Does The Government Have A Duty To Take On More Bad Loans?
Throughout this year, the evidence that the housing industry was suffering has been everywhere. Every time you turn around there seems to be another position on the table. A new solution, a new opportunity, a new way to fix the problem…these have all surfaced. Yet, with each one of these new situations there comes the “what if” situations.
On June 9th, the Federal Housing Administration Commissioner Brian Montgomery made a very interesting statement to the National Press Club. He said that there was his agencies just could not handle any more bad loans, which is one offer or opportunity on the table being discussed. He said, “This is a worrisome idea,” CNN reported, “FHA is designed to help stabilize the economy, operating within management, low risk loans. It’s not designed to become the federal lender of last resort, a mega agency to subsidized bad loans.”
These remarks are meant to table the discussion happening in Congress currently. There is legislation on the table that would have FHA backing up an estimated $300 billion worth of worrisome mortgages. This translates into about 2 million loans.
What is your stance? Should the government really back up these troubled loans? Are you one of the people who are struggling and would like that helping hand from the government?
The concerns go much further….
Montgomery went on to list various reasons why this type of scenario would be troublesome, saying that it would weaken the FHA situation badly. In his own words, Montgomery said his agency has been, “hobbled by low loan limits and higher down payment requirements.” He continued adding that his agency, “was priced out of some housing markets.”
Credit and FHA Standards
One aspect of this entire situation that is new is the way FHA is currently looking at their potential borrowers. For the first time in the agency’s 74 years, it is now pricing loans according to the risk level the borrower possesses, which could be risky for some of today’s FHA borrowers.
Doing this is often believed to be worrisome. It implies that those that have high FICO scores would get the lower rate, while those who are more at risk with a lower FICO score would be a higher rate. What is unique about this is that many people jump in here and claim that this would actually hurt the industry, after all, are not the people who need the most help being charged the most?
According to Montgomery, that is not the case. In fact, he said, “Contrary to conventional wisdom, FHA families with lower incomes have higher FICO scores.” He says, “These are hard working American families who live within their means and pay their bills.”
This would imply, then, that FHA is helping those with lower incomes to get into the homes they want because they are better credit risks than those with a bit more income and lower FICO scores.
What About You?
What situation are you in with your FHA loan? Are you hoping that the government offers more programs to help you get out of the loan or into one that is better protected? As a homeowner, you can wait around until the government makes decisions, or you can put the future of your home in your own hands. Various FHA loan programs could be beneficial to you are already available. Many people will qualify for help under the current program offered, which means that you could save your home loan even if you are currently facing trouble now.
I highly recommend that you invest the time into finding an FHA solution for yourself, instead of letting the government battle it out.
July 30th, 2008 at 8:57 pm
I feel that the government should assist people in keeping there homes who are currently having problems due to our economic climate. It is not just the rates changing but the economy itself. People are laying off, cutting back hours, and gas is so expensive it cost three times as much to go to work as it use to and food cost are out of the park. We could not predict all of these circumstances when we purchased our homes so yes I feel that the government has their fair hand in all of this. The working class American can’t even qualify for the very programs that we sacrifice our hard earned dollars to support because of such rediculous rules as having a car that is valued at over two thousand dollars or owning other property that we can’t eat. Yes one might say sell it. Well the house could take years in the market today and as far as the car is concerned if we sell it what dependable means of transportation do we have to remain gainfully employed? Checked out the buses lately with the rise in gas prices went up and routs vanished almost overnight. We need someone who knows the issues and understands exactly how to address them. We aren’t asking for a handout we work hard everyday but when you earn $271 per week before taxes and $150 is spent on gas to make it to work another week please tell me where is the money for the inflated mortgage payment. So you loose your car you loose your rentals and your credit goes in the toilet now you can’t refinance because you did what you had to do to survive. An american family should be more than a number.