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Subprime mortgage market has crashed and borrowers are flocking back to the FHA, which has become the only option for those who lack hefty down payments or stellar credit.
The spike in quick defaults follows the pattern that preceded the collapse of the subprime market as some of the same flawed lending practices that contributed to the mortgage crisis are now eroding one of the main federal agencies charged with addressing it. During the subprime lending boom, many mortgage brokers and small lenders milked the market for commissions and fees by making as many loans as possible with little regard for whether they could be repaid.
More than 9,200 of the loans insured by the FHA in the past two years have gone into default after no or only one payment, according to the Post analysis. The pace of these instant defaults has tripled in one year. By last fall, more than two dozen FHA home loans on average were defaulting this way every day, seven days a week.
Congress has substantially increased the amount a homeowner can borrow on an FHA loan in pricey areas, thrusting the agency into markets it was previously shut out of, such as California, where plunging home prices have made people more vulnerable to foreclosure. Moreover, lawmakers last year put the FHA in charge of a program created to address the roots of the financial crisis by helping delinquent borrowers refinance into new mortgages.
"With the onslaught of FHA lending that's going on right now, they're bringing in lenders who are not familiar with FHA guidelines," said David Hail, a vice president of Allied Home Mortgage of Houston, one of the nation's largest FHA partners. He said the lenders are "under pressure from their builders or buyers to get these loans done. They're approving loans that they should not be."
The FHA is attractive to borrowers looking to refinance, in part because the agency allows for cash-out refinances, a practice Apgar called "particularly problematic." It has become rare among conventional lenders, who fear that borrowers will take the cash and walk away from the loan.
The FHA also permits "streamlined" refinancing, in which established FHA borrowers get lower rates without verifying their income. The thinking is that borrowers who are on time should stay that way if their rate drops.
Karmen Carr, a housing finance consultant for the FHA, said some mortgage brokers have been known to game the system. They coax homeowners to refinance repeatedly even though it's a costly process for the borrower, she said.
Some experts who track FHA lending say the agency should not wait for lenders to take the lead on toughening the rules, especially given the mortgage industry's poor track record for policing subprime and other risky home loans.
"Even if the market eventually gets these guys, they shouldn't have to wait for the market to do it," said Brian Chappelle, a former FHA official who is now a banking industry consultant. "The most frequent question I get asked by the groups I talk to is: 'Is FHA going to implode?' . . . They haven't seen HUD do anything significant in the past two years to tighten up its lending."
WASHINGTON (AP) -- House Republican leader John Boehner says he does not support handing over more federal money to keep General Motors afloat unless the automaker proves that it has a viable and long-term business model.
Boehner (BAY-ner) says GM has avoided tough choices in the last 30 years. The Ohio congressman says that GM has to work with employees and creditors to plan a stable path ahead.
He says Congress shouldn't offer GM any more money unless it can prove those dollars could be paid back. Boehner says anything short of that would be "throwing good money after bad," and he predicted that GM could survive bankruptcy if it comes to that.
Boehner appeared Sunday on CBS' "Face the Nation."
Originally posted by Hastobemoretolife
reply to post by Hx3_1963
Imagine, that. Now what are the chances of the DOW curves being almost identical between the 1930's and today.
It sounds like central planning is the problem here. I've read comments about how it is going to take the best and brightest about 80 years to figure out how all this went down, but you, my friend, seemed to have figured it out already.
The federal reserve needs to be abolished. And the duties need to be relocated to the Treasury, like ASAP. Within this order needs to be a 2/3 House and Senate, and 2/3 of the States to ratify the Treasury to release any money.
The set rule needs to be that Cash in the system is equal to the amount of GDP. Boom cycles release more cash, bust cycles take cash out of the system. In order for this to work we have to get rid of fractional reserve banking and ratify a balance budget and national debt amendment.
That can be solved by instituting a tax transition of 10% on all products and services.
It will hurt in the short term but will emerge stronger and better in the long term.
The Japanese business daily said the British government would host the meeting on March 24, after a Group of 20 (G20) finance ministers meeting in London next weekend and ahead of a summit of G20 leaders there on April 2.
Top Republicans Call for GM to Declare Bankruptcy
Sen. John McCain said the Obama administration should've let General Motors fold, rather than keeping it on life support.
General Motors should hand over the factory keys to a bankruptcy court, two top Republicans said Sunday.
Sen. John McCain, R-Ariz., said the best thing for the ailing automaker to do would be to go into Chapter 11 to reorganize some of its business agreements and come out stronger than before.
"I think the best thing that could probably happen to General Motors, in my view, is they go into Chapter 11, they reorganize, they renegotiate ... the union-management contracts and come out of it a stronger, better, leaner, more competitive automotive industry," McCain told "FOX News Sunday."
Investors give up on data, pay attention to fear
New week is likely to be same as recent past: Expect lots of selling
NEW YORK - The weekly calendar holds little meaning on Wall Street these days.
Traders and investors who normally plot their course around expected economic figures and corporate announcements are trying to hang on in a market that isn't being corralled by the usual forces. These days, fear does the driving.
Each week brings speculation about a possible turnaround. But as stocks grind lower, traders stop asking "When will it bottom?" and simply mutter "How long until the closing bell?"
Sounds to good to be true!
'Bury' some big banks, GOP senator says
Shelby says letting some troubled banks fail would send a strong message to the market.
WASHINGTON (Reuters) -- The United States should let some big troubled banks fail rather than commit more federal funds to prop them up, two key congressional Republicans said Sunday.
Sen. Richard Shelby, R-Ala., ranking member on the Banking Committee, said the United States should not mimic Japan, which in the 1990s propped up failing banks and prolonged its economic downturn.
"Close them down, get them out of business. If they're dead, they ought to be buried," Shelby told ABC's "This Week" program. "We bury the small banks. We've got to bury some big ones and send a strong message to the market."
Recession will likely be longest in postwar era
Observers see more complicated situation than 1981-82 downturn
WASHINGTON - Factory jobs disappeared. Inflation soared. Unemployment climbed to alarming levels. The hungry lined up at soup kitchens.
It wasn't the Great Depression. It was the 1981-82 recession, widely considered America's worst since the depression.
That painful time during Ronald Reagan's presidency is a grim marker of how bad things can get. Yet the current recession could slice deeper into the U.S. economy.
If it lasts into April — as it almost surely will — this one will go on record as the longest in the postwar era. The 1981-82 and 1973-75 recessions each lasted 16 months.
Unemployment hasn't reached 1982 levels and the gross domestic product hasn't fallen quite as far. But the hurt from this recession is spread more widely and uncertainty about the country's economic health is worse today than it was in 1982.
The IMF just released a report about the total collapse of banking in the G7+ system. The very same countries that lord it over the rest of the earth via the IMF are now nearly all in very deep trouble due to wild lending, wild borrowing and playing wretched money games that exploit loopholes, glitches and time lags in the system. And when there are no legal ways to fleece the system, then outright fraud and theft as well as corrupting the political system was used by the financial gamesters and players.
Originally posted by irishchic
PLEASE slap my wrist if I'm not posting the link to Elaine Supkis blog correctly? Still wet behind ATS ears...
Originally posted by Tentickles
reply to post by jimmyx
Yeah, Obama raised taxes on the tobacco market! I am so pissed about this as well.