Trump's first executive action - FHA Mortgages

[StormRichards]

So if I understand this correctly,that person(s) paying another $29 per month of the mortgage (IE 200k), is going to stop them from being able to afford the payment? I gotta agree, it doesn't sound like they're in a decent financial situation to purchase a house. Unless I'm missing more details.

Today's rate at Wells Fargo for a 30 year fixed FHA loan is 4.25%. Had Trump not blocked this Obama policy, this rate would have dropped to 4.00% on Friday.

It would have benefited anyone getting a FHA loan, but it would have also allowed for people to qualify for a mortgage that otherwise wouldn't.

[Nutria]

Federal government needs to keep their nose out of this stuff.

That horse fled the barn 83 years ago (with the creation of the FHA), and kept on sprinting with the creation of the Government National Mortgage Association 49 years ago and the Federal Home Loan Mortgage Corporation 47 years ago.

[cooliemae]

I believe that the decision to cut the rate was due to the fact that the FHA's mortgage insurance fund has more than enough to continue to meet the reserve requirements and the administration did not want to see additional money going to the fund verses staying in the pockets of those people paying the loans back.

In other words, the FHA is 'making' more money off the loans than is actually required and the administration wanted to lessen how much money was being made.

I'd have to study the issue a little more in-depth to be sure of the details, but on the surface I generally don't like government agencies to take in more money than is necessary to successfully administer a program.

[Nutria]

Folks, I must say I'm impressed that this thread is staying on topic and not devolving into yet another political debate.

Let's keep it that way.

Too late. "Federal government needs to keep their nose out of this stuff" is political, because it states an ideological message.

[Singuy]

Not all FHA loan recipients are on the verge of bankruptcy. My parent's house, sold at 369k was to someone who received a FHA loan. The person also had 20% down at closing. The reason why they got a FHA loan is because of a bankruptcy years prior which trashed their credit.

With that being said, I'm assuming not a lot of quality individuals are using FHA loans which as people have pointed out can potentially cause a housing crash. The insurance premium built into the FHA (like a PMI but for the entire length of the loan) is suppose to prevent any catastrophic event unlike 2007..therefore the interest rates are lower for people with terrible credit scores. FHA loans are not subsidized loans I don't think from my research(I can be wrong).

I don't think the 0.25% makes a difference...I don't think it'll prevent people from obtaining FHA loans. I also don't think it's a great idea to give 16% of all home buyers the ability to buy houses with a credit score of 500.

Another question to ask is are people stupid enough to buy a house with a credit score of 600 obtaining a regular mortgage and the interest rate being 15%? I put my money on yes as well. At least the FHA loans are preventing those type decisions from being made.

[disneysteve]

Too late. "Federal government needs to keep their nose out of this stuff" is political, because it states an ideological message.

True, but at least it's on topic.

[disneysteve]

I'd have to study the issue a little more in-depth to be sure of the details, but on the surface I generally don't like government agencies to take in more money than is necessary to successfully administer a program.

If that's the case, that could alter my opinion. That's certainly not how it's being spun, though. The "let's make more low income folks be able to afford a home purchase" is what the stories are saying.

[cypher1]

Today's rate at Wells Fargo for a 30 year fixed FHA loan is 4.25%. Had Trump not blocked this Obama policy, this rate would have dropped to 4.00% on Friday.

It would have benefited anyone getting a FHA loan, but it would have also allowed for people to qualify for a mortgage that otherwise wouldn't.

Gotcha, thanks!

[Singuy]

If that's the case, that could alter my opinion. That's certainly not how it's being spun, though. The "let's make more low income folks be able to afford a home purchase" is what the stories are saying.

From what I can tell, FHA is almost like the obamacare of loan insurance. Everyone that qualifies for FHA pays a premium(higher interest) for a mortgage insurance even after 20% of the home equity have met. This insurances that the FHA reserve will bail out any defaults for the banks..so individual banks doesn't need quantify the poor creditor into a higher interest rate bracket(like 7-12%).

Perhaps the 0.25% reduction is to give back to the borrowers due to the reserve being too full. To maintain the rate at 0.25% higher could also mean we want the reserve to be more than full to provide an even safer cushion incase there's a crash.

Given all the research, I don't think I like or dislike Trump's decision to not cut the interest rate.
Yes I guess the 0.25% reduction will help out people using this type of mortgage, but I also don't trust them to never default and be responsible. Also not to mention the rate is already really low for people with 500-600 credit scores so these people should already consider themselves lucky.

[GoodSteward]

FHA loans are not subsidized loans I don't think from my research(I can be wrong).

I'm asking my friend to be sure, but I know it was a government loan he got and it was subsidized. Not only that, but he was approved without using credit due to having no credit history. That's right, he was approved based on his bill history, NOT credit. And the interest was like 1% or 2%. The payment is based off of his income, and for the most part he has received a $200+ a month discount on his payment. I believe, however, it is stacked at the end and he has to pay it back. It pushes his loan out to 35 or 37 years if I remember correctly. I can't recall now since it was 7 years ago. I just remember being really upset that he was approved for more house, getting a better rate, making less money and having no credit. He also had $0 down, but so did I. My house was only 78k financed, so even with that I still had no PMI. After all the subsidizing his loan has, he still has had trouble paying it. He can't afford to keep it up. I thought he should have never been approved.

*Did a quick look up and it seems my friends was probably a USDA loan, not FHA.

[GoodSteward]

Found this on a website. My word, it pays to be poor in this country by the looks of it. Can't afford that big house you want? Get a pay cut....

[disneysteve]

Found this on a website. My word, it pays to be poor in this country by the looks of it. Can't afford that big house you want? Get a pay cut....

That chart is insane!

So a person earning 45K, by typical guidelines, shouldn't spend more than 3X income which would be 135K. According to that chart, they could get approved to spend 180-185K on FHA from the looks of it.

[GoodSteward]

So a person earning 45K, by typical guidelines, shouldn't spend more than 3X income which would be 135K. According to that chart, they could get approved to spend 180-185K on FHA from the looks of it.

Pretty sure this is how the govt meetings go.

[StormRichards]

Another blurb on this topic

http://www.msn.com/en-us/money/realestate/on-day-1-president-trump-stops-obama-homebuyer-helper/ar-AAm4xZO?li=BBnb7Kz

Democratic leader Chuck Schumer denounced Trump’s move, speaking on the floor of the Senate.

“One hour after talking about helping working people and ending the cabal in Washington that hurts people, he signs a regulation that makes it more expensive for new homeowners to buy mortgages,” Schumer said.

I'm sticking with my original opinion on this one. If that .25% rate reduction makes a difference in qualifying, then they are trying to buy a house they really can't afford anyway.

[disneysteve]

Another blurb on this topic

http://www.msn.com/en-us/money/realestate/on-day-1-president-trump-stops-obama-homebuyer-helper/ar-AAm4xZO?li=BBnb7Kz

I'm sticking with my original opinion on this one. If that .25% rate reduction makes a difference in qualifying, then they are trying to buy a house they really can't afford anyway.

Well his statement is correct. It does make it more expensive. Certainly, when I'm shopping for a loan, I want the lowest rate I can find. But I also agree with you that if a 1/4 point makes the purchase unaffordable, you probably shouldn't be doing it.