Wikinvest Wire

Big FHA loans are easy

Friday, November 20, 2009

It's a good thing that the folks at the FHA (Federal Housing Administration) know what they're doing. Otherwise, their tiny capital reserves as compared to the nearly $700 billion in home loans they guarantee might be cause for concern, especially after reading a story like this one that, if you were to change some of the names and dates, sounds a lot like the stories you heard a few years ago when the housing bubble was fully inflated.

With F.H.A. Help, Easy Loans in Expensive Areas

SAN FRANCISCO — In January, Mike Rowland was so broke that he had to raid his retirement savings to move here from Boston.

A week ago, he and a couple of buddies bought a two-unit apartment building for nearly a million dollars. They had only a little cash to bring to the table but, with the federal government insuring the transaction, a large down payment was not necessary.

“It was kind of crazy we could get this big a loan,” said Mr. Rowland, 27. “If a government official came out here, I would slap him a high-five.”

In its efforts to prop up a shattered housing market, the government is greatly extending its traditional support of real estate, including guaranteeing the mortgages of middle-class and even upper-class buyers against default.
Surely, the FHA knows what they're doing, don't they? Just because one in six FHA borrowers is now behind on their payments shouldn't be cause for concern after the agency quadrupled the number of loans it guarantees and now has capital reserves below the minimum level mandated by Congress.

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Anonymous said...

So the lucky taxpayers get to subsidize even more silliness. I wonder how much these new "loans" will wind up costing the taxpayers this time.

All this just to keep prices above marginal utility. Centrally planned prices.

Anonymous said...

Anyone who thinks the recession is over should spend some time in San Francisco.My wife and I went to a concert at the Palace of Fine Arts last Sunday, and decided to spend the night in San Francico, in Cow Hollow. On Monday there were a lot of upscale moms pushing strollers. The real story was Union Street, which is a yuppie haven of back to back botiques, upscale stores and restaurants.
About 30% of the stores were VACANT, and at least 10% of the stores had "for lease" signs.
This is going to get VERY,VERY bad.

Anonymous said...

Aaarrrgggghhh! This makes me want to pull my hair out. Why the hell is the FHA backing with taxpayer dollars the purchase of an apartment complex? What public interest does this possibly serve?

I hate, hate, hate everyone in the federal government. I have never been political before, but this is making me think about going door-to-door to encourage people to vote out the incumbents. This is madness.

Anonymous said...

"vote out the incumbents" does nothing. You need to do the homework and vote out that bad representatives regardless of party affiliations, and support the good ones. There are some great folks out there, they just are out numbered by the sell outs.

Anonymous said...

2 unit apartment building? WTF is that? We call that a duplex here!

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