other agencies, wait, get a bank to cooperate, wait…
But it’s not about the steak, it’s the sizzle.
Plus, sluts.
BINGO!
(Sorry … couldn’t help it. It’s a visceral response.)
When people default under this plan and the government, acting as mortgage insurer, pays off the loan to the bank, wouldn’t the government end up owning the home and thus become a national landlord? National slumlord considering the state of most foreclosed properties I’ve seen.
Smells like a Jarret job in the making, slum-czar.
Hope y’all like where you’re living right now,
because it’s going to be damn hard to buy a new home.
How do you figure that, Ernst? If you walk into a bank with a steady job, good income, and a good credit score, why on Earth would the bank not lend you money? Especially if you weren’t looking to participate in a federal home-buying program.
Sure, if your employment and credit history is spotty, you’re not going to have an easy time of it, but isn’t that the way it’s supposed to be? I was under the impression that we got to where we are in large part because we lost sight of the fact that you shouldn’t offer a six-figure loan to somebody who’s unlikely to pay you back.
What I heard is come April, mortage insurance is going to be raised on FHA loans, if I remember right, around 30%.
To me it seems like a regressive tax, the ones affected will be those putting less than 20% down.
Squid, I just figure that sooner or later the banks are going to have to protect themselves, partly through passing costs on, so higher loan fees plus larger downpayment, and partly through tightened standards. If you can put 20% down and have an excellent credit rating, no worries.
If you’re a recently married college-grad and you and the spouse have student loans up the wazoo and one (or both) of you got stupid with that first credit card, and you’ve got new jobs in a new town, trying to start out your real, grown-up life, you might have more trouble getting out of that one bedroom apartment than used to be the case.
I’m just spitballin’, obviously.
We are so fucked.
Sarah Shahi
[…] link: “Obama Will Make Taxpayers Guarantee Mortgages Without … Tags: a-has-announced, congress, federal, finance, has-announced, million-borrowers, obama, […]
Headline is misleading. Key graf:
In other words, all of the loans that qualify for this program are already guaranteed by the FHA, so no new loans will end up under FHA guarantee from this.
In fact, this program isn’t new: FHA Streamline refinances have been a feature of the FHA home loan program for many years, and have always been available without re-verifying income, assets, employment, home value, or credit-worthiness. The only thing that is different now is that when the targeted borrowers refi, they will pay less into the FHA Insurance fund than borrowers who did Streamlines before this was rolled out. Prudent financial decision? Probably not. FHA may be more likely to require a bailout after this. “Making taxpayers guarantee mortgages”? No more than has already been going on for years.
(I can explain why not checking income, etc. for FHA Streamlines makes perfect sense for the FHA and should not be controversial, if anyone is interested.)
Go for it.
The headline, incidentally, is from the CNS story. Hence the quotation marks around it.
Basically, the mortgages already have FHA insurance. The FHA (and by extension the taxpayers) are already on the hook if the borrowers default. Allowing the borrower to refinance into a lower rate/lower payment without extending more credit (FHA Streamlines don’t really allow cash out) reduces the risk of default, and if the new monthly mortgage insurance is the same, costs the FHA nothing. This is a net win for the FHA insurance fund. This holds true even if the borrower is now a greater credit risk–even if they are not creditworthy now, the FHA is still on the hook if they default, and lowering the borrower’s payment does nothing but help the borrower be able to make his payments. That’s why the FHA doesn’t care about income or employment or credit for these loans–it’s irrelevant to the risk equation.
The dodgy thing here is that the FHA is playing around with the insurance rates for the refinanced mortgages. Normally they would get an additional mortgage insurance payment up front (~1-2% of the loan amount less a refund if the old loan was recent–can’t remember the exact current UFMIP rate, too lazy to look it up since it doesn’t really matter here) as part of the refinance. By lowering that to 0.01%, they are getting much less. The monthly MI rate is about what it was 3 years ago (which is what the borrowers would be paying absent the refinance), so that’s basically a wash.
This may be a good move on FHA’s part as far as their interests are concerned if the insurance premiums they forgo are less than the default losses the extra refinances would prevent. That’s out of my area and I don’t have the numbers so I can’t comment. The main people this might hurt are current Ginnie Mae bond holders, since their nice 3+ year vintage bonds with good yields will prepay faster than anticipated leaving them with more cash to reinvest at the lower available rates in the current market instead of it being invested in older, higher-yielding bonds. In other words, this hurts savers, but somewhat indirectly and in an amount that I’m ill-equipped to estimate.
Wish those of us who didn’t have those particular mortgages could get this deal. And it doesn’t seem right to hurt current bond holders — but then, the auto bailouts showed this Administration doesn’t much care about that.
Have you written to the reporter who wrote the original story?
Part of the problem is that banks only have so much money to lend. Factor in the increased reserve requirements Obama has mandated and the fact that the Official Victim Groups are automatically first in line no matter what their ratings, and by the time they get to you there won’t be anything to lend.
Plus, they’ll need to make triple sure that anything they actually get to lend out to non-deadbeats performs, and the standards will be still tighter.