Hi Friends!
This is your Hard Money Lender in Tucson and the Southern Arizona area, Billy A. I got this great article from Donald Miller at W.J. Bradley Mortgage with important information that sheds a light on why and where FHA is going:
FHA mortgage delinquencies skyrocketed more than 25%.
Since most FHA borrowers only put 3.5% down, when factoring in a 6% commission, 2% closing costs, and a declining market, nearly all FHA borrowers over the last five years are effectively underwater. When these borrowers sell or quit paying, the losses will be huge because the capital recovery will be far less than the original loan balance. With a 9.4% serious delinquency rate, the FHA is facing 713,104 future foreclosures. In the next 15 months. This rate has been rising steadily, and many more delinquencies are coming because many borrowers will want to move before prices regain peak values. Many borrowers may opt for a strategic short sale or strategic default, after all, they don’t have much skin in the game, so it’s easy for them to walk away. The FHA insurance fund has far less in reserve than its federal mandate, and many observers are concerned a bailout of the FHA is inevitable.
To avoid a federal bailout, the fund must be replenished quickly with user fees. To this end, the FHA recently raised the fee it charges at origination and the fee for ongoing insurance. Even these measures may not be enough. To raise more money, the FHA must abandon its mandate to provide loans to low and moderate income borrowers and tap into the market for high wage earners. After the fund stabilizes, the conforming limit for FHA loans can be lowered again and the FHA can return to exclusively making loans for low to moderate income borrowers. Will that happen, that is the course the higher ups want to put in place.
In 2008, the conforming limit for both GSE and FHA loans was raised from $417,000 to $729,750 as non-insured private financing evaporated. In late 2011, the conforming loan limit for high income areas likeOrangeCounty or theSan FranciscoBay area was lowered on GSE loans from $729,750 to $625,000. What perplexed many at the time was that the conforming limit for FHA loans was not similarly reduced. Why did the government do this? They too recognized the need to get high wage earners into the fund.
Why not do more? If we really wanted to get more high wage earners to pay FHA insurance, why not lower the GSE conforming limit further?
Think about what would happen if the GSE conforming limit were reduced back to $417,000 and the FHA limit were maintained at $729,750. Anyone putting less than 20% down on a house between $450,000 and $750,000 — which is a huge portion of the coastal markets in California and New England — would be pushed into FHA loans. If these markets really have bottomed — and that’s a big “if” — these new high wage earning borrowers would not cause large losses, and the increase in FHA insurance payments would be dramatic.
Lowering the GSE conforming loan limit will significantly increase FHA insurance fund revenues while simultaneously reducing the footprint of the GSEs. Don’t be surprised if you see this happen sometime soon. If politicians don’t do something like this, they will have to bail the FHA out, and none of them want to face that problem.
For more information about W.J. Bradley click here: http://www.wjbradley.com/recruiting-intro.html
To contact Donald Miller directly click here: Miller@wjbradley.com
In the meantime, if you have any questions, or need any help with your lending needs, give me a call, I’d be happy to help you out! That’s it for this time! Make it another great day!
Your Hard Money Lender in Tucson and Southern Arizona,
Billy A
P.S. I want to be your favorite Hard Money Lender in Tucson and Southern Arizona, so please don’t keep me a secret! If you, your friends or family need help with funding, I’d be happy to give them free information without any obligation. Please give me a call at:
(520) 299-4878!
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